Tag Archive | "lenders"

BMO Completes Acquisition of GE’s Transportation Finance Business

CHICAGO — On Monday, BMO Financial Group completed its acquisition of General Electric (GE) Capital Corporation’s transportation finance business, more two months after the company hinted at a reduction of its U.S. indirect auto finance portfolio to fund the purchase.

The newly acquired business unit, which BMO officials said represents North America’s largest financier to the truck and trailer segment, will be renamed BMO Transportation Finance. It will continue to operate under the leadership of Dan Clark and his management team. On closing, the business had net earning assets of about $8.9 million, BMO said.

“The trucking industry is vital to the North American economy, and we intend to grow that business, building on the team’s 40-year track record of providing industry expertise to its customers,” said David Casper, president and CEO of BMO’s subsidiary BMO Harris Bank, which will oversee the new business unit.

BMO Harris Bank stirred suspicions when it informed dealers on Oct. 1 that it was exiting approximately 12 states in order to refocus “its indirect auto business to solely include the bank’s core market states.” The pullback was thought to be the linked to the bank’s April 2014 decision to move to a flat-fee compensation model in response to the Consumer Financial Protection Bureau’s scrutiny of dealer participation policies. Market insiders believed the bank lost dealers as a result of the move.

At the time of the announcement, a spokesman for BMO Harris Bank denied the move to flats resulted in lost business and maintained that the pullback was the result of a strategic decision. That claim was backed by a Sept. 10 conference call in which BMO Financial Group announced to media and investors its intentions to acquire GE’s business unit.

“The transaction will be funded using existing balance sheet liquidity, additional deposits and some wholesale funding,” Tom Flynn, BMO Financial Group CFO, said during the conference call. “In addition, our funding strategy includes a reduction of our U.S. personal and commercial indirect auto lending portfolio over the next few years.”

BMO Harris Bank, which terminated dealer agreements in those 12 noncore state on Oct. 31, continues to serve dealers in Illinois, Wisconsin Indiana, Minnesota, Kansas, Missouri, Arizona, and Florida.

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Consumers Want Lenders to Bid for Their Business, Study Shows

CINCINNATI ─ Swapalease.com released today finding of survey that questioned more than 2,500 U.S. drivers and car shoppers about the future of automotive trends. Among the study’s findings, the vast majority of car shoppers are not excited about car-sharing services or autonomous driving.

The online survey, conducted between Feb. 20 and March 15, also showed some key gender differences in how shoppers would like to see the automotive experience in the future.

Both men (66%) and women (56%) would most prefer to identify the car they like and then have dealers submit their best bids. However, women (35%) are interested in “showtailing,” where they look at cars at the dealership but then buy/lease online. Men (33%) would like to buy/lease cars online without ever stepping into the dealership.

In terms of finance options, the combined genders (66%) would prefer to see all their financing and rate options online ahead of time. Separately, though, more men (45%) than women (27%) would be interested in lenders bidding for their business ahead of time.

As for leasing, the combined genders (51%) would prefer to select the lease package that’s right for them from a menu containing various options such as mileage and upfront money. Separately, most men (51%) would like to get out of any lease with a 90-day notice, while most women (54%) would like to lease month-to-month with no extended terms.

As for vehicle features, both genders agree that rear back-up camera systems (65%) and in-car Wifi (60%) are the tech features that will most influence their shopping decision in the future. However, lane departure warning systems saw a large difference, with 52% of men indicating the that as an influential technology as opposed to just 31% of women.

Additionally, both genders are not at all interested in using a car-sharing service such as Uber (43%) as well as autonomous driving (37%).

“The automotive industry continues to evolve before our eyes, especially when it comes to the types of cars manufacturers are producing,” said Scot Hall, Executive Vice President of Swapalease.com. “We’d like to see the industry break out of the mold more when it comes to lease packages and more flexible terms, and this survey shows car shoppers would be in favor of some creative thinking on those fronts.”

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Five Trade Groups Urge CFPB to Fix ‘Flaws’ in Fair Lending Enforcement

WASHINGTON — Five trade groups representing the nation’s largest auto finance sources issued a letter yesterday to the Consumer Financial Protection Bureau’s Richard Cordray, urging the director to review and respond publicly to a study that questions the bureau’s methodology for measuring disparities in dealer reserve.

