Former Head of Summit Acceptance Re-Enters Marketplace with New Subprime Lender
CORNELIUS, N.C. — In an exclusive interview with SubPrime Auto Finance News, the former head of Summit Acceptance, which was ultimately sold to Capital One Auto Finance, announced he is re-entering the subprime business as the chief executive officer of a new auto lender.
The name of the new business is Peak Acceptance, according to Steven David. The company received its first round of funding in 2009, and is rolling out its platform to dealers in Texas and additional states in conjunction with subsequent funding commitments.
Peak Acceptance next plans to enter Oklahoma, North Carolina and South Carolina, respectively. However, David said they will be rolling out in a slow and methodical fashion, ensuring that the business model is upheld and risk is as limited as possible.
Basically, he and his team are hoping to reproduce the success that Summit witnessed. The company will originate loans and do its underwriting in Dallas. The loan servicing will be out of North Carolina in Cornelius, which is just north of Charlotte.
"Our intention is to duplicate and improve upon the platforms and processes that led to the success of Summit Acceptance and its acquisition by Capital One," David highlighted.
So why, after so many years has David decided to get back into the business?
"It was not conducive to get back into the business years ago because of 60-second decisions, etc," he noted. "There is no better time to provide some source of financing. As long as we stay within our guidelines, we'll be successful."
He also hopes the market won't heat up as it has over the last few years before lenders were forced to pull back.
"As things get more competitive, companies go deeper," he said, pointed out that risk increases.
However, with many auto lenders tightening their belts and reducing their business in the lower spectrum, he saw now as the opportune time to re-enter the marketplace. And he is not doing it alone.
While Peak Acceptance is a new entry in the subprime auto financing market, the principals, including Stan Lukken and Bob Steele, in addition to David, have more than 50 years of collective experience in subprime auto lending.
Lukken has spent 30 years in systems design, development and consulting, with 14 years of this experience focusing on the financial services industry. He joined David at Summit in 1993 and was named a vice president in 1995. He ultimately moved with the company to Capital One Auto Finance to serve as director of information technology, where he automated loan origination, credit scoring, risk modeling and underwriting workflow systems to support the processing of 10,000 applications each day, David pointed out.
Meanwhile, Steele has 41 years of combined experience in the consumer credit industry, covering direct, indirect wholesale lending and retail auto management. In 1994, Steele joined Summit. He, too, went to Capital One Auto Finance when the company purchased Summit. At Capital One, David said that Steele's role of director of credit and funding operations changed in 2002 when he created the dealer risk management department and took on even more responsibilities.
As for David, himself, it was his father who started Summit. David ultimately became interested in the business and took over the shares to run it, turning it into a very successful business venture.
"We're excited, in this difficult market, to have procured funding to build on our track record and to repeat our past accomplishments as a quality-focused consumer lending service. The leading reason we were able to obtain funding is because of our history and success with our previous company, Summit Acceptance, in Dallas," David pointed out.
The company will focus on developing relationships with franchised dealers. Ideally, the company will fund loans for customers who have a FICO score of 585 or higher. The APR will likely be in the range of 14.95 percent to 21.95 percent.
Dealers should note that while some lenders offer 60-second loan decisions and whatnot, David's company plans to be cautious and fund customers on a 24- to 48-hour decision basis. Inventory will generally be restricted to units with 85,000 miles.
"We may be new, but we've been doing this for a long time (with Summit) and we've never left a dealer not funded," he stressed.
While some financial institutions have automated a lot of their underwriting, David is a firm believer in having a "real" credit analyst making the decisions, or what he calls "an investigator."
"You really can't drive automated credit approvals down too far," he pointed out. "And our history in this business let us raise some money for this company."
Steele, principal and senior analyst with Peak Acceptance, added, "Our key to success in this and previous financial markets is portfolio performance and adherence to solid credit guidelines."
Vice president of operations, Lukken, chimed in, saying that, "It isn't difficult to understand the fundamentals behind the failure of so many subprime financial companies when you see how dependent they were on their automation and their service providers. As a long-time technology guy, I understand the allure of computerized efficiency is very compelling, but it doesn't take the place of prudent decision-making.
"This business requires a constant balance between art and science. You can't be blindly absolute with your scoring models — you can't push common sense into a black box. There are always going to be exceptions to every rule," he continued.
"Nor can you assume that downstream service providers take the same interest in your customers as you do," Lukken went on to explain. "Peak Acceptance pays close attention to every applicant that comes through our door and we continue to oversee our customers' loans throughout their term. These principles are what made us successful at Summit Acceptance 15 years ago, and these same principles are what drive Peak Acceptance today."
The company has also formed a long-term strategic alliance with Paul Jenison, of Jenison Financial LLC. More information on Jenison's company can be found at www.jenisonfinancial.com.
Apparently David and Jenison have worked together in different capacities since 1993.
David noted, "This alliance makes perfect sense, Paul Jenison is intimately familiar with the Peak team and how we operate having spent many days and hours together when Paul was with Prudential Securities as a managing director calling on Summit Acceptance."
Dealers interested in learning more about the Peak Acceptance or establishing a relationship are invited to visit www.peakacceptance.com.