Subprime origination level at lowest point in 12 years


The latest information from Equifax reinforced the depth at which finance companies are backing off in their originations within the subprime space.

Equifax recently shared its observations of auto finance originations through January. Through that juncture, analysts found that 19.2 percent of retail installment sales contracts and leases were issued to consumers with a subprime credit score. Analysts indicated this is the lowest subprime share since 2006.

In 2017, Equifax pinpointed the year-to-date share at 20.3 percent.

“It is evident that banks, captives and lenders are focused on reducing their exposure to subprime accounts in automotive, but with the economy at healthy levels, there is also a smaller pool of subprime candidates shopping for vehicles compared with several years ago,” said Gunnar Blix, deputy chief economist at Equifax.

“There seemed to be more of a focus on pursuing subprime volume in 2017, and today lenders are looking to pull back a little and find more balance in their portfolios,” Blix continued.

Again, looking at data through January, Equifax found that 386,500 installment contracts and leases were originated with consumers with a VantageScore 3.0 credit score below 620. These are generally considered subprime accounts. That contract amount represents a 9.5-percent decrease year-over-year.

Analysts added that this newly issued paper has a corresponding total balance of $6.9 billion, constituting a 9.4-percent decrease year-over-year.

Looking throughout the credit spectrum, Equifax tabulated that 2.01 million total installment contracts and leases, totaling $44.1 billion, have been originated year-to-date. The figures marked a 4.1-percent decrease in accounts and a 2.0-percent decline in balances over this time last year.

Equifax pointed out that 2017 marked the third highest year on record for the number of auto accounts originated; 2016 is the record holder, followed by 2015.

The average origination balance for all contracts and leases issued in January came in at $22,205, according to Equifax. The figure represented a 3.5-percent increase over January 2017.

Also, the average subprime installment contract amount was $18,128, marking a 1.4-percent increase year-over-year.

Credit Acceptance sees increased activity for originations and compliance


As the subprime auto finance company’s field representatives are generating more business from their active dealer network, state and federal regulators are keeping the compliance team at Credit Acceptance busy, too.

The latest filing to the Securities and Exchange Commission showed Credit Acceptance has encountered nine different regulatory matters since December 2014, including actions from the attorneys general in New York, Massachusetts, Maryland and Mississippi, as well as officials from the Consumer Financial Protection Bureau and the Federal Trade Commission.

The newest addition came when Credit Acceptance indicated that on April 10 the company was contacted by the New York Department of Financial Services, Financial Frauds & Consumer Protection Division (DFS). According to the SEC paperwork, Credit Acceptance said that DFS believes that the company may have:

— Violated the law relating to fair lending

— Misrepresented to consumers information related to GPS starter interrupt devices

— Provided inaccurate information in the course of a DFS supervisory examination

“We have not received any written communication from the DFS regarding its conclusions,” Credit Acceptance said in the filing. “We have provided information to the DFS, as requested, but cannot predict the eventual scope, duration or outcome at this time. As a result, we are unable to estimate the reasonably possible loss or range of reasonably possible loss arising from this inquiry.”

During the company’s quarterly conference call with investment analysts, Credit Acceptance Brett Roberts chief executive officer responded as to whether state regulators are taking a great interest in how GPS and starter interrupt devices are being used since the company previously has been questioned about them by the FTC.

“I think it’s hard to compare at this point. It’s very early,” Roberts said. “I think what we disclosed is really what we know at this point. We had a call. The substance of the call is what’s described in the 10-Q, and we're waiting for something in writing.”

Later in the call, Roberts also addressed how the regulatory environment has intensified.

“I think that maybe the main point here is in the last four years, as you point out, we have seven, eight, nine things that we’ve disclosed now. I think in the 24 years I was with the company before that, I don't think we had any. So clearly, something's changed in the regulatory environment,” Roberts said.

“We’re under a lot of scrutiny. We have been for quite a while now,” he continued. “The regulators have a job to do. We respect that. They certainly have their prerogative to ask questions and challenge the things that we’re doing, and it’s our job to operate in a highly compliant way, and we take that seriously. And what’s disclosed in the 10-Q is just where all those matters stand at this point.

“As you said, I don’t want to generalize. We've been asked a lot of questions. We’ve provided a lot of answers, and that’s where it stands at this point,” Roberts went on to say.

First-quarter performance

During the first quarter, Credit Acceptance generated an 18.5-percent year-over-year increase in the number of contracts originated through its active dealer network, which grew by 11.6 percent.

All told, Credit Acceptance added 112,345 contracts to its portfolio in Q1 through 8,762 active dealers, which the company defines as a store that finalizes at least one deal during the quarter.

