Dealer Marketing Services, the makers of ProMax Unlimited, recently released the third solution in a line of three consumer credit soft pull products. The latest addition is the Instant Auto Credit App, an Equifax-powered version of the popular online soft pull solution.
Since the entire trio is now available, ProMax Unlimited indicated the three products can be deployed by dealers individually or as an entire product suite.
The Instant Auto Credit App can allow visitors to a dealership’s website to pre-qualify for auto financing. Consumers who wish to be pre-qualified are required to fill out a short application and verify their identity, in exchange for an offer that includes a maximum loan amount and a range of possible interest rates.
The dealership in turn can receive a pre-qualified lead.
“Leads are the lifeblood of the auto business,” ProMax chief operating officer Shane Born said. “This powerful soft pull tool goes a long way toward converting anonymous website visitors into auto sales and can be used for customers already at the dealership, showroom walk-ins and service lane customers.”
Instant Score, which was the first of the three Equifax-powered credit solutions to be released, can function as a simple plug-in to any page on a dealership’s website. Using Instant Score, visitors to a dealership’s website are able to see their Equifax credit score free of charge. This simple process only requires consumers to fill out a short form and verify their identity, but does not require some personally identifiable information, such as a social security number.
Upon completing the form and having their identity verified, the consumer may view their credit score, and the dealership receives a high quality authenticated lead.
“Our dealership customers highly value prospects that are sourced from their own websites and service lanes,” ProMax chief executive officer John Palmer said. “The PowerLead service from Equifax enables us to help validate consumer identities and performs a soft pull of a customer’s credit file to assess customers quickly and easily. This is why we are so excited to offer our dealerships the valuable services of each of these three products.”
Back in April, the company highlighted Instant Screen powered by Equifax; a solution that can enable dealers to provide a firm offer of credit at the dealership level. Customers shopping for a vehicle or in for a service appointment can be prescreened according to finance company’s predetermined credit criteria.
“The release of these three solutions solidifies our status as the industry leader in automotive dealer soft pull credit products,” ProMax chief technology officer Darian Miller said. “No one else boasts as wide a variety of automotive pre-screen tools.”
For more details, go to www.ProMaxUnlimited.com.
The size of the U.S. subprime population is getting smaller — at least that’s what FICO says. And large finance companies such as General Motors Financial again acknowledged that the segment of its portfolio composed of subprime paper will continue to diminish, too.
However, dealerships that participated in KeyBanc Capital Markets’ monthly survey indicated that they’re still able to obtain financing for their vehicle buyers, even if they fall into the subprime credit tier.
In fact, KeyBanc reported that 100 percent of respondents who participated in the May survey said financing availability remained intact or is even increasing.
“Commentary from the field is that larger players are pulling back on subprime as smaller financing companies are becoming more aggressive and gaining share,” KeyBanc said in its latest survey recap shared with SubPrime Auto Finance News.
“The commentary from the larger lenders, such as Santander, suggests they will not be chasing market share,” KeyBanc continued. “So in the end, who is lending to the subprime consumer is changing, but the auto industry continues to have access to financing.”
Santander Consumer USA shared its stance about subprime volume not only when it announced its first-quarter results back in April, but also when chief executive officer Jason Kulas reiterated the position during the Morgan Stanley U.S. Financials Conference in New York earlier this month.
“We are only concerned about volume to the extent that we want to make sure we get volume that will be profitable through cycles — volume that has the right price and the right structure, the right return,” Kulas said.
Meanwhile, GM Financial noted its stance again last week when chief financial officer Chris Choate hosted a presentation titled “Behind the Charts” in which he touched on several elements of the finance company’s business operations. When it came time for Choate to answer questions from Wall Street observers, multiple analysts wanted to know about GM Financial’s plans for subprime originations.
“We at GM Financial have sort of, particularly in the used-vehicle financing space, we have allowed our market share in that space to erode dramatically. We still have a presence, but it’s way down from what it was,” said Choate, who referenced a portion of his presentation that highlighted how GM Financial’s subprime business outperformed the track of the Wells Fargo Subprime Auto Index going back nearly six years.
“If you go back over a two- or three-year time period, our presence in that used-vehicle financing space as the market got a little frothier and really became too narrowly priced … we just kind of have sidled off to the sideline a bit,” he continued. “So we think that’s certainly one of the reasons why we’re outperforming this index that we showed in the chart is we’ve just maintained a lot of pricing and credit discipline.
