GWC Warranty, a provider of used-vehicle service contracts and related finance and insurance products sold through dealers, recently improved its online coverage lookup tool to better assist drivers in obtaining critical vehicle service contract information.
As part of GWC Warranty’s promise to deliver best-in-class customer service to dealers and their customers, the company explained the coverage lookup improvements include both aesthetic and functional enhancements designed to help drivers quickly find coverage information they need.
GWC Warranty also highlighted a redesigned layout is designed to make it easier to enter required information, while downloadable electronic contracts provide drivers an added level of detail about their coverage.
With the availability of electronic contracts through the coverage lookup tool, customers simply can enter their last name along with either an ID card number or the last six digits of their VIN. Providing this information will initially display a coverage snapshot with mileage, coverage level, dealership, expiration and term information.
Furthermore, a new coverage details link is also now available, which can provide drivers with a soft copy of their contract where they can find additional terms, conditions, policies and component coverage information.
The enhanced coverage lookup tool is the latest in a series of technology enhancements GWC Warranty has introduced to help provide a best-in-class customer service experience to dealers and their customers.
In addition to resources such as the Dealer Portal and the GWC Warranty Dealer App for iPads, the company also introduced a new website last year.
“Each technology enhancement was designed with the intention of making service contracts seamless, intuitive and easy-to-use for dealers and their customers in a way that aligns with GWC’s No Worries, Just Drive experience,” the company said.
As a follow-up to its analysis that stated fraud in auto financing could reach $6 billion this year, PointPredictive released another white paper on Tuesday with suggestions on where that scheme could be nipped before it happens.
PointPredictive’s new whitepaper, entitled “Improving Auto Dealer Fraud Monitoring with Pattern Recognition,” highlights the critical role that dealers play in the growing auto financing fraud infrastructure and how to change the monitoring programs that often find the risky dealers only after major losses have occurred.
The white paper outlines challenges that are common in finance company practices for detecting and preventing dealer-sourced financing fraud in a timely manner and proposes an enhanced approach to addressing these challenges through consortium-based sharing of dealer risk and fraud patterns, pattern-recognition modeling, application-based monitoring and dealer education.
“Our recent study on auto lending fraud trends revealed that, for many lenders, a very small percentage of dealers represent a very large percentage of their fraud and early payment default risk,” said Frank McKenna, chief fraud strategist at PointPredictive.
“This high concentration of auto lending fraud presents lenders with a very difficult challenge — detecting and preventing fraud perpetrated by a few while not burdening the rest of their dealers unnecessarily,” McKenna continued.
PointPredictive acknowledged most auto finance companies cast a wide and inefficient net to address dealer fraud. The firm explained finance companies often will
—Review high-dollar fraud loss cases and review dealers with excessive defaults
—Use performance scorecards based on defaults and charge-offs
—Put problematic dealers on manual “watch lists.”
PointPredictive described these approaches as being often “too little, too late.” The firm insisted the dealer is generally not identified as risky until six to 12 months after the funding of their first fraudulent contract.
The firm went on to note finance companies are also handicapped by a lack of visibility into a risky dealer’s behavior with other providers due to a lack of lender-centric information sharing about dealer risk.
“PointPredictive believes that the most effective way to address dealer fraud in the auto industry is through lender participation in our Auto Fraud Consortium,” said Tim Grace, chief executive officer of PointPredictive. “By looking at each application from a dealer and by gaining a cross-industry view of dealer fraud behavior, we have created enhanced pattern recognition technology that flags high-risk dealers up to six months sooner than most lender’s existing tools.”
PointPredictive recommended that finance adopt a proactive, educational approach with their dealers — since fraud migrates and changes over time. The firm said finance companies can help dealers understand their fraud risks earlier before major losses occur.
The firm went on to mention dealers can also learn how to effectively flag income and employment manipulation during the application process, how to identify straw borrowers, and how to detect anomalies in finance manager results that may be leading indicators of fraud.