The average volume per active dealer rose 5.8 percent to nearly 13 contracts per store.

When addressing that growth, Robert told a Wall Street watcher “that could cause you to conclude that the environment was easier. But at the same time, we've made a big investment in our sales force, which could also be driving that number. It’s hard to break out what’s internal and what’s external there.

Roberts added later in the call, “We can see the growth that came from the people that we’ve hired since the expansion started. In rough terms, they grew about twice as fast as the overall book did, so that still leaves decent growth in the sales reps that were here before the expansion started. So we’re seeing faster growth from the new group but strong growth from everywhere.”

That Q1 origination activity as well as collection on the contracts already in its portfolio all combined to push Credit Acceptance to post consolidated net income of $120.1 million, or $6.17 per diluted share. That’s up from $93.3 million, or $4.72 per diluted share, for the same period in 2017.

The company computed that its adjusted net income, a non-GAAP financial measure, for the three months that ended March 31 came in at $118.9 million, or $6.11 per diluted share, compared to $92.3 million, or $4.67 per diluted share, a year earlier.

Accounting discussion

Credit Acceptance senior vice president and treasurer Doug Busk responded to multiple questions about how the company is bracing for Current Expected Credit Loss (CECL) requirements outlined by the Financial Accounting Standards Board (FASB). Some organizations have to begin complying with these new mandates by the end of next year.

After being peppered earlier in the call, Busk offered his understanding of what accounting regulators are asking finance companies like Credit Acceptance to do.

“CECL is an accounting methodology where, as opposed to recognizing a loss when some event occurs, a certain amount of delinquency or a repossession or a sale of a car, you anticipate that loss at the time you originate the loan, and then book a loss upfront,” Busk said. “The flip side of that is, over time, cash equals accounting, so you'd end up recording some loss at loan origination, and then, conceptually here, then recognizing more revenue over time.

“The fair value option is, you're looking at coming up with an estimate of the forecasted cash flows that the portfolio would generate, and you’re basically calculating an exit price, which represents the fair value of the portfolio at that point, which as I mentioned earlier, would include an estimate of a discount rate, which would represent the return associated with exiting the portfolio,” he continued.

What investment analysts want to know is exactly how Credit Acceptance is going to handle these changes.

“Well, we’re still assessing both alternatives, and our objective would be to end up with the accounting that most closely reflects the economic reality of our business,” Busk said. “So we’re in the process of assessing both of those things. Once we have something material to report, we’ll disclose it in our public filings.

“If neither of those methods line up with the underlying economics of our business, we'll continue to include non-GAAP information in our press release to give shareholders better insight into how the business is actually performing,” he continued.

“We’re obviously working on it. We're working on it hard, but we're not in a position to disclose anything until we've completed our work and fully understand all the issues,” he added.

2 reasons why auto finance stabilized in Q1


Brian Landau, senior vice president and automotive business leader at TransUnion, again used a single word to summarize the latest quarterly auto finance information he and his team assembled. Landau decided the first-quarter moniker should be stabilization.

Landau explained his thinking to SubPrime Auto Finance News as TransUnion released its Q1 Industry Insights Report that showed performance of non-prime vintages helped to construct his assessment.

“Just looking the data, this was a quarter of stabilization. That’s how I would define it for a number of different reasons,” Landau began.

“One is we’re kind of trending like how we’ve done in previous quarters as originations are still in decline year-over-year, but the rate of decline is starting to slow down a little bit. I think we’re reaching a point of stabilization with regard to that,” he continued.

“Another key point is around delinquencies, which are rising but rising at a much slower rate. It’s a much different message now than what it was in 2016. There was a hike from 2016 to 2017 but just a marginal increase from 2017 to 2018,” Landau said.

“More recent vintages in the non-prime space are starting to show some marginal improvement relative to prior vintages with delinquencies growing in a less accelerated manner,” he added.

“All of those signs are pointing to stabilization in the market right now,” Landau went on to say.

TransUnion’s Industry Insights Report showed that tighter underwriting and improvements in the oil states appear to be positively impacting serious auto finance delinquency rates per borrowers who are 60 days or more past due.

After growing from 1.16 percent in Q1 2016 to 1.30 percent in Q1 2017, TransUnion determined the serious delinquency rate stayed relatively flat at 1.32 percent in Q1 2018.

Analysts noticed the top six states with the largest annual decreases in delinquency rates in Q1 2018 — Alaska, Wyoming, Texas, New Mexico, Oklahoma and North Dakota — are among the eight states where oil, gas and mining account for 10 percent or more of gross domestic product.

