Tighter credit union rules threaten to push Centrix Financial, owner of the Grand Prix of Denver, into a pit stop.
Centrix Financial, based in Centennial, on Thursday laid off 150 people – 10 percent of its workforce of 1,500.
The company cited lower loan volumes after regulatory guidelines released in June caused credit unions to pull back from making auto loans to borrowers with subprime credit ratings.
“Credit unions are not making loans while they adjust,” said Lauren Sides, a spokeswoman for the company. “We fully anticipate this will be temporary.”
The National Credit Union Administration, which guarantees credit union accounts, put out stricter guidelines regarding third-party loan service providers, like Centrix, this summer.
The administration followed up the guidelines with visits or phone calls from examiners.
The Colorado Division of Financial Services, which oversees state-chartered credit unions, has worked closely with credit union administration on the issue, said Greg Doane, a senior examiner with the division.
“There have been some onsite visits from the NCUA examiners on some of the credit unions with larger Centrix portfolios,” he said.
State credit unions have not seen any evidence of problems because of loans they had made through Centrix, he said.
Sides likewise said no credit union working with Centrix, which protects loan portfolios with private insurance, has ever lost money.
But credit union administration noted a big jump in loans being made to less-creditworthy borrowers since September 2004. It wanted tighter controls to ensure that credit unions weren’t taking too much risk.
“We have a heightened concern that credit unions engaged in this type of lending activity may not have effective controls and monitoring systems in place,” the NCUA said.
Since 1998, Centrix has underwritten 200,000 loans worth $3 billion. The company works with 300 credit unions in 42 states.
The company, which serves as a bridge between auto dealers and credit unions, screens borrowers, and processes and monitors the loans made to them.
“We have a great program that is very sound, very safe. We have not had any problems with it,” Sides said.
But the private company is not under the supervision of the NCUA, which is liable if the loans Centrix helps make cause a credit union to fail.
Centrix was rebuffed in the past when it extended offers to NCUA examiners to come to Centennial to review its procedures and safeguards, Sides said.
But company executives are meeting weekly with NCUA, trying to understand each other’s concerns. Credit unions are also anxious to see the issue resolved.
“Credit unions are obviously leaders in providing auto loans to their members,” said John Dill, chief executive of the Colorado and Wyoming Credit Union Leagues. “Insofar as those members might need a program such as Centrix to qualify for these loans, the NCUA’s action(s) have slowed or halted access to those programs.”
Until the layoffs, Centrix had been a poster child of job creation in the metro area and obtained a high profile with its acquisition of the Grand Prix of Denver.
Centrix already had plans to reduce its dependence on credit unions as a capital source and those plans will be accelerated, Sides said.
No impact is expected on the Grand Prix because of the layoffs or slowdown in business, Sides said.
Staff writer Aldo Svaldi can be reached at 303-820-1410 or asvaldi@denverpost.com.
