Since the widespread containment efforts caused by COVID-19, dealerships have been among the hardest-hit industries.
Much of this is as a result of dealerships either being forced to close, limited to online sales, or if they’re still open the virus has limited foot traffic in the showroom.
In fact, as of April 16, 24 states allowed dealership sales operations to remain open, according to J.D. Power. Another 23 states have allowed only online or remote sales. Michigan has only recently relaxed its ruling to allow online sales.
This means that contactless transactions are, at least for the near future, priority one in the transaction’s playbook for dealers. Because of this, F&I must play a leading role in helping educate people online during the research, transaction and post-sale phase of each sale.
Sales taking a significant hit
Preserving the transaction is the main priority currently as a result of the ongoing COVID-19 pandemic. The reason? IHS Markit recently lowered its global auto sales forecast for 2020 down 22% to 70.3 million units. It says the U.S. will fall 26.6% to just 12.5 million new vehicles sold, the lowest level since 11.6 million sales in 2010.
Where F&I can help the online process
If they weren’t focused here before COVID-19, dealers are now full speed ahead with online digital retailing options for customers. As part of this, more dealers are beginning to leverage additional online education of F&I options when shoppers are beginning their research online.
Dealers (and lender partners) want to make sure their customers are matched with the right vehicle, loan and terms up front. When it comes to additional F&I options, dealers want to leverage the online experience to remove any friction that historically was perceived to take place toward the completion of the deal inside the F&I office. While many F&I options can be beneficial to a car buyer, such as vehicle service contracts and ancillary protection plans, the customer may perceive these products as “upsells” at the last minute inside the F&I office.
Even before the COVID-19 pandemic, this friction was an issue. According to a recent industry survey, approximately 87% of car shoppers disliked some aspect of car shopping at dealerships, with the majority saying they felt pressure to buy right away or to buy additional F&I features. This pressure and mindset is reduced when car shoppers have information ahead of time on F&I product options. This allows them to research the benefits of these products in the comfort of their own home, as opposed to being in the F&I office where they don’t have time to make proper considerations.
Completing the transaction outside of the dealership
F&I can also be a great benefit to the contactless transaction at the completion of the deal and when the consumer then takes ownership of their delivered vehicle. Paperwork must be completed online through F&I and therefore it is imperative that each dealer has a robust and reliable online digital contract process necessary to complete each transaction outside of the dealership.
This “new normal” will certainly be critical for all involved – dealers, lenders and customers – in the near term, but the COVID-19 pandemic may also serve as a catalyst for longer-term change. As more dealer sales and F&I personnel are forced to work from home, and as consumers are weary of visiting dealers in person with physical handshakes, contactless transactions will continue to grow. Having the necessary digital retailing tools and resources available will not only help sales grow again, but over time it will help dealers build trust they need inside their communities.
Tim Blochowiak is vice president of dealer sales of Protective Asset Protection, a full-service provider of F&I programs offering vehicle protection plans, limited warranty programs, GAP, ancillary products, training and other services through vehicle dealerships. For more information visit www.protectiveassetprotection.com.
Assurant is looking to help dealership employees in the finance department stay sharp.
The company recently launched Virtual Coach, a simulated, interactive classroom experience as part of the Assurant Virtual Learning Platform. The new programs are from the Assurant Performance Institute, which includes in-person training for F&I employees.
The Virtual Learning platform includes Assurant Virtual Coach — a video-based role-playing function allowing for individualized feedback and scoring.
“The Assurant Virtual Learning Platform and Virtual Coach represent a major step forward in the progression of our in-person training,” said Martin Jenns, senior vice president for global transformation at Assurant Global Automotive.
“The Virtual Coach is a continuation of our promise to dealers to provide them with customizable and innovative solutions that help them grow their business,” Jenns concluded.
The Assurant Learning Platform includes multiple modules for fundamental skill development. The on-demand modules are designed to mirror Assurant’s FSM 101 in-person class held in Chicago.
The Assurant Virtual Coach simulates the interactive classroom experience where students role-play with the instructor. Through the Virtual Coach, students can submit videos and receive direct feedback from the instructor that uses the same Performance Evaluation Form (PEF) methodology deployed in the live classroom programs.
“The Virtual Coach combines the best of our instructor-led programs by integrating the same guided discovery learning experience with the convenience of distance learning,” said Dave Worrall, senior director of global training and development at Assurant Global Automotive.
