Author Archives: Carguy
Lenders dip down credit spectrum, boost originations in 2Q
As auto lenders opened their books of business to borrowers further down the credit spectrum, total auto debt increased 4.8% year over year to a record $1.3 trillion, according to the New York Federal Reserve Quarterly Report on Household Debt and Credit.
The report, which uses data from Equifax, showed that auto debt from loans and leases continued to rise as auto lenders originated $156 billion in the second quarter, up from $139 billion in the previous quarter. Meanwhile, the median credit score continued its downward trajectory, falling to 703 in the second quarter from 708 in the first quarter.
Furthermore, N.Y. Fed economists pointed out that auto loans are grabbing a historically larger share of the outstanding “severely derogatory balance” — those loans that are more than 30 days delinquent or have been charged off or repossessed. In the second quarter, auto loans held 21% of the total share, which includes mortgages, credit cards, student loans and revolving debt.
However, serious delinquency rates can be misleading between different credit segments, the economists wrote in an accompanying blog post. One such example is that student loans are typically reported as defaulted after a full year, or 360 days past due, while auto loans usually charge off more quickly, typically before they reach 120 past due. As such, the Fed has put a greater focus on delinquency transition rates. From that perspective, the percent of auto loans transitioning into 30-day delinquency stayed relatively flat at 7%; those that flowed into 90-day delinquency experienced a slight seasonal decline, hovering just above 2%.
Court decision muddles proposed FDCPA rule
A ruling from the Seventh Circuit Court of Appeals could complicate the Consumer Financial Protection Bureau’s proposed guidelines for the Fair Debt Collection Practices Act as it relates to electronic validation notices, Chris Willis, a partner at Ballard Spahr LLP, told Auto Finance News.
“[The decision] is throwing a fly in the CFPB’s ointment for what they proposed in their rules back in May,” Willis said.
The proposed rule issued by the CFPB would allow debt collectors to send validation notices — or formal communications of debt — electronically in one of two ways: either pasted as plain text in the body of an email or via a secure hyperlink through email or text message.
In this recent case, a debt collector sent the plaintiff a validation notice through a hyperlink in an email, which the plaintiff never opened. After subsequent communication with the debt collector, the plaintiff sued claiming she was never provided a validation notice.
Read the court’s decision at our sister site, Auto Finance Excellence, here.
FBI arrests fraudsters in $1.7M auto scam
Tariff threat rattles investors as deadline looms
PA dealers nailed in 4-year fraud scheme
CarLabs readies phase 2 of AI-chatbot for Kia Motors Finance
Fair eyes new debt funding
5 lessons to learn from software vendor data breach
According to a June 12 settlement announced by the Federal Trade Commission, back in 2015 an employee of Iowa-based LightYear Dealer Technologies, the parent company of DealerBuilt, plugged in a storage device to the company’s backup network in order to increase storage capacity. However, the employee failed to ensure that the device was securely configured, thereby providing an open, insecure port into the company network, which was open for 18 months.
Subsequently, a hacker was able to penetrate the network and gain access to the company’s unencrypted backup data, including personal information — such as Social Security and drivers’ license numbers — of about 12.5 million consumers, and the entire backup directories of five dealerships. DealerBuilt failed to detect the breach until an auto dealer’s customer complained about personal information becoming public on the internet, and a reporter told the company about the security vulnerability.
Read the full story on our sister site, Auto Finance Excellence, here.
Aussie fintech to enter US auto market
On the heels of growing its Canadian presence, Australian startup CarDeals2Me is in the “final stages” of preparations for a U.S. rollout, Chief Executive Shaun Sumaru told Auto Finance News.
The 2-year-old company will start testing a new product in the U.S. next quarter that enables consumers to complete the vehicle purchase and finance process without physically going to a dealership. Once the platform is in full swing in the U.S., Sumaru expects to add 30 lenders spanning a range of geographies and credit levels.
“Even though the engagement via our platform [in Canada] was great, there was still a steep consumer drop-off when they transitioned to the dealership directly, which is leading us to create a better experience for those consumers wanting to deal indirectly with dealers or brokers for finance and the end purchase,” Sumaru said. “There was a customer service disconnect.”
Also read: Australian startup eyes foray into U.S. market
After six months in Canada, consumer engagement on the platform is 10 times what it was in the company’s first six months in Australia, Sumaru said. For reference, app traffic in June hit 16,000 visits. “The system wasn’t set up to scale that quickly,” he said, adding that the team enhanced the app’s framework to support the growth anticipated in the U.S. market.
CarDeals2Me is an app that provides car buyers with a price quote that expires within 24 hours. The company partners with financiers, OEMs and dealerships in Canada, Australia and New Zealand. Consumers choose a car on the app and apply for financing, and then they receive a quote for 24 hours on the new or used car with trade-in option.