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Pelican chooses Payix for collections & mobile app

FORT WORTH, Texas and SAN DIEGO - 

This week, Pelican Auto Finance selected Payix to provide its collections tools, including its new mobile collections application. The tools are designed to help Pelican better connect with its contract holders and improve its ability to collect installment payments.

The companies highlighted the mobile app and other tools are white labeled and integrate with Pelican’s portfolio management system in real time. They allow borrowers to make payments quickly, easily and securely — and without paying convenience fees often charged by other payment processors.

The app is now available to Pelican borrowers under the finance company’s name in Google Play and the App Store.

“The Payix mobile app is for reaching more than millennials. It’s exactly what the subprime automotive finance market needs to reach all of its borrowers,” said Joel Kennedy, chief operating officer of Pelican Auto Finance. “It allows us to seamlessly integrate consumer payments and communications into our system, and it makes it incredibly easy for our customers to engage with us, too.

“I really think any lender without an app like this runs the risk of falling behind,” Kennedy added.

In addition to providing collections tools, Payix also offers payment processing resources and business intelligence solutions typically available only to large-scale finance companies. Now providers of any size have access to a broad range of resources that are effective, affordable and easy-to-use, according to Payix president Chris Chestnut.

“We’re excited to have been selected by the great team at Pelican Auto Finance to provide our collections tools and payment processing resources,” Chestnut said.

“As a new company, we really appreciate being able to work with a lender as experienced and knowledgeable as Pelican,” he continued. “Their help and support have been invaluable to us, and we’re 100 percent committed to providing them with solutions that help their business and borrowers succeed.”

Q1 data disputes ‘subprime bubble' talk again

SCHAUMBURG, Ill. - 

Experian Automotive tried again this week to pop the talk about a “subprime auto loan bubble.”

Analysts said, “There’s always someone who claims that the bubble is bursting. But a level-headed look at the data shows otherwise.”

According to Experian’s State of the Automotive Finance Market report, 30-day delinquencies dropped and subprime auto financing reached a 10-year record low for the first quarter. Analysts indicated the 30-day delinquency rate dropped from 2.1 percent in Q1 2016 to 1.96 percent in Q1 2017, while the total share of subprime and deep-subprime installment contracts dropped from 26.48 percent in Q1 2016 to 24.1 percent in Q1 2017.

“The truth is, lenders are making rational decisions based on shifts in the market. When delinquencies started to go up, the lending industry shifted to more creditworthy customers. This is borne out in the rise in customers’ average credit scores for both new and used vehicle loans,” analysts said.

Experian noted that the average customer credit score for a new-vehicle contract rose from 712 in Q1 2016 to 717 in Q1 2017.

The company added the average customer credit score for a used-vehicle loan rose from 645 in Q1 2016 to 652 in Q1 2017.

In what Experian called “a clear indication” that finance companies have shifted focus to more creditworthy customers, super prime was the only risk tier to grow for new-vehicle financing from Q1 2016 to Q1 2017. Super-prime share moved from 27.4 percent in Q1 2016 to 29.12 percent in Q1 2017.

All other risk tiers lost share in the new-vehicle financing category:

• Prime: 43.36 percent in Q1 2016 to 43.04 percent in Q1 2017.

• Nonprime: 17.83 percent in Q1 2016 to 16.96 percent in Q1 2017.

• Subprime: 10.64 percent in Q1 2016 to 10.1 percent in Q1 2017.

For used-vehicle financing, Experian spotted a similar upward shift in creditworthiness.

Prime and super-prime risk tiers combined for 47.4 percent market share in Q1 2017, up from 43.99 percent in Q1 2017.

At the low end of the credit spectrum, subprime and deep-subprime shares fell from 34.31 percent in Q1 2016 to 31.27 percent in Q1 2017.

“The upward shift in used vehicle loan creditworthiness is likely caused by an ample supply of late model used vehicles,” Experian analysts said. “Leasing has been on the rise for the past several years (and is at 31.06 percent of all new vehicle financing today).

“Many of these leased vehicles have come back to the market as low-mileage used vehicles, perfect for CPO programs,” they went on to say.

Experian also mentioned another key indicator of the lease-to-certified pre-owned impact is the rise in used-vehicle financing share for captives. In Q1 2017, captives had 8.3 percent used-vehicle share, compared with 7.2 percent in Q1 2016.