The Assurant Virtual Coach is slated to roll out during the second quarter with two program options tailored to an Assurant client’s training needs.
The basic level will include the FSM 101 virtual training modules, each three-to-five minutes in length, for on-demand learning.
The upgraded service will include the basic offering plus access to the Virtual Coach, complete with a record function, four annual written/video feedback sessions from a certified F&I instructor, and participation access to quarterly live webinars led by certified instructors.
For more details, go to assurant.com.
Bryan Geist of masterQueue was one of several repossession industry experts who gave presentations during the 2019 Innovations in Recovery Summit hosted by Resolvion last fall in Dallas.
Geist began his presentation recollecting tactics some collections agents might have used in the past, pretending to be just about anyone by a company representative in hopes of locating a vehicle.
“Obviously, that would not fly today,” Geist told attendees. “If your staff attempted it now, they would be gone in a heartbeat.”
Geist continued with an overview of what makes a successful skip-tracer. Resolvion recently posted Geist’s presentation online to help other industry participants who might not have attended last fall’s event.
“Effective skip-tracing is still a critical part of a successful repossession strategy,” Resolvion said. “However, the challenge is much different than it used to be.
“In the old days it was all about finding a new piece of information and acting effectively on it,” the company added. “Today, the amount of data is overwhelming and the challenge is to how to interpret the data in the most effective manner.”
The video is available here as well as through the window at the top of this page.
The first month of 2020 already might be nearly gone, but the team at GWC Warranty emphasized that dealerships still have the opportunity to generate more profit this year compared to 2019.
“It’s worth your time to consider any opportunity that could bring in more profit,” GWC Warranty said in a blog before delving into four actions dealerships can examine, including:
1. Do Your Homework
Before heading off to auction, GWC Warranty suggested that it’s helpful to take a look back at the last year to see what vehicles moved most often and which were the quickest movers.
“You may have a sense of this already, but doing this prep work in advance can confirm your instinct for what vehicles to go in on at auction. It might even highlight a new focus for the next time you’re on the lane,” the company said.
2. Try a New Spot
GWC Warranty offered that dealers can step out of their comfort zone for an auction further away from home or even online that might be the ticket to scoring high-demand vehicles at a premium.
“If you’ve done your homework on what sells well in your market, you might even be able to find auctions or wholesalers that specialize in the exact inventory you want,” the company said.
3. Master the Upsell
Even if you’re already prioritizing vehicle service contract (VSC) coverage for your customers, GWC Warranty noted that there may be an opportunity to get them into higher levels of coverage.
“By working on your skills to get customers in increasing coverage, you stand to make more profit at the time of the sale and maximize your incentive program potential available as part of your VSC business,” the company said.
4. Get Into the Renewal Game
GWC Warranty stressed that “it’s the perfect time” to get back in touch with the dealership’s past customers.
The company noted that GWC Warranty Elite Dealers get access to an exclusive Elite Lead Generator report that provides a list of all customers with expired contracts who may now be in the market for a vehicle purchase or perhaps renewing their VSC.
Editor’s note: This commentary is the first in a series compiled by Joel Kennedy, who is the current president of the National Automotive Finance Association and chief operating officer at TruDecision, looking at the intricacies of repossessions and recovery.
The industry that locates borrowers and collateral, recovers collateral and handles liquidation on behalf of lenders has grown significantly in the last five to 10 years. Forwarders present lenders a streamlined way to manage recoveries, liquidations and vendor compliance, as a result of their configuration and focus on technology and innovation improvements to the process. During this time, lenders have seen the value in the forwarder model, resulting in the growth of this industry, and now — forwarder consolidation. The most impacted players in this new world are the recovery agents, and the recovery industry is feeling the economic squeeze, and recovery agents are suffering, or worse shuddering up.
The National Automotive Finance Association along with the American Recovery Association have facilitated working sessions between both lenders and recovery agents for the past few years — with the goal of driving standards within the industry that will benefit all players, and create an environment where recovery agents can once again thrive. Last year, the top forwarders in the industry got together and are actively involved in leading this initiative to a lasting result.