“And that's not to necessarily say that others didn’t,” Choate went on to say. “A lot of the newer entrants in the space — and they do end up in the industry part of this index that we showed — target a different level of subprime. So subprime is big; it’s a word that covers a fairly broad swath of territory, generally from 620 FICO all the way down south of a 500 FICO. And so you have some of the newer entrants that necessarily have to grab onto the credit scale down lower in order to get a toehold and have a viable value proposition to dealers. So it’s not all apples and apples, quite frankly.”
Choate continued his response alluding to trends that KeyBanc referenced in its latest dealer survey: whether or not finance companies might be pulling back in how much subprime paper they’re originating. Choate insisted “it’s a little more complex than kind of a blanket observation there,” as to whether or not the majority of the industry is deciding to take its foot off the subprime pedal.
“If you look at the market data kind of month by month by month by month, there are any number of smaller and larger players that mash on the gas and then pull back,” he said. “It kind of ebbs and flows a decent amount, and that includes Santander and (Capital One) and Wells Fargo and Chase Auto Finance and us and Ally (Financial) and all the others, not just the small guys, who will express through their buying habits a little more desire for a certain credit tier or a credit mix in one month or two.
“And then for whatever reason sort of pull back on that a little bit two or three or four months down the road,” Choate continued.
Then the GM Financial executive took the view of a dealer, “be it CarMax or somebody else.” Choate acknowledged, “You can certainly develop a view that the market has tightened just because one of your primary lenders may have ebbed versus flowed over a certain period of time.
“We certainly don't view at GM Financial that there's going to become a lack of credit availability in subprime,” Choate declared. “It’s certainly possible, and I think we would stay hopeful that pricing will firm a bit in subprime in order to fatten the margins back up a bit.
“But I don't believe that you're going to see any dramatic tightening,” he went on to say. “I think generally credit appetite at least across the larger, more established players of which we and the others I rattled off are those guys, we think it will be fairly stable.”
While FICO indicated the total subprime population dropped to the lowest point in about 10 years when analysts compiled their April data, Choate described the kind of subprime customer GM Financial will book a contract with nowadays.
“The demographic of a subprime borrower today for us is generally better than what a subprime borrower looked like for us 10 years ago. They have better household income, a little more stability on residence, a little more down payment going into the deal,” Choate said. “So we have a better through-the-door subprime consumer now than we did 10 years ago.”
While Federal Reserve chair Janet Yellen made her semiannual visit to Capitol Hill this week and shared her thoughts on how much interest rates might rise, FICO highlighted how the auto finance customer population that often is charged the highest APR — subprime buyers — dwindled to the lowest level in more than a decade.
FICO confirmed to SubPrime Auto Finance News that the share of U.S. adults with credit scores considered to be subprime — registering below 600 — fell to 20.7 percent in April, representing the sixth month in a row of year-over-year declines. Ethan Dornhelm, the senior director, scores and analytics at FICO, explained that the latest reading is the lowest since at least 2005; that’s when the firm began to track this metric.
“I would characterize the decrease in percent of consumers scoring below 600 as a fairly steady trend since bottoming out in 2010; although it does seem to have accelerated a bit in the last few years,” Dornhelm said.
FICO found that the percentage of U.S. consumers with a score below 600 peaked at 25.5 percent twice in 2010 as analysts spotted the reading in both of their April and October snapshots from that year.
Dornhelm then touched on the elements FICO attributed to the prolonged decline in the amount of U.S. adults who fall into the subprime category.
“Some key drivers are likely the steady improvement of the economy and housing market since the bottoming out of the economy in 2009-2010,” he said. “Better economy equals more financial stability which equals more consumers paying their bills on time, managing responsible levels of indebtedness which in turn leads to higher FICO scores.
“Other factors at play include lower interest rates, which in turn reduces consumers’ monthly debt burden,” Dornhelm went on to say.
And speaking on interest rates, they were part of the economic components mentioned by Yellen during her prepared testimony to both the House Financial Services Committee as well as the Senate Banking Committee.
Yellen told lawmakers that the Federal Open Market Committee (FOMC) continues to anticipate that economic conditions will improve further and that the economy will evolve in a manner that will warrant only gradual increases in the federal funds rate.
“In addition, the committee expects that the federal funds rate is likely to remain, for some time, below the levels that are expected to prevail in the longer run because headwinds — which include restraint on U.S. economic activity from economic and financial developments abroad, subdued household formation, and meager productivity growth — mean that the interest rate needed to keep the economy operating near its potential is low by historical standards,” Yellen said.