In other findings:

• Captives continued to dominate new-vehicle financing share, moving from 49.4 percent in Q1 2016 to 53.9 percent in Q1 2017.

• 60-day delinquencies showed a slight rise, going from 0.61 percent in Q1 2016 to 0.67 percent in Q1 2017.

• The average new vehicle contract reached a record high of $30,534.

• The average monthly payment for a new vehicle installment contract reached a record high of $509.

Maintaining auto payment no longer top consumer priority

CHICAGO - 

TransUnion discovered that maintaining payments on that vehicle installment contract no longer is the top priority when the holder hits a rough financial patch and has to adjust to being short on monthly income.

When faced with the choice of which debts to pay and which to miss, the latest TransUnion study found that consumers in financial distress tend to prioritize unsecured personal loans ahead of other credit products such as auto financing, mortgages and credit cards. These findings were released during TransUnion’s annual Financial Services Summit, attended by more than 300 senior-level financial services executives from around the globe. 

The study incorporates unsecured personal loans for the first time since TransUnion began analyzing the payment hierarchy dynamic in 2010. Beyond personal loans, this most recent analysis is consistent with prior TransUnion studies in finding that consumers have historically prioritized auto finance payments over their mortgages and credit cards, and have done so consistently since at least the beginning of 2004.

“It is quite surprising to us that, for most struggling consumers, unsecured personal loan payments are prioritized over other prominent credit products such as mortgages and auto loans,” said Ezra Becker, senior vice president and head of research for TransUnion’s financial services business unit.

“While personal loans have existed for a long time, recent growth in the number of such loans led us explore this product’s position along the payment spectrum,” Becker continued. “The prioritization of personal loan payments above all others is counterintuitive, but our study results are clear.

“We believe the relatively short duration of these loans — usually less than 30 months — is a key factor in the decision process of consumers,” he went on to say.

Recent TransUnion data show that average term lengths are much shorter for unsecured personal loans. For loans originated in Q4 2016, unsecured personal loans had an average term of 28 months. In this same timeframe, the length of vehicle installment contracts averaged 60 months and mortgages averaged 230 months.

“We conjecture that personal loan borrowers may feel they can get a quick win with these loans even when they are struggling, and there is a clear, near-term end to the obligation — a ‘light at the end of the tunnel,’ in a sense,” said Becker.

“In contrast, auto loans and mortgages have much longer terms, and credit cards have no set end date,” he continued. “Finding an opportunity to pay a debt in full can be a powerful motivator for a struggling consumer.”

Historical payment patterns ‘shocked’ during great recession

Prior to including unsecured personal loans in the payment hierarchy analysis, TransUnion had reviewed payment patterns for auto financing, credit cards and mortgages. Since at least 2004, consumers with auto financing, credit card and mortgage have prioritized their vehicle payments.

Mortgages have traditionally been the second payment made, followed by credit cards.

“Auto loans have traditionally been the prioritized payment because most people need a car to get to and from work, run errands or bring their kids to school or other activities,” said Nidhi Verma, senior director of research and consulting in TransUnion’s financial services business unit.

“The far majority of the population does not live in markets such as downtown New York or Chicago, which have strong public transportation infrastructures. Viable alternatives to owning a car are scarce, hence the need to keep up with auto loan payments,” Verma continued.

Analysts determined this dynamic changed dramatically during the Great Recession as the housing crisis devalued millions of homes. As a result, the payment hierarchy flipped in Q3 2008, with consumers paying their credit cards prior to their mortgages.

“As housing values began crashing in 2007 and 2008, many homeowners found themselves ‘underwater’ on their mortgages, meaning they owed more on their mortgages than the value of their homes. With unemployment sharply rising, a lot of these borrowers began to emphasize their credit card payments, protecting their liquidity as a vehicle to pay their bills or simply to put food on the table,” Verma said.

TransUnion asserted this trend lasted well into the housing market recovery, reverting to the historical norm in Q1 2014.

“The payment hierarchy is complex — the decision process for struggling borrowers is a difficult one,” Becker said. “We confirmed through our study that both the strength of the labor market and housing values continue to be critical drivers of that decision process.

“In addition, the timing of consequences, availability of alternatives and social stigma all play a role,” he continued. “The housing crisis was a shock to the system that we fervently hope was a once-in-a-lifetime occasion.

“Barring another such trauma to the consumer credit market, we believe financially constrained borrowers will tend to pay their personal loans, auto loans, mortgages and credit cards in that order,” Becker concluded.