As someone involved in this initiative since 2018, and now as the president of the NAF Association, I wanted to get into the details of the skip / recovery space to better understand the lender’s challenges and the solutions that are available for them. To get educated, I embedded myself for some time within the operations of Flying A Information Resources, a skip / locate and recovery company. The results of my learnings are captured within a three-part editorial series on the fundamentals of skip and recovery. I would be remiss if I did not thank CEO Dick Landeis and president Jim Snead of Flying A Information Resources, for supporting this initiative and opening Flying A’s doors and process to me.
Improving Skip-tracing Results
In Disney’s “The Mandalorian,” the client says that “Bounty hunting is a complicated profession,” and provides the main character, a bounty hunter nicknamed “Mando” with only limited information in his pursuit of a bounty. The bounty hunter works solo and has to rely on his own skill and cunning to locate and capture the bounty. This Mandalorian is a specialist, a professional bounty hunter that his peers hate due to his success at catching elusive bounties that have frustrated and confounded them all.
Just as the Mandalorian is brought in when all other possibilities are exhausted, so too is the world of locating borrowers and collateral that have evaded you — also known as skip-tracing. I happen to believe that the seeds of the problems are sewn early on in the business setup. Auto lenders build up the detailed economic forecast and budget, and most of the focus is on stressing the model relative to revenue and losses. We tend not to spend too much time on the particular underlying people, process, and technology required to deliver on the details of plan. As a result, big dollar recovery processes like late-stage collections, skip, impound, vehicle in shop, and deep-skip tend to be cobbled together as afterthoughts.
Far too often it is “too little, too late.” We’ve all seen the scenario of some “pointy haired boss” lambasting the head of collections for a growing list of uncollectable accounts. So, as ops folks, we react by taking immediate action. Get the car, find the borrower, do whatever it takes to get the job done — fees and overtime be damned. Just find a local skip / recovery specialist and assign the case on the double (skipping all sensible vendor due diligence). Equally as detrimental is the fact that the decision whether to build the intelligence internally or outsource is oftentimes based less on considering the strategic elements, and more on the ego of the collections VP or the CEO.
The Challenges
From the smallest to the largest automotive lenders, the challenges are common:
—Challenge No. 1: I can’t locate my borrower.
There are skip accounts in every stage of delinquency, but they tend to get noticed when they start rolling into the 31 days past due bucket. The focus in the earlier stages of delinquency (say anything prior to 61 days or more past due) tends to be more on locating the borrower and trying to help get them back on track, and collections tends to utilize a standard set of borrower outreach tools that escalate as you trip different days past due triggers. So, the phone calls, text messages, and emails continue, while possibly layering in more mail, collectors refer back to the loan package and start calling references, possibly running an updated skip report, and maybe issuing a field call. How well focused and measured these efforts are can vary on the level of management, rigor and controls in place, and this can have a bearing on the results.
—Challenge No. 2: I can’t locate my vehicle.
As a delinquent account ages, the focus on finding the collateral takes central focus. Locating a vehicle when the borrower has changed jobs, residence, possibly even moving out of state can be tricky. Most recovery agents can conduct some skip tracing to provide more information for the case. If your collateral is equipped with a GPS, you can do some skip tracing there (even if the device was tampered with), and if you subscribe to a license plate recognition (LPR), that can be another source of leads.
—Challenge No. 3: I have deep skip accounts that are at a dead-end, and I am battling against the clock and charging off.
Deep skips are those skip accounts that have been worked but are unresolved. They may have been worked internally, and also by an outside skip agency, or even a repossessor, with no result. Deep skips tend to get thrown over to skip / forwarders from time to time, and lenders figure this is a no-lose proposition to find either the collateral, the borrower, or both. Assuming that the borrower is so many payments behind that getting reinstated is not really an option, locating the collateral is the first step towards recovering the vehicle and liquidating at auction.
—Challenge No. 4: My operations are not skilled at skip=tracing.
Skip-tracing is definitely a skill and an art. You are looking for patterns in publicly available data, customer provided data, and special data sources (like skip reporting tools, legal records, bureaus, etc). The tools are far from a silver bullet, you still need your skip analyst to be able to make sense of all of the information in front of them, and be selective in what additional data is needed to fill in the picture. Further, there are quite a few areas of compliance that need to be addressed when, say, calling borrowers’ place of employment, or their provided references, or known family identified from skip / bureau tools. Building this up from scratch will require some measure of expertise, most likely at the manager level, and the time and resources required to train the team up. For smaller lenders, you can run into situations of inefficiency where you will need to staff and train more than one person to make sure that you have coverage when the person is out or decides to leave the company.