“Forming an effective fraud-prevention partnership with dealers will help lenders insure a higher level of confidence in both their loan and dealer portfolios,” PointPredictive said.
Fraud is becoming more and more of a discussed topic this year, especially in light of Santander Consumer USA being penalized by officials in Delaware and Massachusetts in part due to allegations that contained fraud elements.
In an effort to enhance possible collaboration, Lou Loquasto and Mike Urban from Equifax recently shared a trio of suggestions that could help finance companies' fraud prevention efforts.
Furthermore, TransUnion back in January unveiled IDVision, a suite of solutions providing finance companies with what bureau officials think is a holistic approach to fraud and identity management. IDVision is designed to help companies stop sophisticated and evolving fraud while also protecting and restoring their confidence in conducting business.
To receive a copy of this PointPredictive whitepaper or to obtain more information about its Auto Fraud Consortium, contact the firm at [email protected].
Dealership compliance auditing firm Total Dealer Compliance (TDC) recently launched its virtual training platform: a solution aimed at helping stores mitigate risk faced by proactive regulators to create a culture of compliance at a fraction of the cost.
TDC claims to be charging roughly 80 percent less than its competitors for these virtual compliance training modules to enable dealers to be fully compliant with federal regulations across their sales, BDC, F&I, fixed ops, HR and IT departments.
TDC president Max Zanan explained this virtual compliance program comes at an impactful time for dealerships looking to strengthen their reputation and incorporate a culture of compliance without breaking the bank. Zanan said compliance is essential in today’s dealership environment as the count grows to 17,540 franchised dealerships and independent stores composing a level triple that number.
“With both the FTC and OSHA increasing fines for compliance violations, the cost for non-compliant car dealers average $792,000 loss per year in profit,” Zanan said. “Car dealers should proactively seek a solution that provides peace of mind and promises defensible proof of compliance to both auditors and executives.”
TDC’s virtual compliance training is readily available to all dealerships and includes the following:
• Comprehensive online training modules for each department and employee of the dealership
• Cloud-based e-learning platform with analytic reporting
• End of course assessment and certification
TDC’s virtual compliance training costs are based on user/employee headcount:
• Up to 25 employees: $699 annually
• Up to 50 employees: $1,299 annually
• Up to 100 employees: $2,499 annually
“As the nation’s leader in auto dealer compliance solutions and services, we are so proud to finally be able to provide this robust compliance training online and at a much lower price point than our competitors,” Zanan said.
“Compliance is essential to today’s dealership environment,” he continued. “With our courses updated throughout the year and both affordable and easily accessible, we are excited to help car dealers safeguard their business, mitigate risks and increase their profits.”
More details can be found by visiting www.totaldealercompliance.com or calling (888) 243-5204.
This week, Westlake Financial Services highlighted that it has launched its electronic contracting automotive loan origination solution in 17 U.S. states through DealerCenter. Westlake insisted the move enhanced the finance company’s customer service to both its borrowers and dealer-partners, while continuing to improve the its loan acquisitions processes.
Westlake indicated the solution will be available nationwide by the end of 2017.
“Our two most important customer groups are dealerships and car-buyers, and with electronic contracting we can serve them both better,” said Casey Harmon, Westlake’s senior vice president of corporate development. “The DealerCenter eContracting solution is a more efficient, accurate process for our dealer network, and we think customers will enjoy the simplicity.”
Westlake partnered with eOriginal, pairing that company’s eAsset Management technology with DealerCenter, a leading dealership management system and financing submission platform for independent dealers in the United States.
The solution can allow both independent and franchised dealers to sign contracts electronically, upload supporting documentations, and instantaneously push all information to Westlake as soon as the financing package is complete.
“It lets our dealers connect through DealerCenter to our underwriting systems,” Harmon said in a news release. “This seamless transfer of contract data drastically reduces the time it takes to receive a complete funding package, and allows our acquisitions team to start working deals faster. Several dealers have experienced same-day funding through Westlake’s eContracting solution.”