TransUnion added the other two states — Louisiana and West Virginia — also performed better than the national average in terms of annual changes in 60-plus days past due rates for Q1 2018.

When asked to explain what the trends in those states mean, Landau said, “This is another case of anomalies regressing back to the average. I would say the same thing when we had the financial crisis. There were certain states like Arizona, Nevada and Florida that were heavily impacted by the mortgage crisis. Then you saw them rebound pretty well. I see this as a similar trend.

“Oil and mining are necessities when it comes to manufacturing and transportation. They help the economy move forward,” he continued. "Until we get to a point where we’re moving away from these sources of energy, that will always be the case. There will always be demand for these commodity products.”

While total auto balances rose 5.2 percent to $1.183 trillion, TransUnion indicated this figure marked the lowest annual growth rate since Q1 2012, which at the time was 4.2 percent and on the rise. TransUnion also observed continued shifting in the origination makeup of auto finance holders, which continues to migrate to higher credit tiers.

Analyst added overall originations, viewed one quarter in arrears to account for reporting lag, declined 1.5 percent in Q4 2017. This marked the sixth consecutive quarter of yearly declines, though the smallest such decrease was in 2017.

With that kind of streak in place, Landau responded to the thought of whether the industry could ever see the significant growth the auto-finance space enjoyed coming out of the recession.

“You had a little bit of the perfect storm there,” he said. “You had pent-up demand for new vehicles driven by the fact consumers were delaying their purchases during and shortly after the financial crisis we had. In addition to that, you had below average fuel prices and inexpensive credit fueling demand for more expensive vehicles. In a sense, that helped to promote more financing than in the past.

“To see that kind of growth doesn’t happen too often,” Landau continued. “It may not repeat any time soon, but I would say the market is resilient, and people will still need vehicles to get to and from work, to other places of importance. And vehicles aren’t getting any cheaper, so there will always be the need for financing.

“There is a greater demand now for SUVs and CUVs, which have a price point relative to sedans,” he added. “The OEMs are enhancing the technology in vehicles today, increasing the value of the product. The economy is fairly healthy right now. Wages are growing. Consumers have the means to make more expensive purchases.”

Q1 2018 Auto FinanceTrends


Auto Finance Metric

Q1 2018

Q1 2017

Q1 2016

Q1 2015


Number of Auto Loans


79.7 million


76.4 million


72.2 million


66.4 million

 Borrower-Level Delinquency Rate (60+ DPD)










Average Debt Per Borrower





Prior Quarter Originations*

6.6 million

6.7 million

6.7 million

6.3 million

Average Balance

of New Auto Loans*









*Note: Originations are viewed one quarter in arrears to account for reporting lag.


Q1 2018 Auto Loan Performance by Age Group


60+ DPD

Annual Pct. Change

Average Loan Balances Per Consumer

Annual Pct. Change

Gen Z (1995 – present)




+ 2.8%

Millennials (1980-1994)




+ 2.0%

Gen X (1965-1979)




+ 1.7%

Baby Boomers (1946-1964)




+ 0.5%

Silent (Until 1945)




- 1.2%

Source: TransUnion

Update on credit-card usage

TransUnion also offered a trove of information about consumers using their credit cards.

With more than 416 million credit cards and nearly 175 million consumers with access to them, analysts indicated credit card usage continued its upward trajectory in Q1, according to the latest TransUnion Industry Insights Report, powered by Prama analytics.

TransUnion’s report found that serious credit card delinquency rates per borrower (90 or more days past due) increased in Q1 2018 to 1.78 percent, up from 1.69 percent in Q1 2017. The delinquency rate is now level with the 1.77 percent mark observed six years prior in Q1 2012, though it remains below the 10-year first quarter average of 1.91 percent.

Analysts indicated the average card debt per borrower also followed a similar path as delinquencies during the last year, rising 2.63 percent to $5,472 in Q1 2018 from $5,332 in Q1 2017.

“Though delinquency rates are certainly rising, there are several reasons we do not believe this is a worrisome trend at this juncture,” said Paul Siegfried, senior vice president and credit card business leader at TransUnion.

“First, credit card issuers have been relatively conservative over the last five quarters, issuing more credit to lower-risk consumers compared to higher-risk consumers. Second, the credit limits they are extending to consumers in most risk tiers are generally lower than those they had issued in prior years,” Siegfried continued.

“Finally, we believe it’s a positive sign for the economy that more consumers have access to credit and that delinquency rates, while growing, are doing so at a slow pace and remain below levels observed immediately post-recession,” he went on to say.