—Challenge No. 5: Skip tools are expensive, and managing the cost and utilization is difficult.
There are many skip tools out in the marketplace. Speak to any experienced skip tracer and they will be happy to provide you with their favorite techniques and resources, but for the most part, they will tell you that you are likely to be using various resources until the point that you find a missing piece to your puzzle. So, in the context of trying to control and manage costs, this can be problematic. If the list of skips grows, it is easy for management to say “pull out all the stops, run every skip report you can.” The CFO sees that expense line grow (after the fact), and now your skip tracers are constrained to run fewer reports.
—Challenge No 6: I don’t have a path to develop skip tracing skillset internally.
As outlined in Challenge No. 4, you need some expertise internally to either staff or train your skip resources. In cases where that skill set is not readily available, lenders often lack the requisite path to stand up a successful skip team. This can not only be costly, but quite daunting a task, and time consuming — potentially taking your eye off the ball in other areas where management needs to be actively engaged.
In summary, many lenders struggle with locating their skipped borrowers, and vehicles. They may not possess the path or skillset in-house to positively resolve the situation. The cost to address the gap in skip capabilities can be expensive to resolve, and in the learning phases the cost of running redundant, superfluous reports can only set you back further with the internal turmoil that will ensue.
The Solutions
The issues we outlined exist in some measure at most lenders. There are strategic and financial considerations, understanding your company’s risk tolerance, comfort with compliance, and a variety of other factors to consider in how best to approach gaps in skip tracing performance. Thinking in the most basic terms, there are three possible outcomes that can resolve these gaps:
1. Build the Capability Internally
Building skip capability internally can be a good idea, provided you have a path to acquire (or develop) the team to deliver results, and do so safely with consumer rights and compliance central to your controls. Additionally, the cost of running the variety of skip tools is something that needs to be well-managed and tightly controlled if you don’t want end of month “surprises” for your CFO. Ideally, as a skip function grows and matures, there should be ways to train this skillset into your collections staff (particularly the late-stage group, where the lines between collections and skip are blurred) and extend your ability to locate and resolve skips earlier in the process. These are real benefits, and can be realized if you have a clear path, and are willing to make the investment in time and money.
2. Outsource Broadly
The last decade saw a substantial increase in the proliferation of, and increased market share of skip specialists and forwarders. These outsourcing partners can take your skip activity when assigned and manage the entire process. Lender clients will want to clearly establish their expectations for receiving updates with good content and frequency. You will get the benefit of having a managed process, with streamlined process flow, and if you can integrate the data back in to your core (loan servicing) system, you can make it faster and easier for collectors, and recovery specialists to act quickly and not drop the ball. Beyond the core components of service delivery, outsourcing of skip can open each of your assignments to a variety of data sources and skip tools that are constantly changing, each of which costs money to run. A perfect example of this is tapping into LPR analytics (i.e. have we seen this car before on prior scans?), and posting these vehicles into a live status in LPR, opening them up for not only skip, and locate, but if the client wishes — also recovery.
As already mentioned, the market for outsourced skip and subsequent processes (recovery, disposal, etc.) has grown significantly in recent years. To lender clients, the simplicity of managing all skips (and beyond) through a single or handful of vendors is an attractive option to managing all aspects of skip cases directly. If a lender truly has a solid leader and grasp of skip to the point where they will consistently outperform an outsourced option, and do so at a cheaper cost, then by all means. There are many lenders that do just this, just as there is an ever-growing portion that opt to outsource. The fact is that results and performance can change over time, and performing routine comparisons of the results and cost of achieving those results is something that I always advocate.
Which leads us to our final option.
3. Outsource Partially / Specific Elements
In non-prime auto, while there are several large, national players, for the most part the industry is characterized as fragmented, with a majority of smaller regional participants. Sometimes due to smaller volumes, managing the process internally and directly can be the best option. Problems can however crop up when a borrower goes outside of the lenders’ geographic footprint. Lenders may need to engage new skip and repo companies that operate in these “out of footprint” areas, leading to the assignment of skips and repos out to forwarders that have already established relationships with providers that have been vetted for process, compliance, etc.
Another reason why companies may outsource some (but not all) skips would be that they have arrived at a point where they are at a dead-end. Sending these to an outside party to crack the case is a way to keep things moving.