To date, Westlake noted that it has funded almost 6,000 electronic contracts using the solution. On average, these eContracts have funded a half-day faster than traditional deals.
“Our e-contract solution supplies fast and easy funding to our dealer partners,“ said Mark Vazquez, Westlake’s senior vice president of sales and marketing. “Plus it condenses the time a borrower spends in the dealership signing the documentation. It’s a win all around.”
Dealers can learn more about Westlake Financial Services financial products by visiting www.WestlakeFinancial.com or calling (888) 893-7937.
Ally on Monday introduced an online marketplace called Clearlane; a platform designed to connects consumers with leading auto finance providers to finance or refinance their vehicles with ease.
Ally highlighted Clearlane’s “simple and straightforward” process can provide customers with quotes from a robust network of finance providers, and personalized support to help apply for and complete transactions. As more consumers look to secure financing online, Clearlane's powerful technology and extensive network of trusted providers, makes the process easy and convenient.
"With Clearlane, Ally adds a unique online platform to our digital financial products and services in the auto space, allowing consumers to easily secure financing or refinance their vehicle through a trusted source," said Tim Russi, president of auto finance at Ally. "We are excited about the opportunities to offer more financing and F&I products through the platform in the future, and to eventually leverage the technology to power online sales for our dealers."
Ally noted the Clearlane network includes numerous national, regional and local providers, offering auto finance and refinance products. The Clearlane site was brought to market following Ally’s acquisition of BlueYield, a California-based technology company, last year. The site was enhanced to simplify the customer journey and experience, and rebranded to align with Ally’s broad assortment of products and services.
As Ally continues to expand its products, services and financial resources aimed at helping consumers to better manage their finances, the company insisted Clearlane is a natural fit — empowering consumers with financial options through a trusted network of leading financial providers.
The ability to more easily refinance a vehicle on Clearlane could have a meaningful impact on monthly costs for budget-conscious consumers. According to data from the site, customers reduced their monthly payment on average by $100 per month by refinancing their vehicles with a new provider.
For more information about Clearlane, visit www.clearlane.com.
Equifax auto finance leader Lou Loquasto insisted every credit provider and buyer of vehicle installment contracts has a story about how deliveries might have been completed because of some kind of fraud. Loquasto pointed out that sometimes it’s a “rogue” F&I manager or another unscrupulous member of a dealership’s staff.
“I’ve got my story. My guy is in jail currently,” said Loquasto, who spent a major portion of his professional career at Wells Fargo.
While malfeasance at the dealership level might not be as prevalent, consumers trying to deceive their way to approvals certainly is a growing problem. Loquasto shared, “You could Google the term ‘fake pay stubs’ and you get 370,000 results. For $5 and you invest five minutes, you can make $800,000 a year on paper. Some of these fakes are really good.”
In fact, PointPredictive, a provider of fraud solutions to banks and finance companies, generated a white paper at the beginning of the year detailing new analysis confirming that auto financing fraud risk has been rising for several years, but remains hidden in credit losses. PointPredictive estimates the annual value of auto finance originations that contain some element of misrepresentation may be as high as $6 billion in 2017, which is twice as much as 2016 estimates.
“I think the biggest problem when I was a lender and now talking to people in the business is there’s never been a good way to understand which portion of your loss comes from fraud,” Loquasto said. “You may forecast a 2 percent loss on your portfolio, but you’re not sure exactly what portion of that might have come from fraud.
“You know when that one situation comes up that it’s verified fraud, everyone gets really angry,” he continued. “The thing about fraud is a lot of times you just lose the whole deal. It’s not like a regular repossession where a customer goes bad and you lose half of it. In these situations, you’re losing the whole loan.”
The issue of fraud arrived again this week. Santander Consumer USA announced that it reached settlements totaling $25.9 million with the attorneys general of Delaware and Massachusetts in part because law enforcement said that SCUSA allegedly knew that the reported incomes, which were used to support the applications submitted to the company by dealers, were incorrect and often inflated.
