Point Predictive finalized four different relationships this month with a variety of auto-finance industry companies that plan to use the firm’s products to curb fraud.
The company that offers machine learning solutions now is working with MidAtlantic Finance, TCI, Nicholas Financial and Tricolor Auto.
The newest development arrived on Monday when Point Predictive announced that MidAtlantic Finance has selected the company’s scoring solutions to help improve underwriting decisions prior to funding contracts. MidAtlantic Finance plans to use two scoring solutions from Point Predictive: Auto Fraud Manager to score applications for risk of early payment default, fraud and material misrepresentation, as well as IncomePass to assess borrowers’ stated incomes for validity for improved application streamlining.
“In our retrospective testing with Point Predictive, we saw significant lift of the solutions to help us achieve multiple business gains,” MidAtlantic vice president Michael Pereira Jr. said in a news release. “In the highest risk scores, we were able to identify loans that have a significantly higher risk of early payment default due to fraud or material misrepresentation. We can use those high scores to scrutinize those deals more carefully.
In the low risk scores, we found loans had significantly lower rates of risk and default,” Pereira continued. “We can use those low scores to clear loan stipulations, route loans for faster funding and in general make the whole funding process easier for our dealers and customers. Our plan is to integrate those scores into our existing processes and internal scores to achieve those benefits across all loans going forward.”
To Point Predictive, the addition of MidAtlantic to the consortium is growing proof that shared intelligence and artificial intelligence is the future of auto-finance fraud and risk mitigation.
“We’re proud to partner with MidAtlantic,” Point Predictive Tim Grace chief executive officer said. “Our consortium data and AI scoring will enable them to identify significantly more early payment default before funding and. just as important, they will help them understand which deals have low risk of misrepresentation and default so they can proceed down a faster path to funding.
“Better targeting is the key to profitability and growth and that’s exactly where we aim to help MidAtlantic,” Grace added.
MidAtlantic said it will use Point Predictive’s Auto Fraud Manager to helps address the $7 billion-dollar annual problem of misrepresentation and fraud in the auto finance industry.
Point Predictive reiterated that Auto Fraud Manager uses machine learning to mine historical data from applications across the industry to precisely pinpoint where fraud is happening and how it is perpetrated.
More than 70 million applications have been evaluated and scored by the system, which is continuously learning new patterns as they emerge.
Additionally, MidAtlantic will use Point Predictive’s IncomePass — a solution that can provides an instant assessment of the accuracy of an applicants stated income.
Point Predictive said that finance companies have found that IncomePass can help them automatically identify and clear stated incomes on up to 80% of their applications without costly database checks and onerous requests for documentation such as pay stubs, which are subject to high rates of forgery
Nicholas Financial picks Point Predictive
Another finance company to select Point Predictive as a service provider is Nicholas Financial, which specializes in subprime contracts.
Like MidAtlantic, Point Predictive said Nicholas Financial will use Auto Fraud Manager as well as IncomePass
“Point Predictive is excited to partner with Nicholas Financial to help them achieve better relationships with their borrowers and their dealer network,” Grace said. “Our solutions help lenders reduce their risk of early defaulted loans by up to 50% and, in the process, help them streamline an additional 30% of their loans for reduced stipulations and friction in the lending process.
“By better targeting risk, the end beneficiaries are their dealers and borrowers who can see a reduction in the time it takes to fund loans,” Grace continued.
Nicholas Financial chief executive officer Doug Marohn explained why he believes solutions from Point Predictive will further enable to deliver on the company’s strategy to provide their customers and dealers a quick, easy and hassle-free funding process.
“At Nicholas Financial, we understand that ensuring risk control while providing great customer service is a delicate balancing act. We’ve been able to successfully mitigate and price for risk by identifying fraud throughout the underwriting and funding process,” Marohn said.
“In the current market, managing fraud and early payment default risk is critically important; we need to know who we can trust, and who we cannot. We believe Point Predictive will help us become even more effective in doing just that,” he went on to say.
Tricolor Auto goes with Point Predictive
Point Predictive’s active month began with the company announcing Tricolor Auto will use its Auto Fraud Manager solution to improve risk identification during the underwriting process.
