Tag Archive | "subprime"

ProMax’s Palmer to Share Loan-Approval Tips at Dealer Summit


TAMPA, Fla. — John Palmer, CEO of ProMax Unlimited, will present “Secrets to Getting More Lender Approvals” at Dealer Summit, organizers announced on Wednesday. The event will be held May 3–5, 2016, at the Sheraton Tampa Riverwalk Hotel.

“If you think of John as a marketing and technology provider, you’re only half right,” said Greg Goebel, president of DealerStrong. “The work he does with ProMax is informed by a highly successful first career in automotive sales, F&I and sales management.”

Palmer is expected to offer a wide range of strategies for F&I and special finance professionals, starting with initial approvals via Dealertrack and RouteOne and continuing with expert advice relating to pre-qualifying showroom visitors, pre-approving online credit applications, seeking out aggressive banks and finance companies, and proven word-tracks and selling techniques that produce larger down payments, more cosigners and more appropriate vehicle selection.

“Learn how to use and maximize today’s cutting edge technology along with old-fashioned, tried-and-tested sales techniques in working with both your prospects and lenders to get more deals approved, delivered and at higher grosses.” Palmer said.

Registration for Dealer Summit is open at the event’s website. Dealers who register by April 1 will enjoy a $100 early-bird discount. For information about exhibition and sponsorship opportunities, contact show chair David Gesualdo via email hidden; JavaScript is required or at (727) 947-4027.

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Wells Fargo: Subprime Cap Part of ‘Ongoing Risk Management’


IRVINE, Calif. — A statement released by Wells Fargo Dealer Services didn’t deny the bank has placed a cap on subprime auto loans for this year, but it stopped short of saying the move was the bank’s response to media claims of an overheating auto finance market.

Citing unnamed executives from Wells Fargo, The New York Times reported on March 1 that the bank was limiting the dollar volume of its subprime auto originations to 10% of its overall auto loan originations. For all of 2014, Wells Fargo originated $29.9 billion in auto loans, up 8% from the previous year.

A spokesperson for Wells Fargo Dealer Services said the bank remains committed to the auto finance market and that it remains “firmly committed to responsibly offering access to credit to a wide spectrum of customers during all economic cycles.”

“The percentage of originations we consider subprime, based on our customized scorecard, has remained generally stable over the last decade,” the spokesperson said. “In the fourth quarter, we formalized our existing risk management philosophy. This is part of our ongoing risk management structure and helps us to continue to responsibly manage risk while also tailoring our approach by local market.”

The news comes at a time when several media outlets, including The New York Times, have warned that auto finance may go the way of subprime mortgage in the years leading up to the 2008 financial crisis. Some news outlets have even called on regulators to step in and stop what they called a forming subprime auto finance bubble.

Despite total outstanding loan balance on auto loans reaching an all-time high of $886 billion in the year-end 2014 quarter, finance executives at the 2015 Vehicle Finance Conference in January maintained that the market is operating smartly. They described competition as fierce but disciplined, with one executive noting that finance sources seem focused on smart structures.

Whether motivated by the media or not, state and federal regulators have keyed in on subprime originations and securitizations. Since the summer, regulators have issued subpoenas to several subprime finance sources, including Consumer Portfolio Services, Ally, Capital One, GM Financial, Credit Acceptance Corp, and Santander Consumer USA, requesting documents related to their subprime auto finance businesses.

Speaking to F&I and Showroom at the National Automobile Dealers Association’s 2015 convention, Dawn Martin Harp, who heads up dealer services for Wells Fargo, said regulators have not impacted the bank’s auto origination strategy. She did note, however, that the bank has been working to improve the information it provides to consumers regarding their loans, adding that the bank has more transparency initiatives planned for 2015.

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DOJ, N.Y. Regulator Subpoena Capital One


By: Gregory Arroyo

MCCLEAN, Va. ─ Add Capital One to the growing list of finance sources that have received subpoenas from state and federal regulators regarding subprime auto finance originations and securitizations.

According to a Feb, 24 regulatory filing with the Securities and Exchange Commission, the finance source received subpoenas from the New York District Attorney’s Office and the U.S. Department of Justice (DOJ), requesting information related to its subprime auto finance business.

“Capital One is cooperating with both investigations,” the filing read.

In January, Consumer Portfolio Services revealed in a regulatory filing that it was also subpoenaed by the DOJ regarding its subprime auto finance practices and related securitizations. Santander Consumer USA (SCUSA), Ally Financial, GM Financial and Credit Acceptance have received similar subpoenas.