What I do encourage in cases like these would be to create a learning loop with the outside vendor that allows your internal skip tracers to learn and grow. Industry veteran and expert, Dick Landeis, CEO of Flying A Information Resources said, “The best thing a lender can do is get the skip accounts to your skip agent earlier. There is nothing gained from letting an account age.”
Jim Snead, the president of Flying A Information Resources added, “Like many skip agencies, we will tend to see accounts that have been worked 2 or 3 times by recovery agents that don’t specialize in skip, and are flipped over to us. We are always happy to help, but I can tell you that in most cases, had we gotten the account sooner, we would have solved the case quicker, resulting in higher recovery dollars to the lender client.”
So, I am not the only one that thinks “the sooner the better” when it comes to case submission — so identify the dead-ends sooner and you help the vendor out and yourself with better results. It ultimately increases overall client satisfaction, and results, and the vendor will always have new data sources / methods that will keep them relevant and not losing future business because of it. A win-win.
Measuring Results
While we discussed the virtues of lenders looking outside for help to generate improvements, at the end of the day what matters are the results. We ultimately want to move the needle on the results, irrespective of whether they came internally or externally (of course cost of getting the results needs to be considered). At the end of the day, the metrics we want to move are:
• Reduction in delinquency
• Reduction in skip accounts
• Improved skip performance
• Improved recovery rates from skip efforts appending more reliable, up-to-date whereabouts of your collateral and customer
• Reduced losses
• Streamlined operations, faster management of your issues with accountability
As a former operator of more than 20 years, I can tell you that there is always something new that you can do, some new technique, or some outside service that you can employ that will make all the difference and you think “why didn’t I do this sooner?” To me, the big key with all of this is keeping an open mind, not allowing management hubris get the better of you, and openly testing and evaluating options that impact your business configuration.
Acknowledgment
I would be remiss if I did not thank Dick Landeis and Jim Snead of Flying A Information Resources, for supporting this initiative and opening Flying A’s doors and process to me.
Joel Kennedy is chief operating officer of TruDecision. As president of the National Automotive Finance Association, Joel is passionate about growing and improving auto finance ecosystem. Joel has more than 24 years’ experience helping big banks down to start-up finance companies to build, grow, improve, and repeat. Joel can be reached at (240) 308-2169 or [email protected].
Automotive Personnel founder and chief executive officer Don Jasensky addressed what he believes is the most common hiring mistake employers make.
The National Automotive Finance Association board member discussed when dealerships and finance companies might pass on a potentially high performing candidate because the individual did not “blow you away” or “show a lot of enthusiasm” during the first interview.
To illustrate the situation, Jasensky leveraged his 30 years of interviewing experience and several thousand successful placements to describe two hypothetical candidates named Bill and Mary.
“Bill is under a lot of stress at his current job and may soon be terminated for poor job performance,” Jasensky said. “Mary is excelling at her current position, just as she has in her past positions. She does not need a new job but is open to seeing what your opportunity is about and make a smart decision if it is worth pursuing further.”
He then asked managers to consider these questions stemming from those scenarios:
— Doesn’t this put a lot of pressure on Bill to find a new job? How might it affect his interviewing?
— How will the fact that Mary is under no pressure affect her interviewing?
It’s now interview day. Jasensky first recapped what likely happen during Bill’s interview with the finance company or dealership.
“As possible relief from the pressure of being terminated for poor job performance. Bill will be in ‘sales mode’ and compliment you, your company, and its product or service. Bill will be enthusiastic and ready to jump through any hoop, take any test, and will start very soon with you. Bill wants to impress you,” Jasensky said.
“Yes, Bill will interview very hard for your job. Bill will have no concerns about your position, its work content, or driving distance,” he continued. “Bill will work hard to cover up the fact that he is a low performer. Usually, by compliments, enthusiasm, and lack of job performance specifics. Bill will likely continue to be a low-performer if he gets your job.”
“As a learning and fact-gathering process. Mary isn’t trying to ‘sell’ you on herself nor impress you. She will tell you about her role and successes with pride, but she will not attempt to ‘blow you away,’” Jasensky said.
“Mary will likely be more pensive and ask thoughtful questions and probe you about issues she may see with your company, position, product, or service. She will openly express these concerns. This is how ‘high performers’ interview and make value judgments. Mary will likely continue to be a high performer if she gets your job,” he went on to say.