Officials went on to state the investigation by Delaware and Massachusetts also revealed that SCUSA was allegedly aware that certain dealerships had high default rates due in part to the regular submission of inaccurate data on financing applications — most often involving inflated income. A company spokesperson said Santander neither admitted nor denied the allegations made by the attorneys general about contracts facilitated through certain dealers between 2009 and 2014.
Before this SCUSA settlement became public, Loquasto described what sometimes happens when a finance company learns that a dealership in its origination network fudges the numbers, so to speak, in order for the contract to be purchased and delivery completed.
“As a lender, this is crushing to your relationship with the dealer,” Loquasto said. “You’ve got a dealer you’re working with for a long time and maybe they’ve got a rogue employee. Maybe it’s just rogue people going to the dealership. If you’re asking the dealer to buy back $50,000 in losses from you or if you found out they had an employee that is doing bad things, that’s really bad for the relationship with the dealer.
“As a lender, it’s something on the radar, but I just don’t think there has ever been a real good mechanism to figure out that fraud has occurred and figure out how to share that information with others in the industry so lenders can help each other,” he continued.
In an effort to enhance possible collaboration, Equifax shared a trio of suggestions that could help finance company’s fraud prevention efforts. The recommendations included:
—A shared environment: Rather than relying on their own data, finance companies should be leveraging intelligence from data consortiums that span multiple businesses across multiple industries to stay ahead of the curve.
—Customizable platforms: Systems such as Equifax’s FraudIQ Manager can leverage customizable rules and models, providing lenders the ability to adapt to their unique needs, industry changes or new types of fraud.
—Real-time Intelligence: Fraudsters work fast, so finance companies need to act faster. The best fraud review processes can provide finance companies real-time intelligence for more efficient and confident identification of potential fraud.
Mike Urban, who is vice president of fraud consulting at Equifax, described how these recommendations are even more crucial in light of how online paths to auto financing are become more widespread.
“By moving to more digital access to funds and applications, it’s easier to take that paystub I downloaded off of the Internet, take a picture of it, copy it or scan it, and all of that information is going into the approval process so these criminals can launch broader attacks to see which one is going to come back with an approval. Then once they get that approval, they can walk into the dealer say ‘I’m preapproved. I’ve got my ID, and I’m driving off with the car,’” Urban said.
“Criminals will routinely take advantage of a lenders’ lack of sharing of information to execute large frauds. The more intelligence, the more experience that one lender has with verifying identity, that can be shared so when it hits again they’ll know right away and be able to sidetrack that application and manage it without allowing the credit to go out. Criminals have been sharing data over the Internet for years, and legally, the good guys should be doing it as well,” he continued.
Both Loquasto and Urban mentioned that Equifax has been part of consortiums in both the United Kingdom and Canada for quite some time to combat fraud, and the company recently launched a similar effort in the United States.
“If you think about it, a fraudster or some consumer will fraud on a cell phone and then maybe on a pay TV account. And then maybe they’ll fraud a credit card. These aren’t guys who do it once and are done,” Loquasto said.
“If you can bring in other companies from other verticals to share fraud experience, that’s where our consortiums have found a lot of value,” he continued.
And possibly through that sharing of ideas and information, Urban contends that auto finance companies could arrive at a place where fraud can be mitigated perhaps more than it is now.
“Every lender has different needs and they require solutions that are customized or configured to meet their needs and dynamic business requirements,” Urban said.
“It’s not enough to say I’ve got this big data. They really need a system to implement fraud strategies, looking at different data elements that are coming in through applications, tying together additional data elements into those decisions using analytic models so they can score what their risk is,” he went on to say.
Loquasto closed by saying he has a long-term goal of leading an industry-wide charge of reducing fraud by at least $1 billion.
“Lenders are spending a ton of money on data, credit data, income and employment data, alternative data, but they’re just not spending very much money on fraud. I think people are becoming awakened to the problem and the tools,” Loquasto said.
“We’re a very collaborate industry,” he continued. “You go to conferences and our industry is one of the most collaborative out there. We’re perfect for this type of solution. I think if we work together as lenders and vendors, we can really cut deep into the profits of these fraudsters.”