“We are delighted to have Tricolor join our growing list of lenders that are leveraging the power our Ai,” Grace said. “Our unique approach of combining Artificial + Natural Intelligence (Ai+Ni) and harnessing the power of our proprietary consortium data has proven to work time and time again for lenders across the risk spectrum.
Our testing with Tricolor showed that we were not only able to help them better streamline low-risk applications for quicker funding, but we could also help them identify high-risk applications that might require more scrutiny for potential fraud or misrepresentation,” Grace continued.
“In the end, this will result in lower early payment defaults and more pull through, since they can potentially avoid costly and time-consuming stipulations when the risk is low,” he went on to say.
Tricolor is enjoying success as a subprime auto-finance provider that specializes in working with Hispanic consumers, receiving designation as a Community Development Financial Institution (CDFI) by the U.S. Treasury Department last year.
“Tricolor’s focus has always been to use advanced data analytics and Ai technologies to deliver high quality used vehicles at affordable loan rates for low income families,” Tricolor chief risk officer James Li said. “Point Predictive’s solution fits right into that strategy because of the unique insights their consortium and Ai bring to our decisions.
“With their scores, we can instantly assess the risk of both misrepresentation and the related probability of default,” Li continued. “This helps us make more informed fraud management decisions about each loan application — which ones can be queued for streamlined processing and which one we might need to take a closer look at.
“Ultimately, we will fund more loans, faster and more safely, to worthy borrowers,” Li added.
Origination platform opts for Point Predictive
Finance companies aren’t the only organization aligning with Point Predictive.
Point Predictive also a new standard integration with TCI, a leading loan origination platform provider, to help lenders and finance companies better address the rising risk that they face with fraud and misrepresentation.
As part of this standard integration, Point Predictive’s full suite of artificial intelligence solutions can be delivered to TCI’s customer base of more than 500 finance and lending companies. The integration with TCI now means that all TCI customers will have quick access to solutions to help them better address fast-growing types of fraud such as synthetic identity fraud, income fraud and auto lending fraud.
“TCI is committed to delivering state-of-the-art capabilities to our lenders,” TCI president Bill Nass said. “Right now, fraud and risk are at the forefront of every lender’s mind; with the solutions provided by Point Predictive, we can help lenders rest a little easier.
“Point Predictive solutions will help our customers decide instantly, before they make decisions to fund loans, which applications contain accurate information and which ones do not,” Nass continued. “Partnering with Point Predictive gives our lenders instant access to Point Predictive’s multi-billion attribute fraud consortium and cutting edge Ai+Ni technology.”
Point Predictive explained that its suite of AI machine learning scores and fraud alerting technology will give financial services companies using TCI’s loan origination system the ability to streamline applications for loans and new accounts by precisely identifying which applications contain misrepresentations. In most cases, Point Predictive said it is able to help lenders and finance companies identify a majority of their fraud risk in the riskiest 10% of their total application pool so they can perform greater due diligence on those applications prior to funding.
At the same time, lenders can also use the technology to auto clear and remove burdensome friction from up to 30% of their applications that contain virtually no risk of fraud or misrepresentation.
“We’re excited that TCI completed the standard integration of the Point Predictive Ai auto loan application, dealer and income risk management products. We know finance companies and lenders want easier access to solutions in real-time that can help them immediately reduce fraud risk with low false positives,” Grace said.
“With a respected solution provider like TCI, we can now easily provide access to our powerful scores and alerts to many finance companies that grapple with fraud issues each and every day but may not have the technology resources to implement quickly,” he continued.
TCI’s clients will have access to a full suite of risk scoring technologies including Auto Fraud Manager, Auto Fraud Alert, IncomePass and SyntheticID Alert.
For more information about leveraging Auto Fraud Manager, Auto Fraud Alert, IncomePass or SyntheticID Alert, contact Point Predictive at [email protected].
Less than a month after entering into the credit-union space, LAUNCHER.SOLUTIONS (Launcher) finalized another integration; this time with HRI Analytics.
The technology provider specializing in loan originations explained integration aims to help finance companies make more intelligent underwriting decisions within Launcher’s loan origination system with HRI Analytics’ empirical data driven solutions.
The company reiterated Launcher’s platform, appTRAKER Loan Origination System, was designed by experts in the subprime automotive finance industry, so credit risk management is a top priority.
