Credit Unions Face Rising Auto Delinquencies and Regulatory Scrutiny

Auto loans emerged as the epicenter of credit risk for credit unions in 2024. After a boom in 2021–2022 when many credit unions aggressively grew auto portfolios (often via indirect dealer lending), the tide turned. By Q4 2024, auto loan delinquencies had surged past prior norms – helping drive the overall 60-day delinquency rate to 0.94%, well above pre-COVID highs.

Industry analysts noted that credit unions’ market share gains in auto lending came “at a cost,” as rapid expansion (particularly through indirect channels) brought elevated risk now materializing on balance sheets. In fact, many delinquencies and defaults are concentrated in loans originated by third-party dealers with looser standards. Regulators took notice: the NCUA made auto lending (especially indirect programs) a top supervisory priority for 2024 examinations.

Examiners began scrutinizing credit union disclosures, underwriting and oversight of dealer partnerships to ensure sound practices. Some credit unions proactively tightened approval criteria and reduced indirect volumes to stem future losses. Others increased collections staffing for auto portfolios and ramped up collateral recovery efforts as repossessions rose. Notably, used car values, while still high, started to soften – meaning potential losses on defaulted auto loans could worsen.

Takeaway: The auto lending spree has hit a speed bump. For collections departments, a wave of troubled auto loans – often from indirect channels – is testing their strategies. Strong dealer management, fair but firm repossession and workout policies, and vigilant credit monitoring have become essential to navigate the “auto loan storm” now brewing.