For the second time in roughly a week, details became public involving Santander Consumer USA and regulatory enforcers.
On Wednesday, SCUSA reached settlements totaling $25.9 million with the attorneys general of Delaware and Massachusetts for what state officials said was the finance company’s role in “facilitating unfair, high-rate” vehicle installment contracts.
The developments with the two states come on the heels of Santander Consumer USA and its parent’s subsidiaries entering into a written agreement with the Federal Reserve Bank of Boston.
When SubPrime Auto Finance News reached out to SCUSA regarding the Wednesday’s settlement, a company spokesperson said Santander neither admitted nor denied the allegations made by the attorneys general about contracts facilitated through certain dealers between 2009 and 2014.
“We are pleased to put this matter behind us so we can move forward and continue to focus on serving our customers,” the spokesperson began.
“Santander Consumer is totally committed to treating customers fairly,” the spokesperson continued. “In the last 18 months, our new management team has taken significant steps to strengthen our business practices and controls. Today’s voluntary agreement with the attorneys general of Delaware and Massachusetts, which resolves an investigation dating back several years, is another important step forward in that process.
“We will continue to strengthen our business controls and dealer management program while ensuring that we are focusing on best-in-class consumer practices,” the spokesperson went on to say. “We negotiated in good faith with the attorneys general with respect to past underwriting and origination practices, but would note this settlement is not about securitizations and, in fact, our settlement releases us from any such claims.”
Here are the details that led to the settlement, according to news releases shared by Delaware and Massachusetts officials.
The investigation, conducted by the fraud division of Delaware attorney general Matt Denn’s office in partnership with the Massachusetts attorney general’s office, revealed that Santander allegedly bought auto financing contracts without having a reasonable basis to believe that the borrowers could afford them. In fact, investigators said Santander predicted that a large portion of the contracts would default, and allegedly knew that the reported incomes, which were used to support the applications submitted to the company by dealers, were incorrect and often inflated.
Officials went on to state the investigation by Delaware and Massachusetts also revealed that SCUSA was allegedly aware that certain dealerships had high default rates due in part to the regular submission of inaccurate data on financing applications — most often involving inflated income. But law enforcement said Santander continued to purchase contracts from those dealers anyway and, in some cases, sell them to third parties.
“Protecting consumers from unfair lending practices is extremely important and has been a priority for our office,” Denn said. “We are pleased that this settlement results in significant consumer relief and provisions that will prevent similar misconduct in the future. We will continue to pursue investigations in this area to ensure that Delaware consumers receive a fair deal when they are extended credit to finance a purchase. I am proud of the work of our fraud division and also thank the Massachusetts attorney general’s office for being a valued partner in this investigation.”
Massachusetts attorney general Maura Healey also interjected that many of contracts involved in the investigation fell into the subprime portion Santander’s outstanding portfolio, which were leveraged as part of the funding process with many investment banks and other financial entities to resell or securitize the paper. Healey asserted that SCUSA dropped the contracts into large asset pools and selling bonds or notes backed by the assets in the pools.
Money obtained from the securitization process was then used to fund more subprime contracts — like many other finance companies do — but it drew the ire of the Massachusetts attorney general.
“After years of combatting abuses from subprime mortgage lenders, these practices are unfortunately familiar,” Healey said. “We found that Santander, a leading player in the business of packaging and reselling subprime auto loans, funded unfair and unaffordable auto loans for more than 2,000 Massachusetts residents. This first-in-the-nation settlement relating to subprime auto loan funding will provide relief to thousands of car buyers in Massachusetts and prevent these practices from being used against our residents.”
The settlement in Massachusetts, filed in Suffolk Superior Court, includes $16 million in relief to more than 2,000 affected consumers and a $6 million payment to Massachusetts. Santander has also agreed to implement new oversight policies regarding subprime auto funding and securitization practices.