“We understand how important it is for lenders to have the ability to forecast loss and price their loan offerings in such a way as to drive portfolio yield,” Launcher president Nikh Nath said in a news release. “We chose to integrate with HRI Analytics to allow our lenders to assess risk in a more thorough manner.”
Launcher clients now can improve their risk management processes through this new integration. HRI Analytics utilizes empirical analyses of application data, standard and custom credit bureau attributes, and alternative data to develop custom lending scores. These scores are applied during the underwriting process to improve lenders’ decisioning, especially in lower-tier and thin-file credit situations.
When combined with appTRAKER LOS’s automation and auto-decision capabilities, Launcher insisted clients can expect a streamlined and efficient loan originations process that is custom-built for them.
Brian Hopper of HRI Analytics said, “Integrating with appTRAKER LOS will benefit our mutual clients in multiple ways, from tracking portfolio performance with quantifiable results to managing credit facilities and keeping scorecards current.”
Launcher previously completed integration with LexisNexis Risk Solutions to make more alternative data available to subprime auto-finance companies as well as with General Forensics to curtail power-booking.
Only two more days remain in April; what’s likely to go down as the most destructive month ever experienced by the U.S. economy. More than 26 million American workers already have filed for federal unemployment benefits. Billions of dollars in federal stimulus funds are being pushed to consumers and businesses, so the economy didn’t completely throw a rod and the U.S. commercial engine would quit running altogether.
Undoubtedly a portion of that suddenly unemployed figure have asked auto-finance companies for modifications to their existing installment contract or vehicle lease. But what about the paper coming into portfolios, especially in the non-prime and subprime credit spaces?
Consumer Portfolio Services chairman and chief executive officer Charles “Brad” Bradley Jr. regularly lets his frank industry observations be known when the company hosts its quarterly conference calls with the investment community. Bradley did again when CPS conducted its call back on April 16.
“We said for multiple years that a recession would have an interesting effect on the industry. This will probably fill that bill,” Bradley said. “We’ve already heard lots of other companies are slowing down. Lots of companies have had layoffs. A few companies have ceased to originate already.
“It’ll be very interesting to see the overall effect on the competitors in the industry,” he continued.
Westlake Financial Services absorbed the $103 million active portfolio of one of the providers that already has exited the business — Coastal Credit, which shut down its operations in Indianapolis in March, laying off 127 employees.
Another subprime provider — Nicholas Financial — said in a filing with the Securities and Exchange Commission posted on April 13 that it was temporarily furloughing approximately 40 employees that represent 15% of the company’s workforce. Nicholas Financial said it anticipates the furlough period will end on May 17, and all furloughed employees will be eligible to return to work starting on May 18.
“The furlough period will be reassessed as business conditions dictate by the company,” Nicholas Financial said.
And one of the largest subprime auto finance companies — Credit Acceptance — did not specify furloughs or layoffs in its own SEC filing. But Credit Acceptance delayed the release of its first-quarter financial statement, saying, “the current outbreak of COVID-19 has adversely impacted our business, and the continuance of this pandemic and any future outbreak of any other highly contagious diseases or other public-health emergency could materially and adversely affect our business, financial condition, liquidity and results of operations.”
Just this week certain states like Georgia started to lift shelter-in-place orders. In states where COVID-19 is a greater problem like New York, stay-at-home directives remain.
“The longer it lasts, I think the more painful it would be for a lot of our friendly competitors,” Bradley said during CPS’ recent conference call.
Those subprime competitors of CPS, shops like Credit Acceptance, Nicholas Financial and Westlake, likely are not booking paper like their higher-credit tier contemporaries — captives — the providers included in the moving television advertisements broadcast nowadays that tout 84-month terms and deferments for as long as 120 days.
Again, Bradley speaking earlier this month said, “One of the first things we did, I think most people did, is we tightened in credit. We wanted higher income, a higher payment income. We pretty much stopped making any exceptions to any of our programs and we raised the score across the board.
Bradley then added, “Tightening credit was an obvious thing to do.”
Cox Automotive chief economist Jonathan Smoke pointed out yet another reason why finance companies likely tightened underwriting.
“Subprime accounts that are severely delinquent are up to the highest level since at least 2006. In March, 1.49% of auto loans were severely delinquent, the highest delinquency rate for the month of March since 2009,” Smoke wrote in this blog post.
