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Part One: Is Your Lending Platform Positioned for Increasing Auto Loan Delinquencies and Charge Offs?

Written by Andrew MacDowell, Director, DecisivEdge™

Auto lending has experienced unprecedented risk impacting many financial organizations. During the recent two quarters, auto loan delinquencies have shown signs of significant increases and growing net losses appear non-seasonal in nature.

Heavy competition among lenders for market share and less stringent underwriting standards for auto loans have contributed to this growing concern. Compounding this increasing risk,  lenders appear to have substantially layered risks by offering longer terms combined with higher advance rates. These combined factors have significantly increased credit risk in auto loan portfolios and in some cases may have created fair lending and consumer compliance issues. These self-inflicted risks are resulting in higher net charge-offs for both traditional and nontraditional lenders.

While these decisions create positive consumer opportunities and incremental net revenue, they can also result in future losses and increased recovery costs.  This places additional pressures on risk management practices and daily operations.  Risk management may be unable to anticipate the end result of aggressive higher risk portfolio growth.

So what type of platform capabilities do you need to mitigate the potential adverse impact to your lending business?

    • Comprehensive history of all transactions, delinquency ratings, and credit bureaus.
    • Real time commentary search capabilities including time/date and user stamp.
    • Estimated and actual loss analysis on the repossession /sale of the asset.
    • Automatically update delinquency information after backdated transactions are posted.
    • Bankruptcy sub-statuses (disposition codes) from which to track the process and build work queues.

If you are contemplating a new or replacement auto lending platform, feel free to contact me at andrew.macdowell@decisivedge.com to learn more about DecisivEdge and our expertise in providing lending and leasing solutions and services.