“If these headwinds slowly fade over time, as the committee expects, then gradual increases in the federal funds rate are likely to be needed,” she continued.
“In line with that view, most FOMC participants, based on their projections prepared for the June meeting, anticipate that values for the federal funds rate of less than 1 percent at the end of this year and less than 2 percent at the end of next year will be consistent with their assessment of appropriate monetary policy,” Yellen went on to say.
Yellen also acknowledged that the economic outlook is “uncertain,” in an attempt to quantify the interest rate forecast she just shared.
“Monetary policy is by no means on a preset course and FOMC participants' projections for the federal funds rate are not a predetermined plan for future policy,” Yellen said. “The actual path of the federal funds rate will depend on economic and financial developments and their implications for the outlook and associated risks.
“Stronger growth or a more rapid increase in inflation than the committee currently anticipates would likely make it appropriate to raise the federal funds rate more quickly,” she continued.
“Conversely, if the economy were to disappoint, a lower path of the federal funds rate would be appropriate,” Yellen added. “We are committed to our dual objectives, and we will adjust policy as appropriate to foster financial conditions consistent with their attainment over time.”
In an effort to strengthen finance companies’ underwriting of potential customers with soft credit histories, TransUnion and FICO on Wednesday rolled out the availability of FICO Auto Score 9 XT based on TransUnion CreditVision trended data. The firms highlighted the new score is specifically catered to the auto finance marketplace and includes several new features, including trended data from TransUnion’s CreditVision.
Whereas a traditional credit report offers a glimpse of a consumer at a snapshot in time, executives explained trended data assets leverage an expanded view of credit data with up to 30 months of historical information. This includes available information on each loan account, including payment history, such as dollars paid, amount paid versus minimum due and the total amount borrowed over time.
“The use of trended data from CreditVision in FICO Auto Score 9 XT gives our auto finance customers an in-depth view of borrowers that they previously could not access,” said Steve Chaouki, executive vice president of TransUnion’s financial services business unit.
“We are excited to collaborate with FICO to make their score available through CreditVision for the auto finance community,” Chaouki continued. “Now, lenders and dealers will have a familiar FICO score through which to communicate the predictive power of TransUnion CreditVision. The score will help lenders fund more auto loan transactions at competitive rates, benefitting consumers, dealers and lenders.”
In addition to the use of trended data, the new FICO Auto Score 9 XT ignores collection agency accounts that have been paid off. And like other scores in the FICO Score 9 family, it differentiates unpaid medical accounts that have gone into collections from unpaid non-medical accounts that have gone into collections.
“FICO Auto Score 9 XT is the latest innovation from FICO designed to address the interests of both lenders and consumers,” said Jim Wehmann, executive vice president of scores at FICO. “We’ve worked with TransUnion on a score that examines the way a consumer’s behavior is evolving.
“This helps creditworthy consumers qualify for the best credit terms available to them, and helps auto lenders expand their portfolios safely by making more precise decisions about loan terms,” he added.
The firm went on to mention the expanded view of data from TransUnion CreditVision can reveal trends and behaviors, such as consumers making on-time payments, paying more than the minimum amount due, reducing total amounts borrowed or decreasing utilization over time.
“The inclusion of CreditVision in FICO Auto Score 9 XT enables dealers and lenders to take these behaviors into account. This is especially important because a traditional credit report may tell you a consumer has $7,000 in credit card debt, but one using trended data will show you whether they have built up or paid down that balance over time,” Chaouki added.
FICO Auto Score 9 XT based on TransUnion CreditVision trended data will also be made available by national credit reseller ProMax Unlimited.
“CreditVision and FICO Auto Score 9 XT are evolutionary leaps forward and will allow lenders to make better decisions and give dealers tools and information to close more auto loan transactions at competitive terms,” said John Palmer, president and chief executive officer of ProMax Unlimited and ProCredit Express.
“TransUnion CreditVision is already available now to any dealer through ProCredit Express, and we will make FICO Auto Score 9 XT available in 2016,” Palmer went on to say.
Santander Consumer USA president and chief executive officer Jason Kulas insisted the finance company has “more data than almost anyone else in the subprime space.” So when SCUSA cut back on its core non-prime retail originations by 15 percent during the first quarter, Kulas emphasized how that data helped to maintain “disciplined” underwriting standards.
"What we constantly do is we look back to prior vintages and leverage the performance that we are seeing into how we price new originations to make sure we’re doing everything we can to maximize the value going forward of those new originations," Kulas said when SCUSA hosted its first-quarter conference call with investment analysts.