On Friday, the calendar turns to May. Perhaps next month, the pandemic begins to mitigate noticeably and the economy starts to recover. In the auto-finance segment, there are already flickers of improvement, according to Dealertrack data shared by Cox Automotive.
Based on information as of April 20, Dealertrack found same-store unique credit application submissions for the previous week were down 33% year-over-year for new vehicles and 20% for used vehicles as both readings marked improvements from the prior week.
As for the subprime auto finance space in particular? Bradley likely summed it up best.
“We’ve heard rumblings of all sorts of different things in the industry. We can’t really put a finger on what’s going to happen,” he said.
Well put, Brad, so let’s all stay tuned.
Nick Zulovich is senior editor at Cherokee Media Group and can be reached at [email protected].
Auto Search Technologies’ transition to becoming VehiclesNETWORK continued on Wednesday as 700 Credit gained certified provider status from VehiclesNETWORK for its consumer pre-qualification (QuickQualify) and full credit application (QuickApplication) platforms.
Now dealers who use VehiclesNETWORK to build and manage their websites can elect to add these two solutions to increase the value of sales and finance leads.
QuickQualify can provide dealerships with a consumer’s current FICO score and full prequalification credit report to help in aligning consumers for the right auto loan without posting a hard credit inquiry. The simple data form supported by an informative video do not require the consumer’s Social Security Number or date of birth, which can help to engage more consumers and drive more valuable leads from a dealership’s website.
QuickApplication can replace traditional credit applications simplifying the process and allows for population of the application into AppOne, CUDL and RouteOne.
“We are very pleased that VehiclesNETWORK has certified our credit applications for their customers’ websites,” 700Credit managing director Ken Hill said.
“Empowering dealerships to capture more of their web site traffic and insight into their customers while enabling consumers to understand what type of vehicles and payments they qualify for without impacting their credit is a win-win for the dealership and the consumer,” Hill continued.
VehiclesNETWORK chief executive officer Chris Jackson recapped the company’s recent activities and what this relationship with 700Credit means.
“Over the last few months, Auto Search Technologies, Inc. is sporting a brand-new look and logo — VehiclesNETWORK an apogee company. These are exciting times for our company — our continued growth has brought new partnerships, new clients, more team members and helped us expand into all areas of the online automotive marketing world,” Jackson said.
“With that in mind, we have organized an exclusive partnership with 700Credit who offers a super sharp pre-qualify tool that does not impact your customer's credit and gives you a really good profile of worthiness so you can work a better deal,” Jackson continued.
“This pre-qualify tool will help you convert quickly for this very important tax-time season placing more money on your bottom line,” Jackson went on to say.
For more information on the partnership, call (866) 273-3848.
Experienced dealership managers and finance company executives might remember a juncture when subprime permeated much of used-vehicle financing. People with softer credit profiles opted for less-expensive used vehicles with a contract they could manage and risk that the provider deemed to be prudent.
Times, they are changing.
Experian’s newest State of the Automotive Finance Market Report indicated prime consumers opting for used financing during the fourth quarter surpassed 50% — the highest percentage in Q4 since 2009.
Furthermore, analysts discovered used-vehicle financing saw the largest growth year-over-year among super-prime consumers, rising from 12.55% in Q4 2018 to 13.29% in Q4 2019.
“The trend towards used vehicle financing mirrors previous quarters,” Experian said in a news release.
Meanwhile, subprime and deep subprime contracts constituted 27% of used-vehicle financing in Q4, according to Experian, which added that subprime paper made up 21.69% of total financing in Q4 2019, a slight decrease from Q4 2018 (21.88%).
Experian’s research uncovered that prime consumers leverage used financing for a variety of vehicle types, with full-size pickups and entry-level crossover utility vehicles (CUVs) being the most popular, though their selections also include small economy and mid-size vehicles.
Analysts determined full-size pickups made up 15.09% of used financing in Q4 2019, while entry-level CUVs weren’t far behind at 15.07 percent of used financing.
“We’ve seen consumer preferences shift to more expensive vehicles over the last few years. During the same time period, consumers have been increasingly aware of their financial health, and the increase in used financing is a signal they’re keeping this in mind when shopping for a vehicle,” said Melinda Zabritski, Experian’s senior director of automotive financial solutions.