Santander also will provide significant consumer relief by paying $2.875 million into a trust for the benefit of impacted Delaware consumers. A trustee will be appointed to locate and pay restitution to hundreds of eligible harmed Delawareans who financed vehicle purchases through Santander. Eligible consumers will be contacted by the trustee and the AG’s office regarding the claims process for restitution.
Santander will also pay just over $1 million to the Delaware Consumer Protection Fund, which pays for work on consumer fraud and deceptive trade practice matters and other consumer-oriented investigations and legal actions.
In an effort to keep its commitment to treat customers fairly, Santander reiterated in its message to SubPrime Auto Finance News that management actions during the past 18 months include:
— Improving policies and procedures to identify and prevent dealer misconduct.
— Putting in place a stronger management team and board of directors and improved board and management oversight.
— Reinforcing a culture of compliance throughout the company and investing in highly experienced compliance professionals who have a track record of compliance excellence in financial services.
— Establishing an Office of Consumer Practices to serve as an internal voice of the consumer and to examine, track and improve the customer experience.
— Creating a dealer council to increase focus and formalize decision making on dealer oversight issues.
— Creating a dealer services group to enhance the efficiency of dealer monitoring and management processes.
— Increasing the number of requirements a consumer must meet before the company funds a loan (e.g., providing paystubs or tax returns, making higher down payments, etc.).
Santander Consumer USA chief operating officer Rich Morrin directly addressed how the finance company now is watching its relationships with dealers during its “Investor Day” back on Feb. 23.
“Regulatory expectations of lender oversight of dealerships has increased pretty dramatically. So while SC has always held dealers accountable, it’s not a change,” Morrin said. “What we have done is we take this seriously and so what we have done is we’ve evolved our approach accordingly.”
The COO went on to say, “ … holding dealers accountable ultimately is a positive thing for a number of reasons. One is because we get the right kind of relationships from which to try to grow our volume, but secondly, the application population we get is a lot more positive and high quality, which we view is very positive.”
As a part of Wednesday’s announcement, SCUSA also mentioned the company is fully reserved for this matter with Delaware and Massachusetts and no additional charge will be taken in connection with the settlement.
“This settlement will not impose any new restrictions on SC’s ability to make capital distributions,” the company said.
This week, NextGear Capital, Westlake Financial Services and Spireon all bolstered their executive teams to enhance their respective finance-oriented operations.
To support future growth in the inventory-financing sector, NextGear Capital announced Lisa Mackie will fill its newly created vice president of sales position, effective immediately. Mackie is responsible for strategic leadership, vision and execution of the company’s sales efforts.
“Lisa’s deep expertise in automotive inventory financing will further position NextGear Capital for continued growth,” said Shane O’Dell, president, Cox Automotive’s Financial Solutions Group. “As we expand our client base, Lisa and her team will often serve as the first introduction to Cox Automotive and to the consultative approach that has made NextGear Capital the market leader.”
Mackie joins NextGear Capital with more than 20 years of auto finance and commercial sales leadership experience. Most recently, she was responsible for driving floor plan sales growth across multiple states as director of commercial dealer services at Capital One. Earlier roles included director of commercial acquisitions for Hyundai Capital and vice president for Chase dealer commercial services.
Exec returns to be Westlake’s new SVP of servicing
Over at Westlake Financial Services, the company recently welcomed back Brian Renfro, now to be its senior vice president of servicing. In this role, Renfro oversees customer service, collections and remarketing for the entire Westlake portfolio.
The company highlighted Renfro looks to leverage his extensive background in servicing technology, and implement strategic and compliance operational efficiencies to drive agent training and development. The end result will be a reduction in losses and improved service to customers of Westlake Financial Services.
“Brian brings over 20 years of experience to this role,” said Ian Anderson, group president at Westlake Financial Services. “His experience will help our Servicing department implement technology and operational improvements to help reduce losses.”
Renfro has decades of direct experience with servicing teams, utilizing various dialer technologies, and applications. He began his auto loan servicing career at Union Acceptance Corp. in 1998 and in 2003, he joined JP Morgan Chase.