The letter, which even lists out three areas the coalition wants the CFPB to address, was signed by the American Bankers Association, the Consumer Bankers Association, the Financial Service Roundtable, the U.S. Chamber of Commerce and the American Financial Services Association, which commissioned the study referenced in the letter.

In March 2013, the CFPB issued guidance urging lenders to change the way they compensate dealers for arranging financing, claiming that discretionary dealer markups create a fair lending risk. The AFSA sought to study the CFPB’s claims, and commissioned Charles River Associates (CRA) to conduct an independent study.

Published this past November, the study looked at more than 8.2 million auto financing contracts and concluded that the disparity alleged by the CFPB between the amount of dealer reserve charged to minorities and non-minorities is not supported by data.

Central to the study was an examination of the Bayesian Improved Surname Geocoding (BISG) proxy methodology used by the CFPB to determine disparate impact to legally protected groups. BISG estimates race and ethnicity based on an applicant’s name and census data. The CRA study calculated BISG probabilities against a test population of mortgage data, where race and ethnicity are known.

“The CRA study concluded that observed variations in dealer reserve at the financial institution portfolio level are mitigated when market complexities are considered and adjustments are made for proxy bias and error,” the coalition’s letter stated, in part. “Furthermore, CRA found the bureau’s application of the BISG proxy methodology creates significant measurement error, which results in overestimations of minorities in the population by as much as 41%.

“In its own white paper on the method it uses to proxy for race — published prior to the CRA study — the CFPB acknowledged the overestimation (which it found to be 21%), but never indicated how, if at all, it has corrected this discrepancy.”

The letter requested that the bureau conduct a thorough review of the CRA study, provide a public response to its findings and recommendations, and correct any bias in its testing methodology before pursuing further dealer markup discrimination claims.

In early December, Toyota Motor Credit Corp. and American Honda Finance Corporation revealed in regulatory filings that they could face enforcement actions from the CFPB and the U.S. Department of Justice for their dealer participation policies, which the two agencies alleged have resulted in discriminatory pricing of loans. The two finance sources said they would cooperate with the agencies’ investigations.

In their letter, the trade groups requested that the CFPB address how its portfolio analysis of aggregated contracts sourced from dealers accounts for different operating models, cost structures, pricing policies, location and competitive landscapes, among other things. They also asked the CFPB to address how its methodology considers different business factors such as deals involving new or used vehicles and trade-ins, among other things. Lastly, the coalition asked the bureau to “address and adjust for the bias within the BISG methodology and its overestimation of individuals within protective classes.”

“We share the bureau’s commitment to combating illegal discriminatory treatment in the vehicle finance market,” the letter, read in part. “This common goal is best achieved when fair lending standards are evidenced-based, applied using analytically sound and transparent methods and predicated on accepted legal foundations.

“For these reasons, the industry wishes to engage the CFPB in a constructive dialogue on the CRA study and strongly encourages the bureau to adopt the recommendations above to improve the accuracy of the fair lending analysis.”

The National Automobile Dealers Association (NADA), the American International Automobile Dealers Association (AIADA) and the National Association of Minority Automobile Dealers (NAMAD) issued a joint press release that applauded the efforts of the five financial services organizations.

“Discrimination in the market simply cannot be tolerated,” said NADA President Peter Welch. “However, in light of the rigorous peer-review that has cast significant doubt on the CFPB’s findings, the bureau should change course — or at least hit the pause button — and address these new concerns. We applaud the courage of these organizations for speaking up.”

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WordPress Releases Car Loan Calculator Widgets and Plugins

CITRUS HEIGHTS — CarLoanCalculator released new widgets and plugins dealers and finance sources can add to their websites to allow customers to calculate their expected lease or loan payments.

Dealers can direct customers to CarLoanCalculator.com to quickly estimate their total loan amount using the company’s loan, lease and affordability calculators. Dealers and finance sources can also implement these calculators on their websites by taking advantage of the site’s recently upgraded free loan widgets and new WordPress Plugins.

With the site’s latest update, each of the three loan widgets load faster and are compatible with a wider range of website platforms and themes. Additionally, the site added new WordPress Plugins to give companies the ability to display a loan, lease or affordability calculator as the main centerpiece of a web page rather than as a small add-on that runs across the whole website.