“As consumers look at the options available, selecting a used vehicle can be the best fit for their budgets, while not compromising the features they’re looking for,” Zabritski continued.
Experian pointed out that used financing isn’t the only segment seeing prime growth.
New financing increased, as well, as analysts noted prime consumers comprised more than 72% of new-vehicle financing in Q4 2019. As more financing goes prime, Experian indicated there’s also been a steady increase in average credit scores, with the average credit scores for vehicle financing reaching 719 for new contracts and 661 for used deals in Q4 2019.
Positive trends in delinquency and payments
Overall, Experian computed that the auto-finance market continues to grow with total open automotive balances reaching $1.229 trillion.
Analysts noted the average amount financed for a vehicle purchase increased in Q4 2019. Experian pegged the average new-vehicle contract amount at $32,797 during the quarter, while the average used-vehicle deal reached $20,554.
Despite increases in average amounts financed, Experian highlighted that delinquency rates stayed relatively flat in Q4 2019, with 30- and 60-day delinquencies at 2.31% and 0.79%, respectively.
Additionally, analysts said that while average monthly payments continued to increase, the increases were not as dramatic as historically seen.
In Q4 2019, the average monthly payment for a new vehicle came in at $554, a $9 year-over-year increase, and the average monthly payment for a used vehicle was $393, up $6 year-over-year. The more moderate increases in monthly payments were aided by a reduction in average interest rates, which were 5.76% for new and 9.49% for used in Q4 2019, compared to 6.13% and 9.59% during the same time a year earlier.
“The data shows numerous positive trends for affordability, including flat delinquencies and lower interest rates, which we expect to continue,” Zabritski said. “All signs point to consumers being able to manage their loans well, which is a strong indicator of stability in the industry.”
4 additional findings
Experian mentioned a quartet of other trends from its latest data, including:
— Consumers choosing to lease continued to increase, making up 29.92% of new vehicles financed, compared to 28.76 percent of new vehicles in Q4 2018.
— Banks continued to increase their market share of vehicle financing, rising from 30.72% to 32.74% year-over-year.
— Longer terms continue to dominate the market, with increases in the 61-72 and 73-84 month segments for new-vehicle contracts rising most (40.5% and 30.5%, respectively).
— The average price difference in monthly payments between retail installment contracts and vehicle leases is $93.
To view the entire Q4 2019 State of the Automotive Finance Market Report during a webinar to be hosted by Experian, register at this website.
Open Lending recently shared how successful 2019 was for the firm that strives to help finance companies take prudent risk in the subprime space.
The provider of a unique auto lending enablement platform with default insurance signed 77 new finance companies to its Lenders Protection program in 2019.
According to a news release, notable finance companies now using Open Lending include $8.3 billion Alaska USA, $9.1 billion VyStar Credit Union, $4.8 billion Idaho Central Credit Union, as well as two captives.
“We are extremely excited about the unprecedented number of lenders who signed agreements to partner with Open Lending in 2019,” Open Lending chief executive officer John Flynn said in a statement. “The auto-lending market continues to see extreme competition and we believe our platform enables auto lenders to provide expanded offerings that allow them to be more competitive without unduly increasing their risk.”
Open Lending uses various alternative data sources and proprietary underwriting to determine the appropriate risks for borrowers who don’t have a prime credit profile. The fully automated system then can calculate an interest rate inclusive of the cost of a default insurance policy that helps mitigate the loss in the event the consumer defaults.
“Lenders Protection helps auto lenders say ‘yes’ to more loans,” Flynn said. “It helps lenders earn more from loans that they might otherwise deny and build stronger relationships while providing a credit enhancement offsetting additional risk.”
Your portfolio might be filling with contract holders from Generation Z — consumers born in or after 1995. Recent research from TransUnion showed that this generation isn’t necessarily just staring at smartphone constantly. These individuals also are getting behind the wheel, and sometimes leveraging auto financing in order to do so.
“First and foremost, the interesting insight is that Gen Z consumers are interested in auto financing and are purchasing vehicles,” said Matt Komos, vice president of U.S. research and consulting for TransUnion.
“Generally, there were some anecdotes and stories about that maybe there wasn't as much of an interest in that space for younger consumers,” Komos continued during a phone conversation with SubPrime Auto Finance News. “But we are seeing that when you compare to millennials at the same age, Gen Z consumers are taking out auto loans at a higher rate.”
