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. The auto finance industry may feel like compliance is taking a back seat in 2019, but that is far from the truth. While the CFPB is restructuring and pulling back, the FTC is increasing its focus in the retail automotive space. In addition, all eyes are on the Hill to see what will happen with GAP and the Department of Defense decision on the Military Lending Act. With all these developments, there is no reason to back off compliance and discontinue good practices.
Q. In today’s flat auto sales environment, how are lenders bracing for increased competition?
A. The competition is heating up in today’s flat auto lending market. Those lenders who originally pulled out of subprime at the end of last year and first part of this year, are re-evaluating the space. However, they are finding that in order to compete they must slash rates, even while the Fed increases rates. This competition will only increase in the months ahead, meaning lenders will need to find ways to differentiate their auto loan offerings outside of rate. As a result, we’ll see more lenders evaluate the benefits of selling consumer protection products to increase loan volume and non-interest-bearing income, while also protecting their loan portfolio from risk.
Q. Where are the areas of opportunity for auto finance in 2019?
A. 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.