“And so that process of optimizing the risk return happens right now to be impacting our subprime capture,” he continued. “But it’s not an effort to reduce our exposure to subprime. It’s again a result of this optimization process that we go through constantly.”
As much as Kulas and the SCUSA team examine their own data, the finance company boss acknowledged that Santander also is watching what other players in the subprime space are doing.
“On a comparative basis, it seems that there are markets willing to be a little bit more aggressive on certain pockets of those than we are right now,” Kulas said. “Look, we don’t see any concerning overall trend in terms of individual players. But I will point out that we are seeing some of the same trends we mentioned in the last quarter, where in general the larger players, the more sophisticated players with more data as a group have lost share to the smaller, maybe less sophisticated and in some cases less disciplined competitors.”
“We will continue to focus on maintaining the right risk, we’re balanced, and making sure we originate assets that come through cycles. And in future quarters, it could be a different result; it’s booking less subprime loans as a result of that process, not the overwriting goal,” he went on to say.
More of SCUSA’s data pointed to a retraction in the subprime space. Santander reported that its Q1 2016 net charge-off rate rose to 8.2 percent, up from 6.1 percent in the year-ago quarter. Meanwhile, because of the pressure from declining wholesale used-vehicle prices, SCUSA’s recovery percentage dipped to 51 percent in the first quarter, down from 59 percent a year earlier.
“Our losses are driven by the higher concentration of deeper subprime assets that we originated in early to mid-2015,” SCUSA chief financial officer Izzy Dawood said. “Based on our analysis and historical experience, we anticipate the deeper subprime assets will have this deeper loss curve earlier in the last cycle of the loan and then transition to follow a normal loss curve over the full life.”
Dawood also touched on how all the data SCUSA has at its disposal prompted him to describe 2016 as a “transition year” in regard to the ABS market.
“Clearly I think the market — especially the capital markets — are going through a transition phase as the Fed raises rates and as investors evaluate the risk return thresholds,” he said.
Dealer Marketing Services, makers of ProMax Unlimited, unveiled the second of three soft credit pull solutions powered by Equifax data.
On Monday, the company highlighted Instant Screen powered by Equifax is the latest version of its solution that can enable dealers to provide a firm offer of credit at the dealership level. Customers shopping for a vehicle or in for a service appointment can be prescreened according to finance company’s predetermined credit criteria.
ProMax indicated these offers can be made directly to customers at the dealership or delivered via direct mail.
“Our dealership customers highly value sales leads that are sourced from engaging prospects in their service lanes,” ProMax chief executive officer John Palmer said.
“Instant Screen enables us to use credit data to provide offers to customers quickly and easily,” Palmer continued. “Once auto dealerships implement Instant Screen in their process, they can’t believe they ever did without it.”
ProMax chief technology officer Darian Miller added, “The release of this new version of Instant Screen strengthens our status as an industry leader in automotive dealer soft pull credit products.”
Instant Score, the first of the three new credit solutions which was released last fall, is designed to functions as a simple plug-in to any page on a dealership’s website. Using Instant Score, visitors to a dealership’s website are able to see their Equifax credit score free of charge.
This process only requires consumers to fill out a short form and answer brief questions to authenticate their identity, but does not require the consumer’s Social Security Number. Upon completing the form and having their identity authenticated, the consumer must consent to view their Equifax credit score and be marketed to.
If consent is obtained, ProMax emphasized the dealership receives a high quality lead.
Following the release of Instant Screen, ProMax plans to release an additional soft pull solution also powered by Equifax data to complement the previously released Instant Score: Instant Auto Credit App. The three products can be deployed by automotive dealers individually or in concert.
Instant Auto Credit App powered by Equifax is meant to serve as a logical extension to Instant Score. The Instant Auto Credit App can enable dealership website visitors to go a step further and get pre-qualified for an auto loan.
Consumers who wish to be pre-qualified are required to fill out a short form and answer brief questions to authenticate their identity; in exchange applicants may receive a credit offer that includes credit limit, interest rate and term. The dealership in turn receives a high quality pre-qualified lead.
A wide array of technology providers in the auto finance space — including EFG Companies, F&I Express, RouteOne, National Credit Center and eLEND Solutions — all recently either formed new partnerships or rolled out enhancements to their solutions aimed at helping dealerships and finance companies.
The latest development spotted by SubPrime Auto Finance News was the enhanced partnership forged by EFG Companies and F&I Express. The organization created the partnership to better serve their dealership clients by fully integrating their eContracting capabilities.