Enterprise Car Sales cites credit unions for record origination volume in 2017


The combination of auto financing availability and credit unions and late-model used vehicles from one of the largest rental companies is continuing to generate record-setting originations.

Strong credit union partnerships have long been a driving force behind the growth of Enterprise Car Sales, which opened five new locations in Arizona, California, North Carolina, Pennsylvania and south Florida — in the past 18 months.

In fact, Enterprise Car Sales secured 38 new credit union partners and generated a record $576 million in origination volume in 2017.

“We’re thrilled to partner with Enterprise Car Sales,” said Dorothy Spilker, vice president and chief operations officer at First Eagle Federal Credit Union, which has branches in Maryland, Texas, Illinois and Tennessee and is one of Enterprise Car Sales’ latest credit union partners.

“Enterprise shares our commitment to excellent service, which — combined with First Eagle’s low-rate financing — allows us to provide the best experience to our members," she said. 

Compared with other types of finance companies, officials pointed out that credit unions saw the highest rate of growth in 2017, growing total automotive finance market share to 21 percent — an increase of 6.9 percent.

In addition, Enterprise insisted used-vehicle financing offers increased profit potential for credit unions, as the average used-vehicle installment contract amount reached $19,189 last year.

Enterprise Car Sales, which sold 12 percent more vehicles in fiscal year 2017 than in the previous fiscal year, is further supporting this growth through tailored used-vehicle buying programs that create opportunities for credit unions to increase their used-auto loan portfolios and optimize member loyalty.

All told, Enterprise Car Sales has helped generate nearly $11 billion in origination volume during the past 30 years with more than 1,000 credit union partners nationwide, including longstanding partners Golden 1 Credit Union and Municipal Credit Union.

“Our relationship with Enterprise Car Sales offers tremendous value to our members,” said Greg Brown, senior vice president and chief lending officer at Golden 1 Credit Union, which is based in Sacramento, Calif. “Golden 1 is committed to providing exceptional service to our members, and Enterprise is a partner we can trust to do the same.”

Sue Calais, assistant vice president of strategic partnerships for Enterprise Car Sales, added, “By expanding our network of credit union partners, we’ve charted a course to continued strong growth.

“We value the enduring partnerships we’ve built with credit unions over the past three decades. And we take pride in the fact that they are underpinned by a shared commitment to customer service,” Calais went on to say.

In addition to partnering with credit unions, Enterprise Car Sales also recently launched a commercial accounts program, which specializes in assisting businesses making multiple vehicle purchases.

New-car rates jump to near-decade high as delinquencies remain stable


As Edmunds spotted interest rates on new-vehicle financing climbing to the highest level in nearly a decade, the latest auto finance data from Equifax showed severe delinquency edged up only slightly in February.

According to information shared this week with SubPrime Auto Finance News, Equifax determined the severe delinquency rate — the share of balances 60 days or more past due — stood at 1.13 percent in February, up just 5 basis points from the year-earlier reading of 1.08 percent.

Equifax also reported that auto write-offs registered at 24.5 basis points in February, which is down from 24.9 basis points a year ago.

Equifax tabulated that finance companies originated 28.10 million vehicle installment contracts and leases — totaling $611.3 billion — in 2017, representing a 3.5-percent decrease in total new accounts and a 1.1-percent decline in balances over the prior year.

Equifax deputy chief economist Gunnar Blix pointed to the change reflecting a market shift from new to used vehicles.

Blix also mentioned that according to Equifax’s full-year data, just 9.2 percent of vehicle leases were issued to consumers with a subprime credit score, marking the smallest subprime share since 2011.

When looking at the data as a while, especially with delinquencies remaining relatively stable, Blix said, “Consumers benefit from these trends as well.

“Understanding how auto markets are shifting and learning which credit markets have favorable terms can help them make more informed personal decisions,” he went on to say.

March financing trends

Edmunds passed along information to SubPrime Auto Finance News this week, as well, indicating interest rates on new-vehicle loans will hit their highest level since 2009 in March. The projection would mark the second straight month of sharp rate increases.

According to the analysts at Edmunds, the annual percentage rate (APR) on financed new vehicles averaged 5.7 percent in March — compared to an average of 5.2 percent in February and 5 percent in January. This compares to 5 percent in March 2017 and 4.4 percent in March 2013.

Edmunds experts point to a significant decrease in zero-percent loans as a primary driver for this rise in the average. The percentage of zero-percent loans will drop to 7.4 percent in March compared to 11.4 percent in 2017, which Edmunds attributes to larger automakers shifting to different incentive structures to address slowing sales.