After the interview, Jasensky indicated that it’s likely Bill will be contacting your company often asking for a status update on the job search while he continues his own search with other firms. Meanwhile, Mary is like to be conducting more research about your company, replying only if you are seeking a second interview.
“Don’t confuse Mary’s behavior as being aloof nor low energy,” Jasensky said. “Mary is in thinking and fact-gathering mode, whereas Bill is in ‘sales mode.’
“If Mary becomes more certain that she wants your position, her interviewing will change, and she will switch gears and become more expressive and enthusiastic during follow-up interviews,” Jasensky went on to say.
Jasensky closed his latest personnel by reiterating what he believes is an important lesson in this situation.
“The best indicator of future job performance is past job performance. High performers tend to be high performers throughout their careers, and low performers tend to gravitate towards low performance,” Jasensky said.
“So invite Mary back for a second interview, and spend the time learning about her past and current job performance while checking references,”” he continued. “You may even need to ‘do some selling’ to entice Mary to your company.
“Many managers loathe the thought of having to sell the position or the company. However, you are not looking for a BFF, you are looking for a person to help your company. In a competitive job market, some “selling” by hiring managers is very beneficial in landing the best personnel,” Jasensky went on to say.
To find candidates who could help your organization or to get more recommendations about personnel matters, Jasensky can be reached at (216) 226-8190 or [email protected].
ALS Resolvion is trying to make collaboration within the skip-tracing and repossession worlds a little easier to be done online.
The recovery management firm this week announced a transition of its popular community forum, Lenders Repossession Best Practices, from one operating on social media platform to a site that lives within ALS Resolvion’s website.
The forum is a private community limited to individuals involved in collateral recovery issues at banks, finance companies, captives, credit unions and other firms originating or buying loans. Previously an exclusive LinkedIn Group with limited functionality, the platform transition now offers approved members full forum advantages.
Some of these benefits include member gamification, easy forum responses via email, post notifications and access to network with more than 200 auto finance executives.
ALS Resolvion hopes that the platform transition will continue to spark conversations throughout the year among the financing community.
“Lenders Repossession Best Practices forum is another resource that we felt was necessary to the industry but we had to ensure it also provided all the benefits of a forum,” ALS Resolvion chief executive officer Michael Levison said in a news release.
“Our goal behind the initiative was to provide a way for lenders to network and communicate outside of industry events and we think that the forum transition will be a critical element to making that happen,” Levison went on to say.
For more information about ALS Resolvion’s community forum, Lenders Repossession Best Practices, or to register as a member, go to this website.
Not only did Automotive Intelligence Council member Equifax share its latest data about how originations are trending, vice president of automotive marketing and strategy Jennifer Reid also delved into six best practices that could help finance companies of all sizes.
Even as subprime originations slow to the lowest level Equifax has seen in more than five years, Reid maintained in this video that there are several facets of business that finance companies can sharpen, including:
• Need for speed in underwriting for lenders.
• Best practices to make sure you get the right offer back to the dealer while mitigating risk.
• Ensure customer is who they say they are.
• Ensure you understand the customer's financial capacity (verifiable income and employment through real-time databases).
• Look at your portfolio and get ahead of the process to engage with customers for the right buying decision.
• Looking at the process to see where you can automate more.
Reid arrived at those assertions not long after Equifax shared its data as reported through April.
Through the first four months of the year, Equifax indicated 7.96 million auto loans had been originated, totaling $183.9 billion. This data represented a 0.3% decrease in accounts and a 2.3% increase in balances year-over-year.
Equifax said retail installment contracts constituted 86.6% of all auto account originations and 89.8% of all auto origination balances through April.
Analysts found that 1.81 million auto loans have been originated through April to consumers with a VantageScore 3.0 credit score below 620. These individuals are generally considered subprime accounts. The volume marked a 1.8% decrease year-over-year. These newly issued contracts have a corresponding total balance of $33.6 billion, a 1.8% increase year-over-year.
Through the end of April, Equifax determined 22.7% of auto loans were issued to consumers with a subprime credit score, accounting for 18.3% of origination balances. In the same time a year ago, the account share was 23.1% and balance share was 18.3%.