In the U.S., the study also compared the credit activity and performance of millennials (consumers born between 1980 and 1994) and Gen Z consumers. To have a true “apples to apples” view, TransUnion observed millennials who were between the ages of 18 and 24 years old in 2012 and Gen Z consumers who were 18 to 24 years old as of 2019, adjusted for risk and age differences.
Across traditional credit products, Komos and the study team found preferences for these two groups were broadly similar. However, a combination of finance company supply and consumer demand has caused some differences between generations.
TransUnion discovered the lower rate of unemployment during Gen Z’s young adulthood has resulted in more Gen Z adults joining the workforce rather than enrolling in school. As a result, more millennials (44%) had a student loan than Gen Z (37%).
While TransUnion acknowledged it is often assumed that younger consumers inherently present greater risk to finance companies, Komos and his fellow researchers found it interesting to note that 50% of credit-active Gen Z consumers are prime and above (with a VantageScore 661 or higher), compared to the 39% of credit-active millennials who were prime and above at the same age.
Even with a less risky credit-active population, TransUnion indicated Gen Z consumers have benefited from favorable underwriting standards toward non-prime borrowers with a VantageScore 660 and below in both the auto and credit card industries.
Komos and his colleagues noticed this underwriting expansion into riskier tiers has driven nearly 10% more credit-active Gen Z consumers into auto financing compared to millennials over the same age period. There has also been an increase of subprime (VantageScore 300-600) bankcard activity for Gen Z, as 23% of subprime consumers have a credit card in comparison to 12% of subprime millennials.
“The oldest set of Gen Z consumers came of age during an elongated economic expansion and relaxed underwriting environment, which allowed for a comparatively easier entrance into the credit market than their millennial counterparts,” Komos said.
“Gen Z has been able to access credit cards and auto loans with greater ease, particularly because lenders have been extending their buy-box into non-prime — which has been beneficial to these Gen Z consumers as they enter the credit market,” he continued.
And those previously mentioned smartphones, Komos mentioned how those devices remain important in the auto-financing market, too, when discussing Gen Z.
“Given that this is our first digital native generation, they've grown up in a digital environment,” Komos said. “That’s the way they're used to doing business.
“I think it’s important for lenders to understand the ongoing trends and preferences that these consumers are exhibiting and really try to serve them as best as possible with not just their preferred engagement protocol or method but also with valuable products and solutions that serve the needs of these consumers,” he went on to say.
This week, MaximTrak launched the latest tool available through its F&I platform by leveraging the capability and convenience of text messages.
The company highlighted MaximTrak GO is designed to be a customer-driven, dealer-controlled menu presentation that can allow consumers to discover and select protection products, any time, any place, and through the convenience of their own mobile device.
In light of today’s modern consumers that expect a speedy, frictionless, omni-channel shopping experience, MaximTrak looked to position its latest technology release so dealers can achieve this objective by texting a link to their customers to launch a unique “text-to-transaction” experience that can improve customer satisfaction, product penetration and profitability.
After creating a custom protection package for the customer, dealers can send a link directly to that customer’s smartphone or tablet via text or email. From the comfort of any chosen environment, customers can discover and select the products that work for them, in advance of the in-store F&I and delivery process. They can engage with sales tools, videos, and educational information with real-time calculations showing the financial impact of the products they select.
Customers also can interact with MaximTrak GO to learn about product options and accept or decline products, creating their own package. After a customer selects their product options, they can confirm their package, triggering a dealer notification to complete the transaction.
The company insisted MaximTrak GO also is suited for post-sale follow up, generating a great opportunity for dealers to improve profitability and enable customers to further protect their purchase.
“MaximTrak is dedicated to delivering innovative tools to dealers to improve processes and boost customer satisfaction,” MaximTrak vice president of operations Imran Mussani said in a news release. “Maximtrak GO is an integral piece to this equation, moving the point of sale to where consumers are at and creating a seamless online to in-store experience.”
MaximTrak GO is available to dealers as a stand-alone offering or as a complementary offering to MaximTrak’s FLITE, which is an interactive showroom tool that can engage dealership customers in a survey. That survey can help the customer self-identify risks and build a completely customized profile and menu of products that are directly aligned with the customer’s needs and driving habits.