“Some of the largest volume brands like Chevrolet, Ford, Nissan and Toyota are demonstrating the largest drop in zero-percent loans year-over-year,” said Jessica Caldwell, executive director of industry analysis at Edmunds.

“This goes to show how the cost of lending has become increasingly more pricey, and zero-percent financing, while still a desirable incentive, no longer adds the same wow factor for consumers like it used to,” Caldwell continued.

Edmunds experts also point to a significant decrease in the number of installment in the 2- to 4-percent APR bracket and an increase in the 4- to 7-percent range as contributors to the spike in the average APR in March.

Analysts determined the number of 2- to 4-percent contracts accounted for 8.9 percent of the market, compared to 14.1 percent a year ago, and the percentage of 4 to 7 percent loans accounted for 34.5 percent of installment contracts compared to 27.6 percent last March, indicating that buyers are continuing to land in higher brackets than they previously would have.

“The high interest rates right now may catch a lot of car shoppers off guard, especially if they qualified for a lower rate the last time they visited the dealership,” Caldwell said.

New-Car Finance Data


March 2018

March 2017

March 2013





Monthly Payment




Amount Financed








Down Payment





Used-Car Finance Data


March 2018

March 2017

March 2013





Monthly Payment




Amount Financed








Down Payment




Source: Edmunds

F&I roundup: Updates involving Darwin, RouteOne, Reynolds and Hendrick

ISELIN, N.J., and DAYTON, Ohio - 

Two leading providers of technology to help dealership F&I offices function smoothly — Darwin Automotive and Reynolds and Reynolds — each recently landed significant developments to boost their industry presence.

First, Darwin Automotive announced that Darwin Online is now integrated with RouteOne for retail contract validation, submission and approval.

Meanwhile, Reynolds and Reynolds and Hendrick Automotive Group said that the Reynolds docuPAD system will be installed in all dealership F&I departments throughout the dealer group by mid-July.

Darwin explained what its relationship with RouteOne means.

From the dealer’s website, a consumer can select their vehicle, briefly describe their driving habits, select payment options and then receive a 100 percent accurate payment.  After being educated on the available protection and accessories, the consumer can opt to save even more time and get approved via the RouteOne integrated credit application.

Darwin Online then can send the detailed deal structure inclusive of qualified customer and vehicle incentives and programs, insurance products, as well as any trade detail, if applicable.  Dealers have full control over how much of the process is automated via their online retail services configurations.

If the dealer chooses no further automation, notifications are immediately sent to assigned dealership personnel, and direct consumer engagement occurs. 

If the dealer chooses further automation, credit bureau selection occurs. Depending on the results and deal parameters, the deal automatically can be submitted to select finance companies. This process all can occur in seconds while the customer is still engaged on the dealership’s website.

RouteOne pointed out that that firm can protect dealers from compliance and fraud with a number of free services built into its platform as well as premium subscriptions for those looking for a more encompassing solution, including the dealer’s own privacy policy, Credit Score Disclosure Notices and Red Flag Screening, to name a few.

“Undeniably one of the last pieces of digital retailing yet to be tackled is online F&I,” Darwin Automotive chief executive officer Phil Battista said. “Dealers need to adopt digital retailing technology that directly addresses and prominently promotes both the ‘F’ and the ‘I,’ or there will be one less profit center for them to count on.

“With our RouteOne partnership, Darwin Online continues the evolution of digital retailing in F&I, allowing customers to shop the way they demand,” Battista continued. “We offer dealers F&I everywhere — the ability to educate and sell F&I protection to customers wherever they choose to engage your dealership and our dealers are profiting from this immensely.”

Darwin Online interfaces with more than 142 different product providers and allows dealerships to control their profitability and disclosure. It can interact with all dealership websites without any need for DMS integration. The platform can provide accurate payments that match the dealership’s DMS to the penny.

The provider noted that studies show that 63 percent of online consumers surveyed said they would be more likely to buy F&I products if they were educated about them before they came into the dealership. Darwin Online can prescribe products the customer needs 24 hours a day, 365 days a year.

Approximately 2,500 dealerships have enrolled in Darwin Automotive’s F&I software in just the past two years. 

For more information, or to schedule a product demonstration, call (732) 781-9010 or visit www.darwinautomotive.com.

Hendrick adds the Reynolds docuPAD System in all dealerships

As mentioned, Reynolds and Reynolds and Hendrick Automotive Group recently announced that the Reynolds docuPAD system will be installed in all dealership F&I departments throughout the dealer group by mid-July.