Analysts went on to note the average origination loan amount for all auto loans issued in April was $23,659. This figure is a 4.5% increase over April of last year. The average subprime loan amount was $19,304, which is a 6.1% increase compared to April 2018.
“While overall auto sales have fallen slightly compared to the previous year, we’re seeing active and interesting trends in auto loan originations through April,” Reid said in analysis shared with SubPrime Auto Finance News.
“In particular, while subprime activity continues to grab headlines, it is interesting that the percent of subprime to the total originations are at the lowest level dating back to the end of the recession,” she continued.
“Furthermore, we will keep a watchful eye on lender activity, as it appears lenders are tightening up in the under-620 credit score bucket for both lease and retail contracts,” Reid went on to say.
Equifax also will be among the companies bring their experts to share insights during Used Car Week, which begins on Nov. 11 at the Red Rock Resort in Las Vegas. Early Bird registration discounts are available through Oct. 1.
The complete agenda and other details are available at www.usedcarweek.biz.
Chief fraud strategist Frank McKenna described the fourth gathering of the PointPredictive Fraud Consortium Roundtable earlier this month just ahead of the National Automotive Finance Association’s Non-Prime Auto Finance Conference as the best one yet.
Besides more than 50 attendees from 21 auto finance companies — including five of the top 10 market leaders — McKenna shared with SubPrime Auto Finance News why the industry is uniting to combat a growing problem.
“It was so much more interactive,” McKenna said in a phone interview following the gathering in Plano, Texas. “When we started the consortium meetings, people were a little shy or maybe didn’t know a lot about fraud, but they were interested. They were less able to share best practices and experiences.
“But at this meeting, there was a lot of collaboration,” he continued. “Everyone was talking, everyone was interacting, trying to figure out what the other lenders were doing to stop fraud and what fraud trends they were seeing. It’s been remarkable to see the transformation of the industry. As soon as they start getting together, they realize the value of working together. The mood was really energetic and participatory.
McKenna and PointPredictive partners including defi SOLUTIONS and Digital Matrix Systems discussed rising fraud trends and potential collaboration on how to best address those issues from an industry perspective.
During the roundtable sessions, finance companies identified their three biggest fraud concerns for 2019. McKenna shared that attendees could use their smartphone to participate in surveys that generated immediate results.
Finance companies in attendance identified their first concern as the dramatic increase in deceptive credit washing where individuals overwhelm creditors with false claims of identity theft to remove legitimate trade lines from their credit. Their second biggest concern is the dramatic rise in synthetic identity which is largely driven by individuals using credit protection numbers (CPNs) to create new credit files under false pretenses. Their third biggest concern is the ongoing and systematic fraud by dealers that results in higher levels of first and early payment default.
The event also included guest speakers, including Sgt. Darren Schlosser from the Houston Vehicle Fraud Task Force and Matt Pannell, former special agent with the Social Security Administration, who shared insights into the growth of synthetic identity fraud and credit repair fraud that are sweeping the nation.
“Synthetic identity is being driven largely by unscrupulous credit repair companies that are convincing ordinary people to commit criminal acts,” Schlosser said. “Using so-called CPNs to apply for credit under false pretenses is a crime and I’m seeing an alarming increase in the number of vehicle financing fraud cases where this is occurring.
“I believe collaboration between lenders, law enforcement, car dealerships and others is important in preventing this type of fraud from growing,” he continued.
At the roundtable, McKenna also provided insight into fraud trends by presenting results from analysis conducted on more than 70 million historical auto loan applications.
The analysis showed that auto lending fraud risk has risen by at least 38% in the past seven years and that fraud origination risk is expected to reach $7 billion in 2019. The analysis further showed a dramatic 140% increase in synthetic identity risk patterns in auto applications since 2016.
McKenna’s research demonstrated that the drivers behind the rising levels of fraud risk were the growth in sharing of fraud methods on social media, the increase in financing to borrowers with lower credit ratings and the billions invested in fraud controls by other industries which have had the effect of pushing fraudsters toward auto finance companies and dealers.
“We appreciate the collaboration that PointPredictive enables through their consortium in addressing our key fraud pain points at these roundtables,” said Jorge Arenado, associate vice president of originations at Westlake Financial. “Their focus on both first- and third-party fraud, and not just identity theft, helps the auto lending industry target all the fraud we experience including income misrepresentation, dealer fraud, straw borrower and fraud ring activity.