“At EFG Companies, we understand that no two dealers are the same,” said John Pappanastos, president and chief executive officer of EFG Companies.
“Each dealer operates with different goals, success metrics, and systems, and we pride ourselves in acting as a strategic partner in their success,” Pappanastos continued. “In our effort to further that initiative, we partnered with F&I Express to augment our growing list of e-contracting solutions with one of the most utilized eContracting platforms in the market.”
F&I Express president and CEO Brian Reed added, “For almost 40 years, EFG Companies has been leading innovation within the automotive industry. We have been eagerly anticipating their addition to our F&I eContracting network and look forward to bringing their products to our dealer customers.”
RouteOne launches new desking product
RouteOne recently launched what the company dubbed RouteOne Desking; a new product that can enable dealers to quickly calculate and present monthly payment options to their customers.
The company highlighted that RouteOne Desking covers multiple sales types, including lease, retail and cash deals.
RouteOne Desking features rates, incentives, and residual values from captives and a wide array of finance sources. It also can check for rebate and program compatibility to help reduce errors and the need for manual verifications. It includes dealer configurable options, such as taxes and fees, and default aftermarket values to allow for room on the back-end when the deal moves into F&I.
Once a deal has been desked, all the data from it can generate a credit application, in RouteOne, with the simple click of a button.
“RouteOne’s Desking tool is excellent. The integration is great, however what sets it apart for me is the look and functionality of the customer proposals,” said Jesse Akins, sales manager at Pace Chevrolet in Reidsville, N.C.
RouteOne chief executive officer Mike Jurecki acknowledged, “There are many outstanding desking solutions in the marketplace today, which we will continue to integrate with to fully support dealer choice. So we didn’t get into the business just to get into it.
“We got into desking because our customers asked us to,” Jurecki continued. “They wanted an easy way to consistently calculate payment across all channels that integrates directly into the RouteOne workflow that they are so comfortable with and count on for its reliability. With the launch of this new product, they are able to do just that.”
For more information, dealers can visit www.routeone.com/desking or call (866) 768-8301.
National Credit Center unveils Avendas CRM
National Credit Center (NCC), a provider of comprehensive credit reporting solutions, data and marketing solutions recently rolled out its new customer relationship management technology product — Avendas CRM.
Designed to work with NCC's dealer clients to enhance their customer's experience, Avendas CRM is designed so dealers spend less time using software to locate requisite data, and more time communicating effectively with their customers.
Built on what NCC contends is a responsive, cloud-based platform, Avendas CRM can allows for full functionality and the best experience on any device.
“For two decades, National Credit Center has been on the forefront of innovation in the automotive sector, and that tradition continues with the introduction of Avendas CRM," said Jevin Sackett, chief executive officer of NCC parent company Sackett National Holdings (SNH).
“In developing Avendas CRM, we’ve invested more than 20,000 hours in coding alone, with countless additional hours dedicated to ideation, workflow, and UI/UX. Our automotive professionals spent thousands of hours conducting A/B testing with dealers and industry experts, then used their suggestions and feedback to enhance the product,” Sackett continued.
“The resulting system reflects the wealth of resources we've used to develop this innovative CRM,” Sackett went on to say. “Avendas CRM was designed to minimize the time required to deliver the right message, to the right customer, at the right time."
Understanding the critical importance that time management plays in the automotive industry, Avendas CRM is designed so that dealership staff can be fully trained in a few days, through either in-store training or via online, instructor-led classes. One of the goals of Avendas CRM was to free up dealer staff to interact more with customers, instead of spending time using software to find the necessary data and information required to communicate effectively with customers.
“Avendas CRM was developed to keep pace with the modern methods dealers use to manage their customers' experience,” said Shawn Morse, NCC’s senior vice-president of software solutions. “Currently, the most widely used CRM platforms in the automotive sector were built before the iPhone and Facebook were even released.
“As a result, in our consultations with dealers during Avendas’ development, we heard that many CRM systems weren't optimized for today’s technology, and that resulted in deficiencies in a host of areas — including reporting, email deliverability, security and the ease of use of their existing CRMs,” Morse continued.
“Avendas CRM was developed specifically to address the concerns that dealers identified with their existing CRM systems. As a result, Avendas is designed to provide a cost-effective, modern, intuitive CRM system that gives complete control of actionable data, process management, marketing, security, and reporting back to our dealer clients,” Morse added.