In 2005, Renfro was appointed as senior vice president of operations for Westlake Financial. In 2007, he departed Westlake and held the position of director of servicing operations for Navient for 10 years.
Spireon appoints industry veteran to SVP post
And at Spireon, the company announced the promotion of Reggie Ponsford to senior vice president of sales for Spireon’s Automotive Solutions group. Previously, Ponsford was vice president of national accounts, responsible for Spireon’s largest and most complex customers in the automotive space.
In his new role, Spireon indicated Ponsford will oversee sales for the vehicle finance market segment, including buy-here pay-here and franchised dealerships, rental companies and power sports vehicle retailers, as well as direct and indirect lenders and strategic accounts.
“Reggie was an early pioneer in the GPS-based telematics industry, building an impressive long-term customer list through his genuine dedication to customer service,” Spireon chief executive officer Kevin Weiss said.
“In addition to Reggie’s exceptional sales track record, he has brought strong leadership and a focus on innovation to Spireon, helping us grow our roster of national accounts and extend our position as the largest aftermarket telematics provider in the country,” Weiss continued.
Previously, Ponsford was principle owner of Enfotrace, which was acquired by Spireon in 2011. Before that, he was vice president of sales at CalAmp, vice president of sales and marketing at Aircept, and regional sales manager at Teletrac. Ponsford has more than 18 years of sales and management experience within the wireless asset management and location-based services (LBS) markets. His industry expertise has been a key driver in the growth of GoldStar.
“My goal is to keep customers constantly connected to their mobile assets through Spireon’s reliable hardware and software platform, as well as rich data insights, allowing them to increase profits and mitigate their risk,” Ponsford said.
“I’m thrilled to take on this expanded role, which will allow me to deliver Spireon’s top-notch customer service and the number one product in the market, GoldStar, to even more customers,” he went on to say.
MUSA Auto Finance recently entered into a $125 million warehouse facility with Goldman Sachs and, additionally, secured a capital investment of up to $50 million from Crestline Investors.
Company management highlighted the capital investment, along with the warehouse facility, will provide MUSA Auto Finance with the funding needed to launch its vehicle leasing program nationwide this year. MUSA’s business plan is to begin originating new and pre-owned model leases strategically in key U.S. major markets with continued geographic expansion and market penetration in 2017 and 2018.
MUSA Auto Finance was founded by Jeff Morgan, who also owns Mortgages USA and Internet Auto Group. Richard Frunzi, who is the company president and a former co-founder and chief executive officer of Exeter Finance, joined Morgan last year to create MUSA Auto Finance.
The company has recently consummated the asset purchase of an originations, servicing and collections platform based in Jacksonville, Fla.
“It has always been a career goal of mine to create an auto finance company that would modernize vehicle leasing and make it accessible to more consumers,” Morgan said.
“To be entering into this venture with Goldman Sachs and Crestline Investors sets MUSA on the path to become one of the premier consumer vehicle leasing companies in the U.S.,” he continued.
As mentioned, MUSA Auto Finance maintains its corporate offices in Dallas with a servicing and collections center in Jacksonville, Fla. MUSA originates its leases from franchised and select independent dealers and will be expanding its sales force nationwide. The company expects to be in 25 major markets during the next 12 months and all 48 contiguous states within the next two years.
Along with Morgan and Frunzi, other members of MUSA Auto Finance’s executive team include:
—Cinde Perales, chief compliance officer
—Eric Estes, chief operations officer
—Scott Schondau, chief financial officer
“Our new funding capacity gives MUSA the ability to build out our infrastructure, and launch our innovative lease program nationally,” Frunzi said. “Our effortless lease program greatly simplifies the leasing process, opening doors to dealer personnel that have never offered a lease product before.
“In addition, our unique product gives customers an option to lease both new and pre-owned vehicles,” he went on to say.
For more information, visit www.musaautofinance.com.
