Not long after launching its lending and leasing as a service (LLaaS) product powered by Oracle, technology services and consulting company DecisivEdge articulated what the firm believes are the six “must haves” when auto finance providers are considering loan origination software (LOS).

DecisivEdge senior vice president of business optimization Andrew MacDowell used automotive imagery when explaining that he wanted to take a “look under the hood” of loan origination software on the market today and study the many “moving parts” designed to meet the rigorous requirements of diverse finance companies with the key objective of strengthening customer and dealer relationships, mitigating risk, and streamlining day-to-day operations.

MacDowell arrived at the six “must haves” and initially mentioned them in a blog post shared with SubPrime Auto Finance News.

1. Compliance

MacDowell insisted standalone software will not assure compliance, but should provide the solution to execute with confidence. He emphasized that compliance calculation and Truth in Lending Act (TILA) disclosures must be compliant. 

“Origination software should assist in storing copies of key documentation: including appropriate disclosures and contracts, all documents must be in compliance with the Electronic Fund Transfer Act including electronic fund transfer pre-authorization, disclosure documents, transaction history, application denials, adverse action notices, procedures of less favorable terms, and loans subject to risk-based pricing regulations,” he said.

“Additional software capabilities include generating appropriate notices to customers, and single electronic fund transfer transactions in compliance with EFTA Regulation E,” he continued.

2. Credit Scoring and Auto-Decisioning

MacDowell contends that a state-of-the-art LOS should replace the manual processes of requesting and analyzing credit bureau requests by automatically parsing the credit reports into useful financial information that can be used for automated scoring and decision-making.

He explained that the system should support manual re-scoring of the credit application if another credit bureau report is pulled, or if another scoring model is processed.

“Credit analysts should also have the ability to specify if a credit bureau report is not required. Ideally, the platform would also provide a highly configurable user-defined scoring model that can be setup for each product you are offering and a scoring engine built into the application should use data attributes from both the loan application and the credit bureau report,” MacDowell said.

“The system should support auto-decisioning as well as manual decisioning,” he continued. “Based upon the risk model setup, lenders should look for platforms that can compute a custom credit score for the application and assign a credit grade. The credit grade can then be used to auto-decision the application or be queued to an underwriter for further manual review."

3. Risk-Based Pricing

MacDowell suggested that finance companies must have a platform that helps facilitate the setup of pricing scenarios based on the provider’s credit policies. He noted different pricing rules should be defined based on parameters such as product, state, dealer, credit grade, contract amount and asset/collateral.

“The pricing setup can be configured in a number of ways with multiple attributes to provide flexibility,” MacDowell said. “The system should recommend ‘best-match’ pricing based upon the application parameters and conform with the institution’s pricing strategy during setup configuration. 

“With the auto-decision process, the system can assign a price based on the credit risk of the application,” he went on to say. “In order for efficient processing and data integrity, the uploading of the pricing records from a data file is also supported. This functionality is critical in light of increasing challenges in the auto lending and leasing industry this year.”

4. Multi-Channel Triggers

MacDowell pointed out that finance companies require the key capability to trigger originations in real time, utilizing any consumer banking channel, including mobile, web, telephone, fax, internet or the dealer/branch.

With the convenience and security of a cloud-based solution, MacDowell explained applications can be received, customer credit immediately calculated, and lending decisions concluded automatically or manually.

“Default stipulations should be integrated into the application to allow the lender immediate opportunity to effect a leveraged plan or a decision based on market performance and compliance,” he said.

5. Flexibility of Product Offerings

MacDowell acknowledged that the ability to offer secured or unsecured loans, leases, loans or lines of credit can be a lengthy process without continual compliance to prevailing Consumer Financial Protection Bureau compliance policies and market trends.

MacDowell also mentioned customer status changes, daily interest margins and competitor’s rates are among the key concerns to consider with product offerings. He recommended that they should be integrated into a well-built lending platform.

“With ‘all bases covered,’ product offerings can be validated, tested and brought to market at a faster pace,” MacDowell said.

6. Straight-Through Processing

Streamlining the receipt, analysis, and processing of loan applications allows for more efficient transactions, according to MacDowell.

“By removing the requirement for manual data reentry and enabling the simultaneous distribution of information, such automation lends itself to the elimination of costly processing delays,” he said. “Quick processing of adjudication is important to facilitating lender turnaround responses.

“A major benefit of streamlining lending platforms will result in a consistent, precise and more thorough transaction process,” MacDowell went on to say. “This ultimately leads to generating the right credit decisions delivered at the right time to the right customer.”

MacDowell closed his discussion by making one more point.

“Be diligent as you assess your prospective implementation partner before making your decision. You will want to ensure the prospective implementation partner has the expertise to deliver both technical and servicing requirements,” he said.

DecisivEdge’s solution powered by Oracle

As previously mentioned, DecisivEdge, which also is a gold-level member of Oracle PartnerNetwork (OPN), recently announced the launch of its lending and leasing as a service (LLaaS) product, powered by Oracle. DecisivEdge highlighted LLaaS is designed to be a simple, flexible, securely featured and cost-effective way for small and medium-sized finance companies to leverage the capabilities of a world-class solution.

Oracle Financial Services Lending and Leasing (OFSLL) is at the core of DecisivEdge’s offering. It is hosted in a securely featured cloud and bundled with 24/7 monitoring, support and other value-added services. 

The company indicated the service is priced based on account volume and service levels selected by the subscriber. This simplifies adoption and dramatically reduces the cost of entry. DecisivEdge is onboarding its first customer, a midsized lessor of residential HVAC equipment to the platform and is working with several other interested lenders.

“We are extremely excited to be working with Oracle to bring this innovative solution to the marketplace,” MacDowell said. “The traditional model requires a sizable up-front capital expense to acquire the software and infrastructure, often putting such a solution out of reach for small and medium-sized lenders.”

Andrea Klein, vice president of alliances at Oracle Financial Services, added, “We are delighted to collaborate with DecisivEdge to offer an innovative solution alternative to our customers.

“We look to work with progressive companies such as DecisivEdge to bring to clients the solutions they need to differentiate, enhance and grow their businesses,” Klein went on to say.