Via Flickr

As auto lenders increasingly turn to technology to better their businesses, the Federal Reserve is evaluating the regulatory role the agency will play with regard to artificial intelligence, Fed Gov. Lael Brainard said Tuesday during a fintech conference in Philadelphia.

“We are working across the Federal Reserve System to take a deliberate approach to understand the potential implications of AI for financial services, particularly as they relate to our responsibilities,” she said.

The Fed is encouraging institutions to embrace AI, but at the same time is urging regulation of the technology. Adapting operations with AI to examine massive amounts of data more accurately, mitigate risk, and underwrite loans holds promise for lenders and consumers, but also requires “guardrails,” Brainard said.

However, the Fed emphasized the importance of well-thought-out regulation so as not to drive away responsible innovation from supervised institutions. While no timeline was announced for establishing regulations around AI, the Fed’s goal is to keep lenders and banks away from “less regulated and more opaque spaces” in the financial system, Brainard said.

There are several existing regulations and some supervisory guidance that can be applied to AI, including the Fed’s guidance on model risk management and vendor risk management. Still, the question remains: How should the Fed approach regulation and supervision?

“For our part, we are still learning how AI tools can be used in the banking sector,” Brainard said, calling on banks, financial services, and other firms to collaborate with the Fed to determine how the agency should proceed.

“We welcome discussion about what use cases banks and other financial services firms are exploring with AI approaches and other innovations, and how our existing laws, regulations, guidance, and policy interests may intersect with these new approaches,” she said.

Click here to view Gov. Lael Brainard’s full speech, titled “What Are We Learning about Artificial Intelligence in Financial Services?”

Source link

Turn Your Bulk Auto Notes Into Cash

© Can Stock Photo / Klementiev

Hudson Valley Federal Credit Union has agreed to pay the Department of Justice $95,000 following allegations that the lender violated the Servicemembers Civil Relief Act, a law designed by the DOJ to ease financial burdens on servicemembers during periods of active military service.

HVFCU, based in Poughkeepsie, N.Y., allegedly repossessed nine vehicles owned by SCRA-protected servicemembers without first obtaining the required court orders, according to court documents filed Nov. 2.

The credit union resolved the violations without admitting any liability but has agreed to pay $65,000 to compensate seven servicemembers whose cars it unlawfully repossessed and will pay a civil penalty of $30,000 to the United States.

The DOJ began investigating the credit union’s repossession activities from 2008 to 2017 after discovering two private lawsuits filed in the Southern District of New York. After further investigation, seven additional violations were found. In fact, the DOJ discovered HVFCU’s operations did not have any written policies or procedures that addressed the SCRA’s protections against non-judicial auto repossessions.

As a result, HVFCU allegedly failed to check borrowers’ duty status before initiating repossession procedures and rejected servicemembers’ requests for SCRA protection. For example, the court documents note one scenario where a servicemember and his girlfriend contacted HVFCU multiple times to notify the credit union that he was on active duty in the U.S. Army and stationed overseas. While serving in South Korea, HVFCU repossessed his car in spite of his efforts to contact the credit union.

Besides HVFCU’s settlement, the credit union is taking steps to improve its repossession practices, including expanding annual SCRA training to all staff and creating a dedicated link and phone number for servicemembers on HVFCU’s website, the company noted in a press release.

“Protecting service members is a high priority for this office and the country,” said U.S. Attorney Geoffrey S. Berman. “We are pleased that Hudson Valley has taken these remedial steps, and this office will continue to protect the rights of men and women in uniform.”

During the DOJ review period, HVFCU originated 215,000 loans representing more than $9 billion in aggregate borrowings, the company noted in a press release.

Source link

Turn Your Bulk Auto Notes Into Cash

© Can Stock Photo / sparky2000

The Federal Reserve is reducing the volatility of stress tests for the nation’s largest financial institutions, Federal Reserve Vice Chair for Supervision Randal Quarles said during a Nov. 9 speech at the Brookings Institution in Washington, D.C.

The Fed is proposing changes that are designed to roll back Obama-era financial regulation, which consists of an annual procedure in which the Fed grades banks on their ability to withstand a severe economic crisis.

Since the Great Recession, the combination of the Fed’s procedure, financial firms’ own stress tests, and supervisory oversight over the firms’ practices have “resulted in a meaningful increase in the post-stress resiliency of large financial institutions,” Quarles said. “All of these core components will remain in place.”

However, the Fed is acknowledging banks’ outcry for more transparency and consistency with the tests. “One concern frequently expressed is that the results of the supervisory stress test can lead to capital requirements that change significantly from year to year, which limits a firm’s ability to manage its capital effectively,” Quarles said.

In addition to a lack of consistency, the Fed is looking to revamp specific aspects of the stress tests including streamlining the testing process and reducing the stigma around failing the tests. To that end, a proposed change includes letting banks know the results of its stress tests before planning further capital distributions.

Banks typically have to submit capital distribution requests to the Fed immediately following a stress test, forcing them to provide the agency with a formal plan for dividends and stock repurchases without knowing their effective capital requirement.

“If it guesses wrong, it could be publicly shamed for failing the stress test — if its dividends are too high relative to capital,” Quarles said. “Or [banks are] penalized in the markets for inadequate distribution of income — if its dividends are too low relative to capital.”