2 new relationships designed to boost originations and payments

CARY, N.C. - 

A quartet of auto finance technology firms collaborated this week on a pair of relationships aimed at enhancing both originations and payments.

First, Payix and Nortridge Software announced they formed a strategic alliance to help finance companies connect with their borrowers and improve their ability to collect payments. The alliance is geared to allow Payix to offer real-time integration between its suite of collections tools and the Nortridge Loan System (NLS).

Then, AutoGravity announced a partnership with CarFinance.com, a direct to consumer online finance company that is an affiliate of Flagship Credit Acceptance. The partnership is designed to give qualified users access to even more financing options through the AutoGravity digital platform.

Both developments come at time when the latest report generated by the Federal Reserve Bank of New York declared that 2016 officially represented the year of the highest auto finance originations — at least in the 18-year history of the data officials obtained from Equifax.

Payix’s collections tools include its intuitive, engaging and affordable mobile collections application, as well as web, interactive voice response (IVR), text and collector portal applications. Nortridge explained that its clients can add the Payix solutions to their existing collections tools with virtually no IT work on their part and in just a few weeks’ time.

“Lenders are always striving for ways to improve collections,” Nortridge Software president and chief executive officer Greg Hindson said. “The integration between Nortridge and Payix makes it easy for borrowers to pay anywhere and anytime — benefiting both borrowers and lenders.”

Executives went on to mention the Nortridge and Payix teams collaborated in the development of the seamless web services interface between the Nortridge Loan System and the Payix payment system, ensuring that transactions could be carried out in real-time and without interruption.

“We are elated to partner with an organization as strong and well-respected as Nortridge Software,” Payix president Chris Chestnut said. “Their products are incredibly flexible and reliable, and their team of industry leaders is fantastic to work with. We both realize our organizations are stronger together, and we couldn’t be more pleased to be able to form this alliance with them.”

Payix’s collections tools are white-labeled to help finance companies promote their own brands with their borrowers, and they were specifically designed for any size lender to use easily and affordably. Chestnut elaborated about the tool in this report from SubPrime Auto Finance News.

So finance companies can have more contracts on which to collect, the team at AutoGravity contends its smartphone technology helps potential buyers get up to four personalized finance offers on the new or used vehicle of their choice — on average in under 10 minutes.

Designed with state-of-the-art security, AutoGravity protects user information with advanced bank-level encryption to ensure that sensitive information is processed securely. The tech company also recently confirmed that its network of partner dealerships has grown to more than 1,400 franchised dealers.

“AutoGravity transforms car financing by empowering car buyers with up to four binding finance offers in minutes,” AutoGravity founder and chief executive officer Andy Hinrichs said. “Growth in our network of partner lenders creates more options for our users, marking another great step forward in delivering a world-class digital car shopping and financing experience.”

CarFinance.com joins a growing list of automotive finance providers that have embraced proprietary AutoGravity technology to allow consumers to shop for vehicles and see personalized financing options, all from the convenience of their mobile phones. Users are empowered by a one-of-a-kind financing experience that delivers efficiency, transparency and freedom of choice.

“We are pleased to partner with AutoGravity, a rising star in the digital car financing market,” said Samuel López, senior vice president and general manager of CarFinance.com. “More consumers are using digital tools to shop for and finance their cars, as we have seen with our customers at CarFinance.com.

“Our partnership with AutoGravity will provide car buyers, particularly millennials, access to our suite of best-in-class online tools that make it easy to complete the entire loan process online,” López continued.

Finance offers from CarFinance.com are now available to shoppers on all versions of the AutoGravity auto financing platform.

“Our success at CarFinance.com is driven by our ability to offer a fantastic user experience as our customers secure financing for their next car,” said Gerry Quinn, vice president of business development at CarFinance.com.

“Through our partnership with AutoGravity, we are seizing the opportunity to expand our reach and serve new customer segments with a cutting-edge mobile solution that complements our own digital lending platform and seamless online journey,” Quinn went on to say.

Considering if subprime is the ‘canary in the coalmine’

NEW YORK - 

Financial advising firm UBS used the grim illustration of the “canary in the coalmine” at the beginning of a report it released this week involving the subprime auto finance space. To recap, that illustration stems from miners using caged canaries as a crude toxic gas detection method.