Overall, Reynolds will install more than 350 docuPAD system workstations in the 96 Hendrick Automotive Group dealerships, with a large portion of those installations already having occurred.  Headquartered in Charlotte, N.C., Hendrick Automotive Group will be the largest single user of the docuPAD system in the United States.

“The docuPAD system has proven itself everywhere it’s been installed,” said Bob Brockman, chairman and chief executive officer of Reynolds.  “I’ve always admired Hendrick Automotive Group as disciplined and well run.

“Adding the docuPAD system to their F&I functions will help them take another step forward in the efficiency and effectiveness of their operations and in generating better financial returns in F&I,” Brockman continued.

Installing the docuPAD system also can enable Hendrick Automotive Group stores to adopt Reynolds eWorkflow, an end-to-end digital solution for creating and processing a deal and securing funding using eContracting.  Hendrick Automotive Group dealerships are already using electronic deal jackets and eliminating the stacks of paper that go to the accounting office, the lender and the consumer.

Reynolds eWorkflow also can improve dealership cash flow by cutting contracts-in-transit time and facilitating faster funding of deals.  Additionally, it reduces document storage costs.

“The people at Reynolds are true partners who share many of our company’s core values,” said Rick Hendrick, chairman of Hendrick Automotive Group.  “Continuous improvement has been a long-standing focus for our company.  The combination of Reynolds’ leading technologies and close working relationship with our team members is helping our dealerships take care of a whole new generation of customers.”

The Reynolds docuPAD system is well established in dealerships across the automotive industry as an effective way to increase financial returns in F&I offices, while also reducing errors in the F&I process and safeguarding a dealer’s compliance efforts.  At that same time, the docuPAD system completely changes the consumer experience in F&I.

“Reynolds is working with our dealerships on becoming more efficient, helping reduce storage costs, and simplifying compliance needs,” said Robert Taylor, vice president of Hendrick Automotive Group information technology.  “These new technology platforms are also fully interactive and allow our team members and customers to go seamlessly through an interactive F&I process.  They are interchangeable, giving our individual F&I departments the ability to customize the process, fit the needs of their customers, and improve the overall dealership experience.”

Dealerships across the industry last year closed approximately 1.6 million vehicle sales using the Reynolds docuPAD system, which is an increase of more than 30 percent over 2016.  On average, those dealerships also realized increased gross profit in F&I operations, according to Reynolds.

Looking ahead, Reynolds projected that 2 million vehicle sales will be closed through the docuPAD system in 2018.

“All of us at Reynolds are extremely proud to work with the people across Hendrick Automotive Group,” Brockman said.  “We recognize that their customers expect a rewarding, convenient, and efficient experience.  We believe the new solutions we’re providing will help every Hendrick Automotive Group store deliver that experience more effectively and profitably.”

PointPredictive and defi SOLUTIONS partner to curb auto finance fraud


Auto finance fraud often happens during the origination process, so PointPredictive and defi SOLUTIONS are joining forces in an effort to curtail the growing trend that TransUnion recently reported as having surpassed $500 million last year alone.

On Thursday, PointPredictative announced a new partnership with defi SOLUTIONS. PointPredictive insisted that it brings a suite of artificial intelligence (AI) predictive scoring that can identify the presence of material misrepresentation and fraud within automotive loan applications and automotive dealers.  This predictive technology has been shown to streamline auto financing decisions in real-time while protecting and reducing auto lender losses by 50 percent or more in fraud and first and early payment defaults due to material misrepresentation.

These types of losses are forecasted to represent a nearly $6 billion problem industry wide, according to PointPredictive.

The defi SOLUTIONS platform of services can offer finance companies the flexibility and freedom to leverage leading-edge technologies like PointPredictive’s to optimize decisioning efforts. Officials highlighted defi SOLUTIONS’ auto finance customers will be invited to participate in a limited-time, no-risk, pilot of PointPredictive’s solutions. They will also receive no-fee membership in the PointPredictive Auto Fraud Consortium.

“This addition to our partner roster helps ensure our clients have quick access to the information they need to run their businesses,” said Stephanie Alsbrooks, chief executive officer at defi SOLUTIONS.

PointPredictive chief executive officer Tim Grace added, “We are very excited about our new partnership with the fastest growing auto origination platform in the U.S. — defi SOLUTIONS.

“Our vision is to provide a real-time, actionable fraud score for every auto loan application in the industry,” Grace continued. “Credit scores and identity fraud alerts are not sufficient to allow lenders to determine when someone has made a material misrepresentation of information on an application. These material misrepresentations are some of the leading reasons why default and loss rates are increasing today.”