“The chance to discuss all of these issues with our peers is a big benefit in helping us shape our future fraud strategies,” Arenado continued.
Mickey Watts is senior vice president at Anderson Brothers Bank and a board member of the NAF Association, which also included a special Fraud Friday segment again this year at its annual conference.
“We learn quite a bit from the PointPredictive roundtable each year,” Watts said. “As fraud continues to morph and change, we are able to meet and discuss the changing fraud patterns with other lenders and discuss best practices and how to use the PointPredictive products to our best advantage.”
During the event, PointPredictive showcased its solutions, including:
—Synthetic ID Alert, which can alert finance companies to potential synthetic identity issues.
—Auto Fraud Alert, which can provide 100 alerts and red flag indicators to finance companies based on comparing and validating information a lender receives on an application against data assets managed by PointPredictive
—Income Validation Alert, which can enable lenders to streamline their income assessment of borrowers.
“Our use of PointPredictive solutions has changed our company’s awareness around stopping fraud and misrepresentation within our portfolio,” said Eric Lin, general manager of Universal Finance Company. “The consortium roundtable event is a unique advantage to us and the industry in the fight to protect against financial losses of this kind.”
PointPredictive’s roundtable continues to grow as more finance companies collaborate to address fraud.
“The growth of our consortium and record attendance this year indicates that we’re on the right track in our approach to help solve auto lending fraud,” PointPredictive chief executive officer Tim Grace said. “When we launched the auto fraud consortium two years ago, our mission was to bring the industry together in the same way we did in the past at other companies to address fraud in mortgage and credit card.
“Since fraudsters and unscrupulous dealers attack lenders serially, it is only through collaboration that the industry can address the issue,” Grace continued. “Our solutions are now scoring over 1.5 million new auto applications every month using shared machine learning models. We’re very proud of our growth and the positive effect we are having in the industry.”
Glenn Munro, executive vice president of defi SOLUTIONS, a PointPredictive partner that provides turnkey access to those PointPredictive solutions through the defi SOLUTIONS Loan Origination System, also addressed the attendees.
“We partner with PointPredictive because we have a common belief that shared fraud intelligence and scoring in real-time is the best way to combat the problem. PointPredictive is doing this the right way,” Munro said.
For further information on PointPredictive solutions or to join future Auto Lending Fraud Roundtables, contact PointPredictive at [email protected].
The Federal Trade Commission recently offered six recommendations to dealerships and auto finance companies that might receive subpoenas and civil investigative demands (CIDs) as part of an investigation into potential law violations
Burke Kappler, an attorney in the FTC’s Office of General Counsel, explained in a recent blog post that the regular subpoenas and CIDs are critical and used deliberately and responsibly to avoid unnecessary burdens on businesses and individuals and consistent with its obligations to enforce the law.
“These requests are legally enforceable demands, and recipients of subpoenas or CIDs need to take their obligation to comply seriously,” Kappler wrote. “We expect all companies and individuals who receive compulsory process to respond completely and in a timely manner, or to disclose quickly and candidly any obstacles to full compliance.
“We routinely work with recipients to narrow or defer requests, and generally, we have found that parties cooperate. But not everyone sees the benefits of cooperation, which can often result in delay,” Kappler continued.
In an effort to make the process go as smooth as possible, Kappler offered these suggestions, including:
— Respond promptly to FTC staff upon receipt of a subpoena or CID.
— Take advantage of meet-and-confer opportunities and be forthcoming about any concerns that you have about your ability to comply on time and in full. In meetings or calls, bring people who have knowledge and information about the required documents and information and the efforts necessary to produce them. Provide specific and concrete information — not just guesses.
— If you run into problems meeting deadlines, call staff immediately. Keep them apprised so they can work with you. Stay in contact. Don’t let deadlines pass without explanation.
— Understand that the FTC and its staff need to move investigations forward expeditiously. Unsupported requests for extended delays may not be granted.
— Abide by commission orders promptly. If you have filed a petition to limit or quash a CID or subpoena and the commission has ordered some form of compliance, you must do so or risk a potential enforcement action within 30 days of the commission’s deadline.
— Bear in mind that there are many other factors that affect the timing and course of an FTC investigation. Delaying compliance with a CID or subpoena in hopes that you won’t have to comply at all rarely works, and most often results in follow up from the Office of General Counsel.
