Tag: consumer protection products

Categories
Uncategorized

Managing Rising Consumer Debt

Brien Joyce Vice President EFG Companies
Contributing Author:
Brien Joyce
Vice President
EFG Companies

The data says it all. According to Euromonitor and JATO, between 2009 and 2016:

  • U.S. consumer spending on vehicles grew by 36 percent
  • The outstanding balance of consumer auto loans increased by 36 percent
  • Disposable income only grew 15 percent
  • The outstanding balance of consumer loans as a whole decreased by 7 percent
  • The average auto debt per car in circulation rose by 44 percent

Everyone knows that since 2009, auto manufacturers and lenders aggressively pursued unit sales and loan volume. Manufacturers have hit a peak when it comes to providing deep incentives, while lenders loosened credit standards, increased terms, and dove into the deep-subprime space.

Morgan Stanley recently reported that the percentage of deep subprime loans rose from 5.1 percent in 2010 to 32.5 percent in 2017.

Now dealers, manufacturers, and lenders are beginning to see what the other side of this rapid expansion looks like. Sales are plateauing regardless of dealer or manufacturer incentives. Defaults and delinquencies are up, and loan originations are on the decline.

Continue reading “Managing Rising Consumer Debt”
Categories
Business Growth

Consumer Communication

Contributing Author: Brien Joyce

 

Contributing Author: Brien Joyce, Vice President, Specialty Channels, EFG Companies

Ask yourself the following questions:

  • How often are your indirect auto loans refinanced within the first 30/60/90 days?
  • Do you consider your offering equal to, or more competitive than, the competition?
  • What differentiation does your offering provide to cut through the clutter and drive auto loan growth and retention?

With a dense auto lending environment from captives to credit unions, dealerships have had their pick when it comes to choosing which loans to push. In fact, dealerships have reduced the number of lenders they work with. According to a recent study from Dealertrack Technologies, the average number of lender relationships has dropped to between 6.9 and 10 lenders. With that in mind, lenders have vied to provide consumers with low rates and dealers with high margins.

Continue reading “Consumer Communication”
Categories
Compliance F&I

How are You Embracing Change?

Karen Klees, Certified Consumer Credit Compliance Professional

 

Contributing Author: Karen Klees, Certified Consumer Credit Compliance Professional, EFG Companies

Recently, U.S. Bank issued a letter to its dealer partners describing the bank’s policy with regards to fair and responsible lending. Well, that in itself is not news. Lenders have been issuing letters of this nature for the past few years. However, this letter did mark a significant milestone since the CFPB’s regulation of the retail lending industry. In this letter, U.S. Bank became the first lender to explain a monitoring program with a heavy focus on how F&I products are priced and sold.

To date, even with state regulations on F&I pricing, dealers have had substantial leeway to set their margins. While third-party administrators set risk-based costs for each product, dealers have the opportunity to set their margin based on how much money a lender will advance.

Along with potential reserve for originations, setting F&I product margins is the finance department’s primary way to generate profit. Because of this reliance, dealerships are very concerned about lending oversight. Meanwhile, U.S. Bank is taking what they believe is a proactive step to monitor pricing before any regulatory decisions are made. And, it’s likely that other lending institutions will observe this practice closely to hone their internal best practices.

Continue reading “How are You Embracing Change?”