With more than 5,000 dealership partners nationwide, NCC said it was critical that Avendas CRM complement the company’s existing products. As a result, Avendas CRM also was designed to work seamlessly with the NCC credit portal (NCCI), giving dealers powerful customer data in the most efficient way possible.
“With its ease of use, flexibility, customizability and value, Avendas CRM is breaking new ground in the field of automotive CRM,” the company said. “Designed, tested, and then enhanced by industry experts who use CRM daily, Avendas CRM will transform the way dealers manage new and existing customer relationships.”
For more information, visit www.NCCdirect.com.
eLEND Solutions’ ID Drive to generate soft-pull credit report
Executives from eLEND Solutions recently announced that their ID authentication program now instantly and automatically can convert a driver’s license scan into a consumer consented soft pull credit pre-qualification application, without even requiring a Social Security Number.
Initial results from California-based Huntington Beach Chrysler Dodge Jeep Ram show a 36-percent conversion ratio using ID Drive pre-qualification and a dramatically shortened sales cycle.
“In the first month, we scanned nearly 900 driver’s licenses — capturing the relevant data in our in-store systems, giving us an accurate record of who has driven our vehicles — of those scanned, nearly 50 percent opted for pre-qualification and we converted 36 percent of those into a sale — making it one of our highest performing and most profitable channels,” said Pete Shaver, managing partner of Huntington Beach Jeep.
“And because the process is so fast and easy, we can verify their address and pull credit in less than 10 seconds. We are saving a huge amount of manpower and time,” Shaver added.
Having this information up front enabled Huntington Beach Chrysler Dodge Jeep Ram to shave an estimated one to two hours off the sales process — what eLEND Soluations called a huge upside for both the dealership and the customer.
Shaver also confirmed that the simplified pre-qualification process directly impacts customer satisfaction.
“Customers appreciate not having to share their SSN and knowing there won’t be any negative impact on their credit score — and they love the fact that it shortens the sales cycle,” Shaver said.
Pete MacInnis, chief executive officer of eLEND Solutions explained that ID Drive’s pre-qualification differs from pre-screening or hard pull inquiries because it does not require a SSN or impact the consumer’s credit profile while providing the dealer with a full credit report and real-time credit score.
“This new enhancement is designed to help dealers sell more cars in less time, improve CSI by reducing bottle necks in the F&I department and improve overall profitability,” MacInnis said. “We are giving dealers the information they need to put customers in the right vehicles with the right deal structures, matched to specific lender programs at the front of the sales process.”
In addition, MacInnis pointed out that ID Drive is the only driver license scanner that can authenticate every version of driver license for all 50 states, appending validated address and phone information, and automatically can convert a driver license scan into a consumer consented pre-qualification application.
Once scanned, the consumer’s lead information is electronically integrated with any pre-existing lead or credit application data — prior to the test drive — then securely exported into the dealer’s CRM and finance systems, integrating the historically fragmented sales and finance processes.
The company added that ID Drive’s Pre-qualification also includes much lower costs per credit pull and simplified compliance requirements and cost savings for dealers.
ID Drive’s pre-qualification function can work hand-in-hand with eLEND’s CreditPlus program which instantly pre-qualifies customers based on dealer-defined credit criteria, giving car buyers direct, upfront access to dealership financing sources and real near-final terms from multiple finance companies, all of which are controlled by the dealer.
For more information, visit www.elendsolutions.com.
It’s been a busy week of announcements by Equifax; first a solution launch with LexisNexis Risk Solutions tailored specifically for the auto finance space. Then on Friday, Equifax joined with online sales lead generator Black Book Activator to develop Black Book Activator eCredit, a new customer-facing credit scoring solution available to the dealer community and online vehicle shoppers.
Executives explained the Black Book Activator eCredit solution can provide vehicle shoppers on dealer websites with free access to their Equifax Risk Score; what’s considered to be a key measurement designed to educate consumers to help better understand their vehicle finance options and monthly payments based on their credit score.
The companies insisted the solution can provide a simple process that can deliver the user’s Equifax score instantly and privately. The credit scores are not shared with any third parties, including the dealer.
Equifax and Black Book highlighted the ease of use of this service speaks to consumers growing concerns around identify theft and fraud that can occur as a result of sharing sensitive personal information.
Unlike many other services, which require a consumer’s Social Security number, date of birth and/or other sensitive personal information, the service asks only for a user’s name, address and answers to a two-question, multiple-choice quiz. The process is designed to ask user-specific questions, which is geared to help ensure that the right score is delivered to the correct person.