While birds didn’t appear to be harmed as UBS analysts compiled their report, they did acknowledge that a combination of factors has created an interest spike in subprime auto finance five times the normal level the firm typically receives from the investment community. The combination of deteriorating subprime auto finance metrics and results from its first-quarter consumer survey shedding light on the likelihood people will default sometime this year triggered the Wall Street fervor, according to the report obtained by SubPrime Auto Finance News.

“There are increasing signs that risky assets are vulnerable at elevated levels, from upticks in consumer delinquencies, to a major slowdown in bank and non-bank lending, to a stubborn increase in delinquent working capital loans,” UBS strategists Matthew Mish and Stephen Caprio wrote in the report.

The sentiment about defaulting came from UBS’ own research. Its Q1 survey revealed that 17 percent of participants said they either “strongly agree” or “agree” with the statement that "I am likely to default on a loan payment over the next year.” That question about payment not only includes auto financing but also other non-mortgage categories such as credit cards and student loans.

While the reading softened by 1 percentage point on a sequential basis, UBS pointed out the level soared about the survey mark generated in Q3, which was 12 percent.

And in terms of demographics, UBS’ survey showed that consumers between the ages of 21 and 34 told the firm they were most likely to default this year. Also of note, the annual income level of participants who acknowledged a default was coming this year was the highest segment among the three designated by UBS — individuals making $100,000 or more annually.

Mish and Caprio also referenced a previous report they compiled that mentioned many elements regarding delinquency and default previously highlighted by SubPrime Auto Finance News. The trends touched on S&P Global Ratings reporting that collateral performance in the U.S. subprime auto loan asset-backed securities (ABS) sector weakened in 2016 for the fourth straight year.

Also of note, the Federal Reserve Bank of New York indicated the amount of consumers who had a bankruptcy added to their credit reports during the fourth quarter softened to a new low going back 18 years.

The New York Fed reviewed Equifax data and found about 204,000 consumers had a bankruptcy notation added to their credit reports in the fourth quarter; an amount 4 percent below the same quarter in 2015 and a new series low that goes back to 1999.

In its UBS report, Mish and Caprio wrote, “Academic literature and recent data suggest the stigma associated with bankruptcy has declined post-crisis, particularly for the millennial generation.”

So with so much interest in the topic, what are Mish and Caprio telling UBS clients?

“We would limit corporate debt exposures in autos, auto lenders, rental car companies, credit card lenders, and non-bank providers of consumer loans and mortgages,” they wrote.

Payix launches mobile collections app and payment processing solutions

FORT WORTH, Texas - 

Payix co-founders Chris Chestnut and Preston Cecil sat in Chestnut’s home a little more than a year ago. The pair had worked together at Innovate Auto Finance, a North Texas company that specializes in purchasing auto portfolios of all sizes in the less-than-prime credit tiers.

With the success at Innovate Auto Finance fresh in their minds and Chestnut having been part of the information technology brain trust at AmeriCredit, they sought to create a solution that could benefit a finance company that might not have the resources to create a tool from scratch to reach their customers and collect payments through a way that’s one of the best to reach subprime consumers.

As a result, Payix was born; a company providing collections tools, payment processing resources and business intelligence solutions to U.S. finance companies and dealers. Offering white-label services and real-time loan management system (LMS) integration, the fintech firm is out to help its clients connect with their borrowers and improve their ability to collect payments — especially with Payix’s intuitive, engaging and affordable mobile collections application.

“One of the main drives for our solution is to truly give smaller lenders and dealers access and benefits of a very large-scale mobile technology solution,” Chestnut said during a phone conversation with SubPrime Auto Finance News ahead of Tuesday’s official launch.

“This ability for them to get brand recognition and basically leverage that trust they’ve already got with their borrowers through our technology, I feel gives them a huge leg up on the mobile use by their borrowers. We’ve coined this term called smartphone dependent borrowers,” he continued. “Folks who are truly probably deep subprime and subprime borrowers, they use their smartphone almost exclusively out of necessity because of their circumstances, they don’t have other access. They truly use their smartphone for everything.

“We felt this is who our solution is geared toward, lenders who are catering to those types of borrowers. Being able to present to those borrowers a solution that is in that lender’s name and brand only helps the situation in collecting payments,” Chestnut went on to say. “We felt from the very beginning being able to offer this as a white-label solution was extremely critical.”