Regulators are also targeting debt-collection and repossession practices.

Last year, CPS agreed to pay more than $5.5 million to settle the Federal Trade Commission’s charges that it used illegal tactics to service and collect consumer loans. And last month, Santander USA Inc. agreed to pay at least $9.35 million to resolve a lawsuit filed by the DOJ. It claimed that the finance source’s repossession activities over a five-year period starting in January 2008 violated the Servicemembers Civil Relief Act.

A spokeswoman for Santander said the settlement, which covered 1,112 repossessions, is unrelated to the subpoena the DOJ issued to the finance source last year. The spokesperson noted that Santander neither admitted nor denied any wrongdoing in agreeing to settle the DOJ’s charges. She added that the finance source had already set aside funds to cover the cost of the settlement.

“Since 2012, SCUSA has used systemic controls to prevent improper repossessions of vehicles, including those who were contracted with SCRA-eligible customers,” read a statement Santander issued to F&I and Showroom magazine. “The majority of accounts found objectionable by the DOJ involved repossessions prior to 2012, and approximately one-third were accounts form other financial institutions that we converted to SCUSA accounts at a later date.”

In its regulatory filing, Capital One said that the regulatory climate has been heating up over the last several years, noting that state and federal regulators have focused on compliance in a number of areas, including data security, money laundering, fair lending and consumer-protection issues. And the finance source made clear it doesn’t see the scrutiny ending anytime soon.

“We are subject to heightened regulatory oversight by the federal banking regulators to ensure we build systems and process that are commensurate with the nature of our business and that meet the heightened risk management and enhanced prudential standards issued by our regulators,” the filing read, in part. “We expect this heightened oversight will continue for the foreseeable future until we meet the expectations of our regulators and can demonstrate that our systems and process are sustainable.”

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Santander Agrees to $9.35 Million DOJ Settlement


WASHINGTON, D.C. — Santander Consumer USA Inc. has agreed to pay at least $9.35 million to resolve a lawsuit filed by the U.S. Department of Justice (DOJ), which charged the auto finance source of violating the Servicemembers Civil Relief Act (SCRA). The complaint and the settlement, which is subject to court approval, were filed on Wednesday in the U.S. District Court for the Northern District of Texas.

The settlement covers repossessions of 1,112 motor vehicles between January 2008 and February 2013. According to the DOJ, the proposed consent order represents the largest settlement involving vehicle repossessions ever obtained by the United States under the SCRA.

“This is a just resolution that will provide service members with financial relief and help repair their bad credit caused by Santander’s improper repossessions and fee collections with respect to more than 1,100 cars,” read a statement from Acting Associate Attorney General Stuart Delery. “The Department of Justice will continue devoting time and resources to protect our service members and their families from such unjust actions and hold bad actors accountable.”

The SCRA protects service members against certain civil proceedings that could affect their legal rights while they are in military service. It requires a court to review and approve any repossession if the service member took out the loan and made a payment before entering military service. The court may delay the repossession or require the lender to refund prior payments before repossessing. It can also appoint an attorney to represent the service member, require the lender to post a bond with the court and issue any other orders it deems necessary to protect the service member.

The DOJ charged Santander with failing to obtain court orders before repossessing motor vehicles owned by protected service members, preventing them from obtaining a court’s review on whether their repossessions should be delayed or adjusted in light of their military service.

The lawsuit alleges that Santander initiated and completed 760 repossessions without court orders. The agreement requires Santander to pay $10,000 plus compensation for any lost equity (with interest) to each of these service members. The lawsuit also alleges that Santander sought to collect fees arising from an additional 352 repossessions that unrelated finance sourced had conducted in violation of the SCRA before Santander acquired the loans. The agreement requires Santander to pay $5,000 to each of these service members. Santander is also required to repair the credit of all affected service members.

“The SCRA is an important protection for the men and women serving our country in the armed forces, and this settlement not only will rectify the past improper repossessions of service members’ vehicles, but will work to prevent such improper repossessions in the future,” said Acting U.S. Attorney John Parker of the Northern District of Texas.

For future repossessions, the settlement requires Santander to check the Defense Department’s automated database to see if a car’s owner is in military service prior to conducting a repossession.

The Department of Justice first learned of Santander’s repossession practices through a referral from the U.S. Army’s Legal Assistance Program. The referral involved a claim that Santander illegally repossessed the car of a service member, U.S. Army Specialist Joshua Davis, in the middle of the night, after having been informed that he was at basic training. The department also opened its investigation after learning that Santander used an arbitration clause included in its loan documents to prevent a second service member from pursuing systematic relief through a class action lawsuit he filed. It alleged that Santander had repossessed service members’ vehicles in violation of the SCRA.