Dealers interested in MaximTrak GO can call (800) 282-6308 or visit www.maximtrak.com to get more information or request a demo.
Equifax recently made another move to give its auto-finance company clients a more vivid picture of what their applicants’ credit background truly might be.
The Automotive Intelligence Council member announced new direct-to-consumer partnerships with Esusu, MoCaFi and Zingo that Equifax said will help develop a more complete picture of a consumer’s financial profile.
Equifax explained in a news release that it wants to offer real solutions that can meet people wherever they are on their personal finance journey. The rent-reporting platforms can enable consumers to opt-in to include rental payment data as part of their respective credit report to allow a more complete picture of financial history.
All three companies, as part of their credit education initiatives, will also present their users with a free weekly or monthly VantageScore credit score so they can track score changes over time.
Equifax acknowledged most renters’ on-time housing payments are not reflected on their credit reports — even though it is often one of the largest and recurring bills consumers pay. Having little to no credit can impact a consumer’s ability to qualify for a mortgage, finance a car or take out college loans.
These direct-to-consumer Equifax partnerships with Zingo, Esusu and MoCaFi continue to give the underserved population an opportunity to add additional payment depth to their credit histories.
Esusu can enable tenants to build and establish their credit scores while helping property owners reduce turnover and missed payments to increase their operating income.
“Esusu’s partnership with Equifax will help accelerate our growth,” said Abbey Wemimo and Samir Goel, co-chief executive officers of Esusu. “It will also help in creating more financial opportunities and access for millions of Americans.”
MoCaFi, short for Mobility Capital Finance, is a platform that seeks to provide banking services to the underbanked, while helping them build credit and improve their economic mobility.
“MoCaFi’s partnership with Equifax represents a new paradigm of what’s possible when two organizations come together to drive financial inclusion,” said Wole Caxum, founder and CEO of Mobility Capital Finance. “Our work is already allowing people, especially communities of color, to see the benefits of using rent reporting to impact their credit scores. These are exciting times for us as our work is just getting started.”
The Zingo platform collects, verifies and reports rental payments initiated by the consumer, thus enhancing their credit profile when consistent payment history is reported.
“The Zingo automated rent reporting platform puts the consumer in control,” Zingo CEO Maria Gallegos said. “Our mission to empower consumer-initiated rent-reporting to Equifax supports their goal to help consumers live their best financial lives.”
Tom Madison, senior vice president and general manager at Equifax Global Consumer Solutions, elaborated about what collaborating with Zingo, Esusu and MoCaFi means
“Our partnership with these market leading rent-reporting agencies reaffirms our commitment to become a more consumer friendly data and credit reporting agency,” Madison said. “This will help provide a more comprehensive view of consumers’ payment histories and help people in the pivotal moments in their financial lives, such as applying for their first mortgage or buying a car.
“Everyone, regardless of their income or living situation, deserves the chance to reach their financial goals. Through these partnerships and continued efforts, Equifax aims to help consumers live their financial best by understanding their credit throughout their lifetime,” Madison added.
If auto-finance companies were not already using alternative data to enhance their underwriting efforts, they appear to have gotten the green light this week from five prominent federal regulators.
Those five agencies — the Federal Reserve, the Consumer Financial Protection Bureau (CFPB), the Federal Deposit Insurance Corp. (FDIC), the Office of the Comptroller of the Currency (OCC) and the National Credit Union Administration (NCUA) — issued a joint statement on the use of alternative data in underwriting by banks, credit unions and non-bank financial firms.
The statement notes the benefits that using alternative data may provide to consumers, such as expanding access to credit and enabling consumers to obtain additional products and more favorable pricing and terms. The statement explained that a well-designed compliance management program provides for a thorough analysis of relevant consumer protection laws and regulations to ensure firms understand the opportunities, risks, and compliance requirements before using alternative data.
Officials reiterated alternative data includes information not typically found in consumers’ credit reports or customarily provided by consumers when applying for credit. Alternative data include cash flow data derived from consumers’ bank account records.
“The agencies recognize that use of alternative data in a manner consistent with applicable consumer protection laws may improve the speed and accuracy of credit decisions and may help firms evaluate the creditworthiness of consumers who currently may not obtain credit in the mainstream credit system,” officials said in a news release issued by the CFPB.
The entire three-page statement can be found here.