“Our recently updated loan widgets and WordPress Plugins allow both car dealers and small lenders to provide added-value to their customers without having to spend a dime,” the company stated in its press release.

The site’s car loan calculator allows buyers to enter an estimated vehicle price, down payment amount, trade-in value, amount of money owed on the trade-in, projected interest rate and sales tax, length of loan and loan start date. Once submitted, the system calculates the estimated monthly and annual payments broken down by principal and interest paid, and shows the remaining balance.

The company’s lease calculator breaks down a person’s estimated payments, as well as monthly depreciation charges and finance charges.

The site’s affordability calculator allows buyers to enter a desired monthly payment to back in to their optimal loan amount.

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Car Lenders Ease Credit Standards and Terms to Spur Loans

Lenders in the United States gave car buyers some of the easiest credit terms since the financial crisis in the first quarter as they competed to make more loans to borrowers they see as safe, a credit research company said on Tuesday.

The lenders also provided more money to people with subprime credit scores, cut interest rates and granted more time to repay, Experian Automotive, a unit of Experian Plc, said in a report. Rates of late payments and repossessions by lenders also declined in the quarter, Experian said.

The relaxed terms make it easier for individuals to buy cars, which is good for car dealers, manufacturers and the economy, reported Reuters. But more aggressive lending also increases the chances of another round of losses for banks if borrowers lose their jobs and cannot keep up their car payments.

“This thawing of the credit pipeline has been good for everyone, from consumers to lenders to automotive retailers,” said Melinda Zabritiski, director of automotive credit for Experian.

Lenders are competing more to make car loans as banks struggle with weak demand for credit from consumers and many businesses in the aftermath of the crisis.

Car loans proved to be safer than mortgage and credit card loans during the recession. Borrowers tend to make payments on cars a top priority because they need the vehicles to get to work or apply for jobs, studies have found.

Experian said the portion of new car loans going to subprime borrowers increased by 11.4 percent in the quarter from a year earlier.

The average credit score for borrowers buying new cars dropped six points to 760 on Experian’s scale, which classifies marks of less than 680 as subprime. For used-car buyers, the average score dropped four points deeper into subprime range to 659.

Loans were also bigger, with the average amount financed rising $589 to $25,995 for new cars and increasing $411 to $17,050 for used cars.

But average monthly payments increased by $3 or less for new and used cars as borrowers were given more time to repay and were charged lower interest rates.

The average time to repay loans increased by one month from a year earlier to 64 months for new cars and to 59 months for used cars. More than 9 percent of used-car loans were made for more than six years.

Interest rates fell, on average, by 0.27 percentage points to 4.56 percent for new cars and by 0.06 points to 9.02 percent for used cars.

The report also showed that Ally Financial Inc., the former General Motors Co mortgage and auto lender now 74 percent-owned by the U.S. government, has continued to push deeper into used-car lending compared with its competitors.

Ally’s share of used car financing by the biggest 20 lenders increased 8.3 percent from a year earlier to 4.2 percent of the market, while its portion of new-car financing fell by 39.7 percent to one-tenth of the market, still the largest market share of any company.

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DealerTrack Credit Application Network Reaches Milestone of 1,111 Lender Connections on 11/11/11

LAKE SUCCESS – DealerTrack announced that the number of active lenders connected to its DealerTrack credit application network has surpassed 1,111 U.S. lenders.

The DealerTrack credit application network allows dealers to electronically submit credit application data to the industry’s most diverse network of banks, independent finance companies, captives, and credit unions.

The DealerTrack credit application network, which has grown from five lenders in 2001 to more than 1,111 lenders today, continues to expand.

“With the overall improvement in the automotive retail industry, the DealerTrack credit application network continues to be the biggest credit network for dealers and lenders,” said Mark O’Neil, chairman and chief executive officer, DealerTrack.

“The number of lenders that continue to join our credit application network is a bright spot for the automotive retail industry and the economy in general.”

As part of this milestone achievement, DealerTrack will be running a promotion for all dealers in the United States, in which dealers can win $1,111.

For the promotion, DealerTrack will be asking dealers to refer lenders who aren’t already electronically connected to the DealerTrack network. If the referred lender electronically connects to the DealerTrack network before December 31, 2011, the dealer has a chance to win $1,111 cash prizes.

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