Investor buys 17% of Nicholas Financial’s shares
Nicholas Financial — determined to be among the top 20 market holders of what Experian Automotive analysts classify as finance companies; operations that do not hold consumer deposits and often specialize in originating subprime paper — filed the mandatory document with the Securities and Exchange Commission because an investment firm purchased more than 5 percent of its outstanding shares.
As first noted by the Tampa Bay Business Journal, a Schedule 13D was posted involving Nicholas Financial; what the SEC said is commonly referred to as a “beneficial ownership report.” That filing indicated The Magnolia Group, an investment firm out of Omaha, Neb., acquired more than 1.3 million shares of the finance company’s common stock; an amount representing about 17 percent of what Nicholas Financial had outstanding. The aggregated price of the share purchase came in at more than $14.65 million, according to the filing.
The filing stated that The Magnolia Group made this move “based on the belief that such securities, when purchased, were undervalued and represented an attractive investment opportunity.” The filing continued that although The Magnolia Group “has no specific plan or proposal to acquire additional common stock or dispose of the common stock, consistent with its investment purpose,” that the investment entity “at any time and from time to time may acquire additional common stock or dispose of any or all of its common stock depending upon an ongoing evaluation of the investment in the common stock, prevailing market conditions, other investment opportunities, liquidity requirements of (The Magnolia Group) and/or other investment considerations.”
The filing added, “The purpose of the acquisition of the common stock is for investment, and the acquisitions of the common stock were made in the ordinary course of business and were not made for the purpose of acquiring control of the issuer.”
According to the company’s financial statement following the close of the third quarter of its fiscal year on Dec. 31, Nicholas Financial’s diluted earnings per share decreased 40 percent to $0.21 as compared to $0.35 in the year-ago span. The company reported its net earnings softened from $2.7 million to $1.6 million.
The company explained that its Q3 net earnings were adversely affected primarily by an increase in the provision for credit losses due to higher charge-offs and past-due accounts, along with a reduction in the gross portfolio yield. To a lesser extent, the company pointed out its results were favorably impacted by a decrease in operating expenses, which was partially offset by a change in the interest rate swaps.
Nicholas Financial indicated that it purchased 3,846 vehicle installment contracts during the Q3, leaving its number of active contracts as of Dec. 31 at 37,834. The average amount financed per contact in Q3 came in at $11,945 with an APR of 21.99 percent and an average discount of 6.87 percent.
Within its outstanding portfolio, Nicholas Financial said the average term amount remaining on the contract stood at 57 months. The company added 14.45 percent of its outstanding contracts were in delinquency, ranging from 60 days or less (7.04 percent) to more than 90 days (3.95 percent).
“During our third quarter, competition for new loan originations remained high with yields that continued to trend lower. We do not expect to see any material changes during our fourth quarter ending March 31,” said Ralph Finkenbrink, the company’s president and chief executive officer.
F&I program provider RoadVantage recently announced industry veteran Aaron Riddle joined its sales team as a regional vice president.
Riddle comes to RoadVantage with more than 25 years of experience in F&I, most recently with Ally Financial where he served as an area growth leader. Riddle’s background includes experience with F&I finance companies, products, trainers and providers, including several years with Safe-Guard Products as well as PermaPlate.
“Aaron’s career spans multiple sides of the F&I equation, giving him in-depth experience, established relationships and a unique perspective,” RoadVantage chief executive officer Garret Lacour said. “Aaron will be a strong asset as we continue to grow our presence nationwide.”
Riddle began his career on the finance-company side of F&I before moving to aftermarket products and providers, where he had a proven track record of income development with large accounts such as AutoNation, DCH/Lithia and Sonic Automotive. At RoadVantage, he will be covering the northern segment of the West Coast.
“I’ve been watching RoadVantage and was immediately drawn to this opportunity,” Riddle said. “Their innovative approach to F&I, including initiatives like their free consumer videos and how they handle claims — there’s a reason RoadVantage is growing so rapidly, and I’m excited to be part of a company that is leading the pack.”
Riddle is a certified member of the Association of Finance and Insurance Professionals.