And because the score is requested by the consumer, it does not adversely affect future credit scores, according to Mike McFall, president of Black Book Activator Division.
“Our testing and consumer feedback have shown that car shoppers want access to their credit scores as they are making buying decisions, but until now, there hasn’t been a simple, non-intrusive way for auto shoppers to get an instant, accurate score without sharing a lot of detailed information,” McFall said.
“Working closely with Equifax, we've created an easy plug-in for dealers, and a truly risk-free way for consumers to gain insight about which vehicles might make the most sense for their budgets, moving them one step closer to purchase,” he continued.
Before mentioning dealers who are already seeing benefits, Equifax vice president of dealer services John Giamalvo pointed out the value proposition for stores this solution can present.
“Both Black Book Activator and Equifax are focused on innovation and customer service,” Giamalvo said. “Black Book Activator eCredit is a unique solution that will engage online customers and help enable smoother, better informed transactions for both buyer and seller.”
Frances Looper, who is the Internet manager for Love Chevrolet in Columbia, S.C., was among the first to test the new service.
“We are always excited to try things that make it easier for our customers to shop online,” Looper said. “We focus heavily on digital and this fits right into our plan because most people are hesitant to give their Social Security number for anything they do online, but they want a score to be smarter shoppers. This gives them both.
“As a bonus, users don't leave our site to get the information, and they don't feel as if their privacy has been compromised. It makes everything friendlier," she added.
Frank Vargas, Internet manager at Planet Dodge in Miami acknowledged that customers are savvier today as they have “high expectations and dealers who step up with information like credit scores are more likely to engage them and make a sale.”
In light of the belief that everyone is pressed for time, Equifax and Black Book shared one more dealer’s experiences with the tool that aimed at making the process of qualifying customers much easier and quicker.
“These clients were invisible shoppers before this,” said Patrick Silva, who is marketing and operations manager of Mel Rapton Honda in Sacramento, Calif. “We weren’t seeing enough leads before and this has helped to bring in more.”
Black Book Activator eCredit will be showcased this weekend throughout the NADA Convention & Expo in Las Vegas at booth No. 1661C.
LexisNexis Risk Solutions and Equifax spent more than two years working on a solution sought by the auto finance industry; a tool one of the lead managers in development told SubPrime Auto Finance News is the answer to several requests on how to leverage alternative data more effectively and efficiently.
On Tuesday, the companies launched PowerView Score, a new, three-digit credit score tailored specifically for use in the vehicle finance space. The new scoring leverages alternative data sources, including telecommunications and utility payment history from Equifax and public records information from LexisNexis, to help finance companies identify creditworthy vehicle buyers.
Ankush Tewari, senior director of credit risk decisioning at LexisNexis Risk Solutions, explained both companies saw a market need, articulating what finance companies sought.
“They need the score to be more predicative in what they’re doing today. They need better coverage of thin files and no files. They really needed the products to be easily integrated into existing decisioning systems,” Tewari said.
“Companies don’t necessarily want to do a whole huge build-out to ingest a new score. They would like it to fit in with what they’re already doing today,” he continued.
“They were looking for a solution that can be backed by the stability of two of the largest data players in the industry with LexisNexis Risk Solutions and Equifax,” Tewari went on to say.
The new alliance between LexisNexis and Equifax allows auto finance companies to have one-stop access to the power of Equifax’s National Consumer Telecom and Utilities Exchange (NCTUE) and traditional credit bureau data partnered with LexisNexis Risk Solutions decisioning data.
The companies highlighted that combining this data to construct the PowerView Score has demonstrated a strong ability to be highly predictive and allows for improved risk models that can be used to support credit analysis of applicants from prime through subprime.
In back-testing, the companies indicated the new scoring showed significant improvement in model performance across portfolios.
“This score presents a growth opportunity to prime and nonprime lenders who want to auto decision more customers or may be considering expanding their criteria to address a broader market,” Equifax auto finance leader Lou Loquasto said in a press release about the solution.
“The alternative data capabilities of LexisNexis Risk Solutions merge perfectly with Equifax’s robust telecom and bureau data offerings to create an industry leading risk solution for auto lenders, while helping them to make more informed decisions,” Loquasto added.
Tewari elaborated about how the reading PowerView Score can generate is different from other tools that might be available and why it’s so specific for vehicle financing.
“If you’re familiar with how credit scores are built, generic scores are built on generic consumer samples that cover all different types of loans,” he said. “This score was built on a sample that was specifically auto industry focused. No other type of data was used other than auto loan data to develop the score.
