Brien Joyce on Growth Potential in Auto Finance
Q. What is the “State of Compliance” and how will it affect the auto lending environment?
A. Going into 2018, the auto finance industry has some significant compliance wins in its belt. Now, for every new regulation the CFPB puts out, it must eliminate two. Because of this, we don’t expect to see many new regulations come out from the Bureau. In addition, the CFPB’s Arbitration Rule was struck down by Congress in the third quarter of 2017. However, these wins have not affected lenders when it comes to maintaining their compliance practices. Lenders spent a lot of time and money adjusting their compliance practices in recent years. One government entity losing steam will not cause lenders to quickly reverse policies and procedures. Going forward, expect lenders to become more efficient when it comes to compliance, implementing positive process improvements with the ultimate goal of protecting consumers.
Q. In today’s flat auto sales environment, how are lenders bracing for increased competition?
A. With fewer people in the market, lenders have to work harder to capture that business. We’ll see more lenders adjust their marketing spend to expand their web presence and get in front of consumers in the places where they spend most of their time. While lenders market directly to consumers, they’ll also shore up their dealer relationships. In 2018, I expect lenders to increase their focus on dealership goals by buying more aggressively where possible, scheduling ongoing in-dealership meetings at least once a week, and reviewing profit metrics with dealership leadership once a quarter. More lenders will think beyond technology solutions for automatic approvals to ensure loan officers are available during dealership hours to better manage contracts in transit and get more loans funded.
Q. Where are the areas of opportunity for auto finance in 2018?
A. Even with rising delinquencies, economic indicators continue to be strong. As more consumers held off making their next vehicle purchase in 2017, the pent-up demand will begin to unfurl in 2018 – especially as SUVs hit the market. With this in mind, there is growth potential for the auto lending environment in 2018. To recoup profit lost in 2017, lenders are evaluating their go-forward strategies with regards to loan volume. Just like dealers, lenders are looking at how to generate increased customer loyalty. We’ve seen lenders invest heavily in mobile app development for this reason. We’re also seeing lenders strategically use consumer protection products as communication points during the auto loan lifecycle. Lenders are becoming more educated and confident in presenting consumer protection products in a consistent manner, generating higher penetration rates, additional profit, protection for the consumer, and an additional reason to stay in contact. Lastly, lenders are making themselves more accessible to consumers, encouraging more input and a two-way conversation.
Q. How is younger talent in the C-suite affecting auto lending?
A. As younger talent takes on leadership roles, we’re seeing more out-of-the-box solutions to traditional auto finance challenges, like delinquencies. These leaders are evaluating other options to protect their loan portfolio outside of APR and loan terms. For example, the recession taught lenders the value of consumer protection products. Now, there is more of an acceptance and understanding of these products in the lender community and I expect more lenders to evaluate how to best use consumer protection products to protect their loan portfolio, control compliance, and increase loan volume.