Part of the research Payix’s founders included material from a 2015 Pew Research Center study. Payix cited it in a white paper posted on its website. A portion of the white paper stated there three additional reasons for smartphone dependence that standout for lower-income borrowers, including

—It’s the best choice. People living month-to-month on a low income finally have an affordable and convenient way to access the “internet of things.” According to Pew research done in 2014, more than 75 percent of monthly data plans now cost less than $100 per month. Additionally, market competition has driven average smartphone prices down in recent years, which provides access for this demographic group that was considered out-of-reach not too long ago. Now, that access is an essential part of day-to-day life.

—It’s the new home phone. Cell tower coverage and carrier reliability has reached a point where, according to the National Center for Health Statistics (NCHS), almost half of American households have abandoned what was once considered a must — a home phone. Many argue a home phone today is a superfluous item for the wealthy or those on the technology fringes.

—They have limited options. Although higher-income consumers often have access to PCs at work, school, or home, lower-income individuals are more likely to have jobs that either don’t require direct access to a computer or limit their discretionary online access. That leaves a smartphone device as the best or even only option to get online.

The Payix mobile app and other collections tools — including web, interactive voice response (IVR), and collector portal applications, as well as a client administration portal (CAP) — is designed to provide finance companies and dealers with control of their payment channels.

In addition, Payix says it has built a one-of-a-kind, powerful borrower communication channel that can provides finance a new way to talk with their borrowers in real time. These solutions are designed to help any size client, can easily be added to complement and work alongside other collections tools already in place, and can work with the finance company’s loan management system.

To get to Tuesday’s product launch took some heavy technological and capital-raising lifting by the Payix team. The company leveraged its collective experience in subprime auto financing as well as a relationship with a Silicon Valley firm that built the platform in less than four months.

“To build a native mobile application I’m sure as you can imagine is not cheap,” Chestnut said. “The bigger finance companies, they have the money and time to go invest to build that type of solution. Although we’ve been able to execute our build in a short amount of time, we’re able to do that because of the level of expertise that we have as a software company.”

In addition to offering collections tools, Payix also is rolling out payment processing solutions. The company is a registered independent sales organization (ISO) of Deutsche Bank AG and is powered by First Data. It transacts e-commerce payments through its own proprietary payment gateway.

Payix also can offer its clients business intelligence solutions to help them better understand their customers’ payment patterns and communication preferences.

“We’ve got very powerful programs at our disposal to offer to these lenders that hopefully will save them a lot of money,” Chestnut said.

While Chestnut didn’t offer any specifics regarding how many clients Payix hopes to land — or what kind of profitability is needed to satisfy investors — the co-founder is confident about what the company can do.

“As you can imagine would be like anyone starting a new company, we want to get as many clients as possible in a safe way. We’re ramping up diligently and prudently. We’ve got internal goals we’re striving for. But honestly, we’re going to make right decisions. We’re not going to put somebody on the platform in a way that jeopardizes them or us,” Chestnut said.

“In a nutshell, the philosophy we’re going with at this point is we feel like we have a product that’s a solid valuable product to our lenders and clients,” he continued. “We feel that will be evident as they get informed and exposed about what we’re doing. Through that process, they’ll see value. We feel they’ll also see the value that it adds to their borrowers. It allows them to interact with them in a much more efficient and effective way so the borrower receives value.

“Frankly our goal is to position the company and products in a way that we’re all winning together,” Chestnut went on to say. “That may sound a little clichéd and hammy, but the point is that’s truly what we’re doing. We feel like we’ve created a situation where by our lenders winning and their borrowers winning that we as a company also can win so we’ll have the success and eventual profitability we’re all hoping for.”

Deep subprime used financing sinks to 9-year low

SCHAUMBURG, Ill. - 

Part of the dialogue happening at the recent SubPrime Forum during Used Car Week stemmed from whether or not finance companies — especially ones that specialize in subprime paper — were tightening their underwriting.

Furthermore, companies such as Consumer Portfolio Services had just discussed why their originations dipped during the third quarter.

Well, Experian’s latest State of the Automotive Finance Market report showed that perhaps underwriting in the subprime space is, in fact, tightening.

Experian’s Q3 data released on Monday indicated that financing extended to consumers in the subprime tier fell 4.5 percent from the previous year, and contracts to deep-subprime consumers dropped 2.8 percent to the lowest level on record since 2011.

Looking specifically at used-vehicle loans, analysts noticed that the subprime sectors saw an even larger decrease.

