There’s a rise in the number of cars and trucks for sale in the parking lots of credit unions across the city.
It’s a sign, credit union executives say, of a growing number of people unable to make their monthly payments as savings accounts deplete and unemployment benefits run out.
And some don’t expect to see a reversal in the auto repossession trend for some time to come.
“I kind of expect it to continue, maybe even go up this year,” said Jim Holt, president of Mid American Credit Union.
Holt said auto repossessions at Mid American have been trending up since the fall.
It’s the same at Cessna Employees Credit Union, said president Larry Damm, where he said repossessions in 2009 were three times as many as in previous years.
“It’s huge,” Damm said. “The difference here is voluntary repossessions. Folks just drove in and gave us the keys.”
“And we believe we’re going to be there for another year.”
Repossessions can happen in two ways, executives said. Voluntary repossessions are typically when the borrower is late on payments and turns the vehicle in. Involuntary is where the borrower is behind on payments and the credit union has to seize the vehicle for which the loan was made.
Executives said credit unions generally see an increase in repossessions during economic downturns.
“This isn’t unique to Wichita,” said Bob Corwin, CEO of Meritrust Credit Union. Corwin joined Meritrust in 2008 from a credit union in Beaverton, Ore.
But with this downturn “I’m hearing this is a little bit more unique because of the uncertainty as to when the cycle might end,” Corwin said.
In a lot of instances, Corwin and other credit union executives said they are working hard to avoid repossessions — voluntary or involuntary — by extending payments, requiring interest payments only or modifying payment amounts.
“We do everything we can to try and keep that car in their driveway as long as we possibly can,” said Chuck Bullock, CEO of TECU Credit Union.
That’s because “we’re taking a bath” on the resale value of cars and trucks that TECU and others repossess, Bullock said.
“During 2009 you might as well have hung a scarlet letter around an SUV or pickup,” he said, referring to their resale value.
The executives said the higher repossessions aren’t causing them to rethink making auto loans because it’s a staple of a credit union’s mission to serve consumers. Most of the car loans that have become repossessions were good loans when they were made: credit union members with good credit and payment histories and a long employment record.
“On many of them we look back and say, ‘We’d have done the same thing,’ ” Cessna’s Damm said.
But Bullock said at TECU, the higher repossessions have prompted his credit union to revisit the standards it follows in making car loans.
“It does require us to re-evaluate our underwriting criteria,” Bullock said. “For the most part, we still want to make good loans and, of course, those were all good loans when we made them.”
The higher repossessions are having an impact on the credit unions’ balance sheets, executives said, but not to the extent that the repossessions are putting them at risk.
Like he tells his board at TECU, “99 percent of our members are still paying on time,” Bullock said.