PointPredictive users have real-time access to Auto Fraud Manager 2.0 and DealerTrace 2.0, which can increase fraud detection by leveraging enhanced predictive algorithms that evaluate the entire financing application, as well as recent activity from dealers. This tool can enable finance companies to screen for, and detect, all types of fraud including identity, employment, income, collateral and dealer risk.

In recently completed evaluations, the company said Auto Fraud Manager identified more than 50 percent of fraud, first payment defaults and misrepresentation-related early payment defaults within the riskiest 7 to 10 percent of all applications, when rank-ordered by the Auto Fraud Manager score.

For further information on receiving Auto Fraud Manager through defi LOS, contact PointPredictive at info@pointpredictive.com or Patty Jefferson at pjefferson@defisolutions.com.

Editor’s note: Eric Werab, vice president of fraud and product strategy at PointPredictive, is slated to be a special guest during an upcoming episode of the Auto Remarketing Podcast. Past episode are available here.

Pairing up to enhance F&I: GWC with Nicholas Financial and Westlake with AUL


This week, two providers of vehicle service contracts enhanced their relationships with finance companies that often cater to consumers who fall into the subprime credit space.

First, GWC Warranty, a provider of vehicle service contracts sold through dealers, announced a strategic alliance with Nicholas Financial, a provider of direct consumer loans and installment sales contracts.

Also, Westlake Financial Services revealed a new partnership with AUL Corp., a warranty and vehicle service contract administrator. Bringing nearly 30 years of experience, AUL will now provide back-end servicing in 19 states for Secure One, Westlake’s vehicle protection program.

Nicholas Financial operates a network of 63 locations in 18 states spanning the Southeast and Midwest. Nicholas, which was established in 1987, is one of the largest publicly traded specialty consumer finance companies in North America.

“GWC's partnership with Nicholas Financial is yet another example of our company’s commitment to delivering a best-in-class experience that helps dealer generate strong referrals and repeat buyers,” said Rob Glander, chief executive officer and president of GWC Warranty.

“By aligning with Nicholas, we now have a partner to help us in continuing to share the ‘No Worries, Just Drive’ experience we provide dealers and their customers nationwide,” Glander continued.

Glander insisted the strategic alliance will offer both dealers and consumers more convenient and seamless access to quality financing and best-in-class service contracts. Through its established and growing dealer network, Nicholas will now offer GWC vehicle service contracts, providing its dealers and their customers the confidence that comes along with GWC’s track record of paying more than $3.5 billion in claims to date as part of APCO Holdings.

“At Nicholas, we offer dealers the opportunity to increase sales and maximize profits through financing programs tailored to both the customer and the dealer,” said Nicholas president and CEO Doug Marohn.

“GWC, much like the team at Nicholas shares a passion for helping dealers create repeat sales. This customer-focused approach to vehicle service contract and claims administration made this partnership a natural fit,” Marohn went on to say.

A similar scenario unfolded for Westlake and its Secure One platform, which offers two vehicle protection coverages: Powertrain and Advantage.

Powertrain will cover the vehicle’s engine group, turbocharger/supercharger, transmission, transaxle, transfer case and drive axle group. With Advantage Coverage, the customer will receive all Powertrain Coverage, plus power steering, electrical and air conditioning.

Both coverage options are available on either a 12-month/12,000-mile or a 24-month/24,000-mile financed term. Additional product benefits include; $100 deductible, 24-hour roadside assistance, rental car and trip interruption.

“Our customers look for reliable vehicle protection options that allow them to drive every mile with confidence,” said Ralph Ontiveros, vice president of Westlake Services & Lending Solutions.

“Not only does AUL have a national network of repair facilities and industry-leading customer support, it also is backed by an ‘A’ rated underwriter, providing great benefits to our customers and peace of mind on the road,” Ontiveros continued.

AUL vice president of national accounts Bryan Nieves added, “We just celebrated the issuance of our 2 millionth policy, and we welcome new partners who share our customer-first philosophy. Westlake Financial’s sterling reputation and commitment to its customers’ well-being make them a natural fit for our back-end services. We look forward to honoring their reputation with best-in-class support.”

Westlake Financial Services is active in all 50 states plus Puerto Rico, with a dealer base of more than 30,000 franchise and independent dealerships. Dealerships interested in learning more about Westlake Financial Services are invited to contact Westlake directly at (888) 893-7937 or online at www.westlakefinancial.com.

Nicholas Financial operates a network of 63 branch offices in 18 states including Alabama, Florida, Georgia, Illinois, Indiana, Kansas, Kentucky, Maryland, Michigan, Missouri, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, and Wisconsin. The company originates direct contracts in Florida and North Carolina. More details can be found at nicholasfinancial.com.