Financing to consumers with deep-subprime credit dropped by 5.3 percent to 5.11 percent; the lowest Experian has seen on record since tracking began in 2007.

Meanwhile, Experian senior director of automotive finance Melinda Zabritski — who discussed some of the Q3 data during the SubPrime Forum — pointed out that newly originated financing to prime borrowers jumped 2 percent to encompass nearly 60 percent of contracts financed in Q3.

“For anyone making doomsday predictions about a subprime bubble in the auto industry, Q3 2016 provides a stark reality check,” Zabritski said in a news release issued on Monday.

“This quarter’s report shows that lenders are reducing the percentage of loans to the subprime and deep-subprime risk tiers while increasing the percentage to consumers with good credit,” she continued. “The most important takeaway here is to understand the market reality and not to be led astray by rumors or unsubstantiated facts.

“By doing so, lenders, dealers and consumers are able to make smarter decisions and more easily explore financing programs and other opportunities available to them,” Zabritski went on to say.

The report also determined that average credit scores for both new and used vehicle loans are on the rise.

For new-vehicle contracts, the average credit score climbed two points to 712 in Q3, marking the first time average credit scores for new-vehicle loans rose since hitting a record high of 723 in Q2 2012.

For used-vehicle contracts, the average credit score jumped five points to 655.

Experian reported that 30-day delinquencies were flat year-over-year, at 2.36 percent. However, 60-day loan delinquencies were up slightly, moving from 0.67 percent in Q3 2015 to 0.74 percent in Q3 2016.

Beyond the subprime data, Experian highlighted that credit unions continued to gain market share as consumers search for low interest rates

Perhaps the biggest shift from Q3 2015 to Q3 2016 was the growth in market share for credit unions. Credit unions grew their share of the total loan market from 17.6 percent in Q3 2015 to 19.6 percent in Q3 2016.

For new-vehicle contracts, credit unions grew their share by 22 percent, going from 9.9 percent in Q3 2015 to 12 percent in Q3 2016.

According to the report, interest rate increases played a key role in helping boost credit union share. Interest rates for the average new-vehicle loan went from 4.63 percent in Q3 2015 to 4.69 percent in Q3 2016.

 “Credit unions typically have the most competitive interest rates, so any time rates jump overall, it’s a natural reaction for credit unions to see a rise in their market share,” Zabritski said. “With vehicle prices and loan dollar amounts rising, car shoppers are looking for any relief they can get. Credit unions’ traditionally lower rates are obviously an attractive option.”

Other key findings for Q3 2016 included:

• Total open automotive financing balances reached a record high of $1.055 billion.

• Used-vehicle contract amounts reached a record high of $19,227, up by $361.

• The average new-vehicle contract amount jumped to $30,022 from $28,936.

• Share of new-vehicle leasing jumped to 29.49 percent from 26.93 percent.

• The average monthly payment for a new-vehicle contract was $495, up from $482.

• The average new-vehicle lease payment was $405, up from $398.

• The average monthly payment for a used-vehicle contract was $362, up from $360.

• The average contract term for a new vehicle was 68 months.

Lending Club unveils refinancing product

SAN FRANCISCO - 

Lending Club, which claims to be the world's largest online marketplace connecting borrowers and investors, this week announced the launch of an auto refinance product that is designed to give vehicle owners a simple solution to save money on their installment contracts.

The product is being launched initially to California residents, with plans to expand nationally in early 2017.

In less than a minute, consumers can check their rate online to see what they might qualify for based on their credit profile and ability to repay, as well as the make, model, mileage and current value of their vehicle. 

Once a borrower selects an offer, completes the application process and is approved, WebBank will issue a new loan ranging from $5,000 to $50,000, with terms ranging from two to six years and APRs starting at 2.49 percent and up to 19.99 percent, and Lending Club will facilitate paying off a borrower's existing contract.

Lending Club president and chief executive officer Scott Sanborn explained this auto refinance product leverages the company’s technology and expertise to help eligible consumers save money by refinancing into more affordable terms with better rates, clear terms and no hidden fees.

“Tens of millions of Americans borrow over half a trillion dollars every year to buy cars,” Sanborn said. “The practices and processes of the auto lending industry offer consumers limited options and a lack of transparency. This has created a gap between the rates consumers pay and the rates they might otherwise qualify for, unnecessarily driving up debt burdens.

