Moving to a flat-fee model for dealer compensation would make it “cheaper to get business,” but would lower the amount of deals Texas Dow Employee Credit Union would close with dealers in its market, said Chuck Smith, TDECU’s senior vice president and chief lending officer. “
I would love for everybody to go to a flat fee, but about 70% of what we do is spread business, 30% is flats,” Smith said at the Auto Finance Risk & Compliance Summit Tuesday.
It’s common for larger credit unions and lenders that have reached about $10 billion in assets — and subsequently become designated “larger participants” by the Consumer Financial Protection Bureau — to move to a flat-fee model, Smith said. “But in the market that we operate in, for us to walk away and say we’re not going to do spread business anymore, would probably really affect our production that we do today,” he added.