As part of its investigation, the United States has already identified Santander’s illegal repossessions and efforts to collect unlawful repossession fees between January 2008 and February 2013. Service members identified based on that investigation will be contacted by an independent settlement administrator later this year. And according to the settlement, Santander must conduct a review and provide compensation for any additional unlawful repossessions that may have occurred since February 2013.

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Equifax Refutes ‘Subprime Bubble’ in New Report


ATLANTA — Equifax Inc. has released its latest economic trends commentary, “Subprime Auto Loans: A Second Chance at Economic Opportunity,” which examines two groups of consumers with deep subprime credit scores over a three-year period: those who originated a subprime auto loan and those who did not.

Equifax found that over the three-year time period, those consumers with deep subprime credit scores that originated a subprime auto loan showed, in aggregate, a significant increase in their credit score. In fact, those consumers improved their credit score by a median of 52 points, which is a 62.5% improvement over the median score change of the group that did not take out a loan. Even more telling, those that took out a subprime auto loan were four times more likely than those who did not to have improved their score to a level above 640, moving them out of the subprime segment.

“The auto industry’s success wouldn’t be what it is today if it weren’t for the responsible, solid subprime loans made to the many Americans in need of a car to get to their jobs or take their children to school,” Chief Economist Amy Crews Cutts and Deputy Chief Economist Dennis Carlson said. “Lenders now have better tools, more data and enhanced technology available to them to make sounder and safer decisions. While we should all continue to remain vigilant, we can confidently say that subprime auto lending is currently performing well, it’s not growing as quickly as prime lending, and our data does not suggest that a bubble is forming.”

“I started my career sitting across the loan desk from thousands of nonprime families in need of a vehicle — each of them having a story about circumstances that resulted in their less than perfect credit score,” said Lou Loquasto, auto finance leader at Equifax. “It was rewarding to watch these customers diligently make the most of these second chances and see a high percentage graduate to a prime credit standing — empowering them to take full advantage of their newfound financial well-being.”

To read the full report, click here.

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No Subprime Bubble in Sight, Equifax Says


ATLANTA — While year-to-date auto loan growth rates have slowed compared to last year, totals for new credit and the number of new loans originated for auto purchases are at all-time highs, according to Equifax’s latest National Consumer Credit Trends Report.

Through June, the total number of new loans originated was 12.5 million, an increase of 4.9% from same time a year ago. The total balance of new loans was $254.2 billion, an increase of 6.9% from same time a year ago. The total also represents nearly half of total new non-mortgage credit originated.

“Auto sales continue to soar, crossing the 17.4 million mark on an annualized basis for new cars and light trucks in August,” said Amy Crews Cutts, senior vice president and chief economist at Equifax. “The abundance of high-quality vehicles for sale, the attractive financing options available, and the ever-increasing age of cars on the road today have created an environment that makes it easy for consumers to say ‘yes’ when it comes to purchasing a new or used car.

“Importantly, auto loan originations to borrowers with subprime credit scores remain stable, providing additional evidence that a bubble is not occurring in that space,” she added.

On that note, the total number of new loans originated year to date through June for subprime borrowers, defined as consumers with Equifax Risk Scores of 640 or lower, is 3.9 million, representing 31.2% of all auto loans originated this year. This is a slight decrease in share from this same time in 2013.

Similarly, the total balance of newly originated subprime auto loans was $70.7 billion, an eight-year high. The total also accounted for 27.8% of the total balance of new auto loans, a slight increase in share from the previous year. However, serious delinquencies represented 1.05% of total balances outstanding, a decrease of 8% from same time a year ago.

Year to date in June, the average loan amount for borrowers with risk scores of 680 or lower increased the most, showing a 3% increase from the previous year. Loan sizes among borrowers with risk scores of 760 or higher showed little change from the same time a year ago.

The report also showed that the total balance of auto loans outstanding in August was $924.2 billion, an all-time high and an increase of 10.8% from same time a year ago. The total number of auto loans outstanding stood at more than 65 million, a record high and an increase of more than 6% from the same time last year.

By source, balances on outstanding loans funded by banks, savings and loans and credit unions totaled $453 billion, while the total number of loans was more than 31.4 million. Similarly, total outstanding balances for loans funded by auto finance companies was $471.2 billion, while the total number of existing loans was 34.1 million.

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