“We are excited to leverage our technology and core capabilities to put thousands of dollars back in consumers' pockets,” he continued.

Lending Club has become one of the nation’s largest platform for personal loans, primarily by helping consumers gain access to lower interest rates as compared to traditional options such as high-interest credit cards. The company declared that currently there is more than $1 trillion in outstanding auto debt, with just a fraction of that figure — $40 billion — refinanced annually.

The company thinks this ratio represents huge potential for both Lending Club's platform and the millions of Americans who could save by refinancing into a more affordable product.

Lending Club estimated the average APR for borrowers on new contracts through Lending Club will be about 1 percent to 3 percent lower than their current contract, translating into an average savings of up to $1,350 over the life of the loan.

“This is Lending Club's first offering of access to a secured loan with an overall risk and return profile that's complementary to the unsecured loans available through our platform. It’s a big step in the evolution of our platform, a win for consumers, and will give our investors access to another proven asset,” Sanborn said.

Customers can find out more about their auto refinancing options through Lending Club at lendingclub.com/apply/site/auto-refinancing.

19 institutions join launch of mobile payment tool

LAS VEGAS - 

The potential for more vehicle installment contract holders in your portfolio to use their smartphone to make regular payments to keep their auto financing current took another step forward on Monday.

Early Warning announced preliminary details of a tool named Zelle, what it’s calling a new, faster payments network that will “revolutionize” how U.S. consumers and businesses send and receive money. The company indicated Zelle will launch in early 2017 and will be directly embedded within mobile banking channels of its network banks, which already includes some large auto finance players such as Ally, Capital One and Wells Fargo.

A consumer-facing app for person-to-person (P2P) payments will be released in 2017, according to Early Warning.

Early Warning insisted Zelle will change how money moves, empowering millions of consumers with a faster, safer way to send and receive payments within the security of their financial institution. Zelle will provide an intuitive and user-friendly experience for network bank customers who want to send, request and split payments with their friends and family.

Payments can be sent using just an email address or mobile phone number from within the mobile banking experience of network banks or using the Zelle app. Anyone with a valid checking or savings account can receive payments by quickly registering at ZellePay.com, or by using the Zelle app with a valid debit card account.

“Zelle will transform how people manage their financial lives, providing them faster, safer and more convenient payment options with their friends and family,” Early Warning chief executive officer Paul Finch said. “We are pleased to partner with the leading financial institutions and financial service organizations in the country to make our vision for faster payments a reality for millions of consumers nationwide.”

Zelle is an inclusive network that is open to all banks and credit unions in the U.S. At launch, officials pointed out Zelle will be one of the largest payment networks in the U.S., accessible to more than 76 million mobile banking users nationwide. A total of 19 financial institutions have joined the Zelle Network, including eight of the largest retail banks in the U.S.

“Zelle is an always-on, easy to use mobile payment capability that gives our customers one more secure, convenient way to stay connected and live their financial lives,” Bank of America chief executive officer Brian Moynihan said.

The following financial institutions will join the Zelle Network: Ally Bank, Bank of America, Bank of the West, BB&T, BECU, Capital One, Citi, Fifth Third Bank, FirstBank, First Tech Federal Credit Union, Frost Bank, JP Morgan Chase, Morgan Stanley, PNC, USAA, U.S. Bank and Wells Fargo.

“The Zelle Network is an innovative, faster, and more secure way for PNC customers to send person-to-person payments,” said William Demchak, chairman, president and chief executive officer of The PNC Financial Services Group. “I believe our customers will appreciate the convenience and security of Zelle when the network goes live early next year.”

Early Warning has partnered with payment processors CO-OP Financial Services, FIS, Fiserv, and Jack Henry, as well as global card networks Mastercard and Visa to offer banks and credit unions multiple integration pathways onto the network as well as to increase the speed-to-market for new network members.

“Paying a friend with Zelle on a mobile device is the way of the future,” said Richard Davis, chairman and chief executive officer of U.S. Bancorp. “Zelle is better for both the sender and recipient. There’s no waiting for a check to arrive, or stopping for cash on your way home to pay the babysitter. We’re delighted to be a part of the Zelle Network as one of the first banks to offer Zelle to our U.S. Bank customers.”

TransUnion finds 9.3M consumers couldn’t handle rate rise

CHICAGO and WASHINGTON, D.C. - 

While the Federal Reserve chose again to pass on moving interest rates higher, research from TransUnion found that up to 92 million credit-active consumers would experience some type of monthly debt service payment increase if policymakers had raised interest rates by 25 basis points.

