The current political situation has left the future of lending up in the air. At the moment, the Fed is keeping interest rates steady, but it remains to be seen what effect the Trump administration’s tariffs will have on the economy. At the same time, there are opportunities for credit unions to grow their portfolios. More credit unions are trending toward increased diversification, and there’s room for growth in direct originations and participations.
Happy Money CEO Matt Potere talked with our Host/Cofounder Sarah Snell Cooke about current consumer and business lending trends and the opportunities for credit unions to grow and diversify.
Disclosure: Transcript below video is automatically generated.
Sarah Cooke 0:00
Hello. Welcome to The Credit Union Connection. I am here today with Matt Potere from Happy Money. He’s the CEO there. We’re live at the GAC. Welcome, Matt. Welcome to you. Why don’t you start us off with a little bit about yourself and Happy Money?
Matt Potere 0:19
Yeah. Well, Sarah, thanks for having me. So I’m Matt Potere. I’m the CEO of Happy Money, and Happy Money is a consumer finance business. We help customers consolidate their credit card debt to save time and money, and we do that in partnership with credit unions. So it’s great to be here at GAC.
Sarah Cooke 0:33
Credit union mecca for the for the week anyway. So talk to us a little bit about consumer lending trends, and I’m sure it’s like all up in the air with all the political things going on right now. So how scary is that? But…
Matt Potere 0:47
There’s a lot going on for sure. I think the last time we talked, the Fed had just cut rates, and we were seeing a really steady march down with interest rates. We have seen rates back down a bit, but it doesn’t look like it’s quite such a steady run down with what they thought it would be. So there’s a lot, there’s a lot up in the air. Inflation is a little bit of a question, but we do think broadly interest rates have peaked, and I don’t think we’re going back to that anytime, anytime soon. But I think the fundamental story is the consumer’s healthy. For the most part, we see strong credit quality trends across the industry, and there’s, there’s lots of demands, and it’s, it’s interesting now, talking to credit unions here at GAC, there’s really a lot of demand to get back into growth mode, to get access to the assets and put them on their balance.
Sarah Cooke 0:57
Right.
Matt Potere 1:04
So it’s been, it’s been fun.
Sarah Cooke 1:38
Cool, cool. So credit unions are very into auto lending, which is great. Lot of people need used cars, especially low to moderate income. But so my question is, how do we diversify and why is that important?
Matt Potere 1:55
Yeah, it’s, it’s, it’s somewhat surprising when you see how much indirect auto concentration there is credit union space. You know, it’s an I think the reason for that is it’s an asset that’s easy to get access to, but those margins are razor thin. And so we’re hearing a big demand to try to diversify into other asset classes, to get to get good risk adjusted returns. And I think we’re going to increasingly see that trend.
Sarah Cooke 2:22
And I know you do, you focus on consumer lending, but it seems like business lending might be one of those areas too, where credit unions certainly have a lot of room to grow.
Matt Potere 2:30
For sure, I was actually meeting with some credit union CEOs last night over dinner, and they were talking about, really want to get on indirect auto. One of the places they’re thinking about doing a little bit more is on the commercial side, on the commercial real estate side. So, yeah, I think, I think we’re gonna see this in multiple assets.
Sarah Cooke 2:47
Cool. Yeah, so participations also is an opportunity. Can you talk a little bit about that?
Matt Potere 2:54
Yeah. So we, for our credit union partners, we offer two options. One is direct originations, where the partner gets the member, and those loans sit directly on their balance sheet. And the other is participations, where there’s a an originating credit union and they participate out the loan. It’s a great option for a credit union who might not otherwise be licensed, or wants to, wants to partner, or doesn’t have the field of membership to be able to lend, you know, across the country and other in other markets, it’s a way to get access to great assets with a with a good return.
Sarah Cooke 3:27
Yeah.
Matt Potere 3:28
So we’re seeing a lot of demand for that, especially recently.
Sarah Cooke 3:30
Yeah, and I think a lot of the government related credit unions might have a little hesitation in lending, right about now, just in case, just in case. So participations, though, can be scary for some as indirect was when it’s, you know, was relatively new, and sometimes still. How do you assuage that?
Matt Potere 3:50
Yeah, I think the first thing is, you know, we’re very focused. You know, I’ve spent my whole career in consumer finance, if you look at the rest of our team, very focused on good, sound risk management. We’re originating assets and loans on behalf of our credit union partners. So it’s really important that those loans are well underwritten, that they have good risk adjusted terms, and that they’ll perform well through cycles. And so one of the things that we hear a lot of, and the reason our credit union partners tend to give us really good feedback is we’re really thoughtful on the credit side, and we try to be really good partners. We talk a lot about what we’re seeing from a trend perspective and the macro environment. We think that’s really important, whether you’re directly originating an asset or whether you’re participating. It’s important that you have a strong partner that’s giving you the right level of attention. And that’s true for personal loans, and that’s true for commercial. It doesn’t really matter on the asset class.
Sarah Cooke 4:46
Yep.
Matt Potere 4:46
That’s really important.
Sarah Cooke 4:47
Yeah. So you know, we’re live here. I know you want to get back to the event. So as you know, I always give the guests final thoughts. What would you like to say to our audience today?
Matt Potere 4:57
Well, it is, it is a really exciting time to be here. You know, over the last couple of years, it’s been a it’s been a challenging environment for everyone, for our credit union partners, certainly for those that are partnering with them, but the atmosphere here is is different than it’s been over the last couple of years, and it’s an exciting time. And so I think the market is getting back to responsible growth, and that’s fun. I think it’s good for consumers. It’s good for the broader economy, and certainly good for credit unions.
Sarah Cooke 5:25
Awesome. Thank you so much for your time, Matt. Appreciate it. Thank you.