2015 is here and the CFPB is keeping up the pressure on compliance regulation. Everyone is wondering what the year will look like. Will more lenders implement flat rates? Will the CFPB find a way to extend their influence into the F&I space? Will Congress step in and impose restrictions on the CFPB? With so much up in the air, dealerships and lenders alike are waiting with baited breath to see what 2015 has in store.
As your new year’s resolution, focus on and hone your lending institutions operations by focusing on the following:
Developing a robust compliance management system;
Managing complaints; and,
Understand the role your vendors play in compliance.
2014 marked another record year for auto sales, and subsequently more lenders expanded their portfolios into the subprime realm. With dealerships having an average of 10 lenders with which to place loans (according to Dealertrack technologies), lenders are now concerned with sustaining 2014 results and staying ahead of the pack. Smart lenders have taken the opportunity to increase loan volume by tapping into a rising dealer need and providing complimentary consumer protection products on their loans. Examples include vehicle return, limited powertrain, tire and wheel coverage, etc. with an option to sell upgrades. However, this also means that lenders need to be extremely selective as to whom they choose as their F&I product administrator. That company’s customer service will ultimately directly affect dealership, and therefore lender, profitability.
With 2015 just ramping up, now is the time to pay attention to what makes a product administration partner reputable and dependable. Those proof points can help overcome consumer concern in the F&I office, as well as increase customer retention for both your institution and your dealership partners.
Proof points to pay attention to include the company’s investment in customer service training and technologies, customer service awards and recognitions, and professional certifications like the National ASE Blue Seal of Excellence. However, what really sets a product administrator apart is transparency. When evaluating whether your product administration partner is holding you back, consider whether they provide information on:
Contributing Author: Steve Roennau Vice President Compliance EFG Companies
A good portion of Experian’s latest State of the Auto Finance Market Report revolved around alleviating industry concerns that the auto market is looking more like it did right before the Great Recession. If you’ve been paying attention to headlines lately, you know that economists are worried about how quickly the subprime market is expanding and are asking if there will be another bubble to pop.
With those concerns in mind, lenders are especially concerned with the upward trend in auto delinquency. According to Experian’s report, finance companies experienced a 2.6% year-over-year increase in 30-day delinquent loans with a total balance of $6 billion.In addition, the top 10 states with the highest delinquency rates account for 32% of the total amount of delinquent loans.
With strong subprime growth and increasing delinquency levels, smart lenders are looking at how to level out their delinquency rates, or at least protect their loan portfolio from this growing risk. While some would argue that the best way to pad the portfolio is by increasing APR, there is another option that benefits the lender, the dealer and the consumer. That option is the use of complimentary consumer protection products.
With consumer protection products, like a vehicle service contract or vehicle return protection, consumers are protected from the high costs associated with a vehicle breakdown, or from the negative financial repercussions of instances like involuntary job loss. This same consumer protection also protects the loan. How? Consumers can continue to make loan payments if they don’t have to reallocate funds to cover costly mechanical repairs or cover living expenses on an unemployed budget.
Dealerships also benefit by setting up the F&I product presentation with a description of the benefits consumers will receive with their loans. This offers F&I managers an excellent springboard into presenting upgrade options or additional products to further protect the consumer. Your loan will essentially turn the conversation from strictly a sales presentation to a rewarding and productive discussion about the benefits of consumer protection products, and the value the dealership is providing.
Don’t feel like your only course of action to combat delinquency levels is to raise rates. Pair your loans with complimentary consumer protection products. They can help protect your loan portfolio, while also protecting your customers and providing your dealership partners with the ability to make additional F&I income.
With almost 40 years of experience in innovating compelling consumer protection products, EFG Companies knows how to strategically place the right product mix with your loan to achieve greater loan volumes. Find out how today!