However, TransUnion determined the average monthly payment increase for these consumers would be a mere $6.45. Further reassuring for finance companies, analysts insisted only about 10 percent of these impacted consumers — or 9.3 million — will likely not have the capacity to absorb an increased monthly payment obligation arising from a Fed rate hike.

To recap, this month’s gathering of the Federal Open Market Committee (FOMC) produced a result the industry has seen for much of the past couple of years — members leaving the federal funds rate unchanged.

“The committee judges that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives,” the Fed said last week.

“The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation,” policymakers added.

The Fed explained that information received since the FOMC met in July showed that the labor market has continued to strengthen and growth of economic activity has picked up from the “modest” pace seen in the first half of this year.

“Although the unemployment rate is little changed in recent months, job gains have been solid, on average,” the Fed said.

Policymakers also pointed out household spending has been growing strongly but business fixed investment has remained soft. Inflation has continued to run below the committee’s 2 percent longer-run objective, partly reflecting earlier declines in energy prices and in prices of non-energy imports.

The Fed went on to say market-based measures of inflation compensation remain low; most survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months.

Before the Fed made its decision, TransUnion found that up to 68 percent of credit-active consumers would experience some level of payment shock — a change in monthly payment obligations — from an interest rate increase. Analysts insisted that unlike vehicle installment contracts that have a fixed APR for the term, consumers who are susceptible to a payment shock have one or more variable-rate credit products in their wallets, such as a credit card, home equity line of credit, or certain forms of mortgages and personal loans.

TransUnion also analyzed historical payment behavior across each consumer’s credit wallet to assess whether that consumer could afford an increased monthly payment of any size.

“Ahead of a potential rate hike from the Federal Reserve, there is much speculation about the impact to consumers — and their lenders — from increased monthly payments,” said Nidhi Verma, senior director of research and consulting in TransUnion’s financial services business unit.

“In theory, 137 million consumers could be exposed to a payment shock, but in fact not all of these consumers will be impacted,” Verma continued. “For instance, some consumers are transactors, i.e., they pay their balances in full each month. Some have an APR that cannot be further increased.

“Our data show there will indeed be an impact from potential interest rate rises, but it’s far less widespread than many anticipate,” she went on to say. “Most importantly, it can be identified at a consumer level based on our research.”

According to TransUnion’s study, while consumers across all risk tiers would experience an impact from the potential Fed interest rate hike, the impact varies. Consumers in the near-prime risk tier (those with a VantageScore 3.0 credit score between 601 and 660) had the largest share, with 82 percent of near-prime consumers impacted from a potential rate increase.

TransUnion used its CreditVision aggregate excess payment (AEP) algorithm, which incorporates monthly payments from mortgages, credit cards and other debt obligations, to determine a consumer’s capacity to afford an increased monthly payment. With a 25-basis point rise in interest rates, 90 percent of exposed consumers can absorb their respective payment shocks. However, 9.3 million consumers do not appear to have the capacity to absorb a 25 basis point rise in interest rates.

“While it’s important to address the 9.3 million consumers who cannot absorb the payment shock, 90 perent percent of exposed consumers can afford their increased monthly payments,” Verma said. “However, if interest rates continue to rise progressively, more consumers might not be able to absorb the payment shock.

Lenders should be mindful of which consumers in their portfolio are at risk from payment shocks, and use solutions such as AEP to identify these consumers and engage them appropriately,” she added.

TransUnion’s study found that if interest rates were to rise by 100 basis points, an additional 2.5 million consumers might have a negative capacity to absorb their respective payment shocks. In total, 11.8 million consumers are estimated to be at risk of a negative capacity to absorb their increased payment obligations from a sudden 100 basis point rate increase.

“Fortunately, we believe it is highly unlikely the Fed will raise rates more than 25 basis points at any one time over the near term,” Verma said. “This pace gives potentially impacted consumers an opportunity to adjust. In many cases, making minor changes to household spending would allow consumers to accommodate the payment shock.”

Verma discussed TransUnion’s finding more in the video available at the top of this page and also posted here.

For more information on how the impact of a Fed interest rate hike might impact consumers, and how to use TransUnion’s CreditVision aggregate excess payment algorithm to estimate the risk in your portfolio, visit www.transunioninsights.com/interestrates.