For more information about GWC Warranty, visit www.GWCwarranty.com.

For more details about AUL’s offerings, visit www.aulcorp.com.

PointPredictive rolls out Synthetic ID Alert to stop a growing fraud concern


PointPredictive understands criminals looking to orchestrate auto finance scams aren’t sitting idle.

On Tuesday, PointPredictive announced the launch of a new patent pending solution called Synthetic ID Alert. The solution is a complement to the company’s comprehensive application fraud scoring solution Auto Fraud Manager.

Synthetic ID Alert can help auto finance companies stop synthetic identity fraud by producing alerts on applications that exhibit patterns consistent with synthetic ID fraud. This sophisticated machine learning AI is quickly and easily installed within a lender’s technology system to be used in real-time application review.

“Auto lenders participating in our consortium meetings have identified that one of their top three issues this year is solving synthetic identity fraud. Our analysis shows that synthetic identity fraud accounts for 15 to 20 percent of fraud and misrepresentation losses across the industry. This equates to more than $1 billion in synthetic identity originations this year,” said Eric Werab, vice president of fraud and product strategy at PointPredictive.

“Synthetic identity thieves have figured out that credit scores and reports can be manipulated through schemes such as trade line piggybacking, which can artificially inflate their credit scores.”

Synthetic ID Alert scores applications based on patterns of fraud that fraud data scientists have identified in millions of historical automotive applications. This solution understands the logistics of social security number issuance, the interconnections between each of the pieces of information supplied on the application by the dealers and borrowers, and how all of these compare to proprietary and statistical norms accumulated from historical applications, dealer performance and fraud ring patterns.

If the solution determines that an application has a high likelihood of synthetic identity, a score and actionable reason codes are provided to the finance company so they can take immediate steps to prevent funding the fraudulent installment contract.

With this solution, PointPredictive projected that finance companies will need to act on less than 0.5 percent of their total application population to stop a significant portion of their synthetic ID fraud.

“Our proprietary machine learning algorithms are built on over 40 million historic applications and are capable of instantly identifying a pattern of synthetic identity. We wanted to create a simple, easy to install and use solution for lenders to solve a specific need,” PointPredictive chief executive officer Tim Grace said.

“With Synthetic ID Alert, we think we can help lenders identify a significant portion of their synthetic identity fraud applications before they approve the loans that will lead to losses,” Grace continued.

The solution is available immediately to finance companies as an application that can be installed in less than a day on existing technology systems. We also plan to offer this installation to our partner loan origination and solution providers.

To receive more information about Synthetic ID Alert, or to request the firm’s latest white paper entitled, “How Hidden Fraud & Misrepresentation are Contributing to the Rise in Default Rates,” send a request through www.pointpredictive.com or directly to info@pointpredictive.com.

NIADA adds Nicholas Financial as newest industry partner


New Nicholas Financial president and chief executive officer Doug Marohn is continuing to make moves to bolster the finance company that specializes in subprime vehicle installment contracts.

After recently highlighting plans to enhance originations along with installing an interim chief financial officer, the National Independent Automobile Dealers Association reached a partnership with Nicholas Financial, calling the provider one of the last true “common sense” finance companies in the subprime auto finance space.

Nicholas Financial connected with NIADA as a Bronze-level National Corporate Partner, joining a highly vetted roster of product and service providers available to NIADA member dealerships.

“We are extremely excited and proud to be part of such a great organization,” Marohn said. “NIADA has been synonymous with integrity and service in the preowned automobile industry for years. Its values align well with Nicholas', and we look forward to a very long and prosperous partnership.”

With local branch offices in every market Nicholas Financial services, the company has the ability to tailor lending and purchasing guidelines to the specific needs of each dealer partner.

Marohn emphasized Nicholas Financial's unique approach to originations is designed to find ways to approve deals even when others might say no, and provides an opportunity to price each contract on its own risk level.

Marohn went on to say that Nicholas Financial strives to conduct up-front investigations and customer interviews so dealers know the approvals they get are solid. That process allows Nicholas to provide some of the fastest funding in the industry; of many company features that appealed to NIADA senior vice president of member services Scott Lilja.

“Nicholas Financial brings to our independent auto dealership members a very local-market, personalized service approach to their auto finance resource needs,” Lilja said. “Local underwriting means quick turnaround on loan applications, helping our members meet and exceed their customers' expectations.

“In this day and age of automated, centralized, technology-driven loan decision systems within the auto finance market, Nicholas brings a unique, local-market service approach that aligns with our mission as the voice and advocate for independent auto dealers nationwide,” Lilja went on to say.