“We had experts from both sides who are experts in the auto lending industry provide input on how the score should be constructed, what the goals should be. There was a lot of industry expertise from both sides that brought the score together,” Tewari continued. “The key was building it on an industry specific example of records.”
The industry creditability both LexisNexis and Equifax possess also influenced why the two companies collaborated, according to Tewari.
“We had really good collaboration starting with the business leadership and that propagated down to the product teams, teams of statisticians from both companies working together. It’s really been just a process of getting the score built, coded up and ready to go. There really haven’t been any obstacles per se,” Tewari said.
“To have a company as well known and stable as Equifax with complementary data assets like the NCTUE, that was really critical to all of this,” he continued. “The alternative data space is rather relatively new compared to traditional credit bureau data. Having large companies with well-known brand names contributing assets to a score that is jointly brought to market provides signals that this a product that is legitimate, predictive and better than other solutions out there in the market and that lenders should be at least interested in testing it.”
According to the February Equifax National Consumer Credit Trends Report, 2015 marked another strong year for the auto loan market as originations increased year-over-year, while the mix of loans across the entire credit spectrum held for the fourth year in a row.
From January 2015 through November, analysts pegged 21.7 percent of all auto loans originated during this timeframe were issued to consumers generally considered to be subprime.
Equifax also noticed subprime auto loans have consistently accounted for between 21 percent and 22 percent of new auto loans for the past four years.
“Considerable attention is being given to the subprime segment with some analysts mentioning concern that it is growing disproportionately faster than originations to other segments of the credit spectrum, although the proportional mix has remained relatively static since 2012,” said Amy Crews Cutts, chief economist at Equifax.
“Credit performance is still excellent, showing that lenders are prudently extending credit to well-underwritten borrowers,” Cutts continued.
“Lenders are making more informed lending decisions and the underwriting process has been strengthened as a result of new data and technology that is available to the marketplace,” she went on to say. “For example, today lenders have access to instant income and employment verification which help to accurately portray a consumer’s ability to repay the debt.”
The National Consumer Credit Trends Report cited normal cyclical patterns in delinquency and write-off rates, but also mentioned to a shift in the marketplace with finance companies growing originations more quickly than commercial banks. From January through November 2015, Equifax indicated 53.7 percent of all new auto accounts came through finance companies.
Other highlights from the report included:
• Originations are at highest levels since 2008.
More than 26.8 million auto loans, totaling $554.8 billion, were originated between January and November 2015. This is a 9.4-percent increase in accounts and a 12.4-percent rise in balances over the same time period in 2014. These are the highest levels for the period since Equifax began tracking this data.
• Increase in car sales drives more loan activity, including growth in prime and subprime volume.
A total of 5.8 million auto loans have been originated between January and November 2015 to consumers with an Equifax Risk Score below 620. These are generally considered subprime accounts. This is an 11.2-percent increase over 2014. These newly issued loans have a corresponding balance of $104.2 billion, a 14.5 percent increase year-over-year.
• Delinquency rate for auto loans remains unchanged in January 2015 versus January 2016.
Total auto loan and lease severe delinquency rate in January were 1.15 percent, the same as in January 2015. (Severe delinquency is defined as loans 60 or more days past due or in collections and calculated as a share of outstanding balances). The recession peak delinquency rate was 2.84 percent in January 2009.
• Loan write-offs saw modest increase of 1.8 basis points in January 2015 versus January 2016.
Write-off rates on total combined auto loans and leases outstanding rose to 22.5 basis points in January, up 1.8 basis points from the same month last year. (Write-offs are defined as accounts that terminate in severe derogatory or bankruptcy status and are calculated as a share of outstanding balances). Write-offs peaked at 50 basis points in March 2009.
• Severe delinquency rates on bank loans remained fairly consistent in January 2015 versus January 2016.
Severe delinquency rates on auto loans held by banks were 0.48 percent in January, up from 0.46 percent a year ago. Severe delinquency rates on loans originated to consumers with subprime credit scores were 2.15 percent; in January 2015 they were 2.06 percent.
• Delinquencies experienced a slight decline in finance company portfolios while loan write-offs remained fairly consistent in January 2015 versus January 2016.
Severe delinquency rates in January on auto loans held by finance companies were 1.99 percent, down from 2.01 percent in January 2015. Among subprime accounts, the severe delinquency rate fell from 4.76 percent a year ago to 4.72 percent in January.