The reasoning behind the practice was initially a way for firms to think about their capital uses and needs in developing capital distribution plans, rather than rely primarily on the results of the supervisory stress test to guide those plans.

Now that financial institutions have several years of experience with the current system, firms have told the Fed that they would be able to engage in more thoughtful capital planning if they knew that year’s stress test results before finalizing their distribution plans for the upcoming year.

“I am sympathetic to their concerns,” Quarles said, noting adjustments to capital distribution requirements would not go into effect before 2020.

To view Quarles’ full speech titled, “A New Chapter in Stress Testing,” click here.

Source link

Turn Your Bulk Auto Notes Into Cash

Courtesy of Unsplash

Dealertrack, with the launch last week of its uniFI dealership management and F&I software product, is looking to streamline dealer workflows and shorten the amount of time it takes to buy a car.

A Cox Automotive study published in July found that dealership personnel uses an average of six platforms to complete a deal and that a customer spends an average of three hours at the dealer purchasing an automobile.

The Dealertrack’s uniFI platform integrates the various systems dealers use for handling credit checks, loan applications, taxes, titles, and trade-ins and is designed to speed up the purchase process. So, instead of switching between screens and rekeying data, the dealer can use uniFI as a central platform that pulls in all a customer’s information and then easily navigates through each aspect of the purchase.

“Dealerships don’t want the consumer to have a three-hour process, the consumer doesn’t want this either. We thought about a platform that could help make the car buying experience much more efficient, and shorten the time period,” said Cheryl Miller, vice president, and general manager F&I solutions at Cox Automotive, Dealertrack’s parent company. The uniFI product also can increase a dealer’s competitiveness, she said, because consumers that have a good experience are likely to return the next time they’re shopping for a car.

The uniFI product, which first piloted in June 2017, is currently available as a SaaS.

Source link

Turn Your Bulk Auto Notes Into Cash

Daniel Chu (center), Tricolor CEO on a panel at Auto Finance Summit 2018

Buy-here, pay-here lender Tricolor Auto Acceptance LLC is preparing to issue its first rated securitization, a $101.7 million transaction slated to close Nov. 21, according to a Kroll Bond Rating Agency presale report released this week.

The securitization is backed by loans with a weighted average Fico score of 583 and a weighted loan-to-value ratio of 124.7%. Average loan balances are $17,742, and average interest rates are 17.68%.

The company, which caters to Hispanic car buyers, had previously issued two unrated deals, in February 2017 and in March 2018.

Separately, TriColor expects to close a $100 million warehouse facility this month, according to Kroll. The lender has another $100 million credit facility slated to expire in December.

Established in 2007, Dallas-based Tricolor operates 33 dealerships in Texas and California. The Texas dealerships are branded as Tricolor, but the six in California are branded as Ganas Auto Group. The Ganas collateral is not included in the rated securitization.

Source link

Turn Your Bulk Auto Notes Into Cash

                          Courtesy of Pexels

Toyota Finance Services has deployed several pilots in ridesharing and car rental services. The company gave specific insight into the findings from two of these pilots at this year’s Auto Finance Summit.

“A variety of scenarios are going to coexist in the future, it’s between personally owned and shared, and autonomous vehicles and driver-driven,” Sabreen Dhillon, Toyota Financial Services, senior manager of relationship marketing, said in a presentation at the summit.

To work toward these future scenarios, Toyota partnered with Uber in December 2016 to test Uber drivers’ ability to make weekly payments on off-lease Toyota vehicles directly from rideshare earnings.

“In order to launch this pilot, we had to develop a number of capabilities, which included payment-splitting, customer data collection on things like GPS location, mileage tracking, and the handling of early returns,” Dhillon said.

The flexible lease program with Uber had a 24-month term, so the findings of this program are just beginning to make their way into new product offerings. Ultimately, Toyota has decided to expand the program with Uber.

“The goal is to bring autonomous rideshare at scale to market,” she said. “This means that Toyota is integrating its technology, along with Uber, into Toyota vehicles that are being put on the rideshare platform for continued research and development.”

A few key results from the Uber pilot will shape the way the program moves forward.

“We learned driver behaviors were varying widely, and that some people simply needed, or wanted access to a vehicle when they needed it,” said Dhillon.

This realization caused a shift from the focus on traditional ownership model that focuses on the sale of the vehicle to an access model, where the focus is on utilization rates. The resulting pilot, short-term rentals in partnership with Launch Mobility, launched in late 2017, is still proving itself.

“Early performance indicates that we’re already at about 30% utilization or 7 hours per day,” Dhillon said. “We see there is demand for it, but we’ll have to see how things progress.”

Check out the exclusive interview below, which is part of a special video series sponsored by White Clarke Group.

[vimeo 299340227 w=640 h=360]

Source link

Turn Your Bulk Auto Notes Into Cash

Via Flickr

USAA has specific objectives around customer service and simplifying the consumer-facing loan application process. The bank’s priorities heading into 2019 are to continue to provide an end-to-end digital experience for members to find and finance cars.

“As a direct lender, we facilitate the process from research to enabling that member to apply online, decisioning that member real-time, and ultimately funding that member,” Renee Horne, USAA vice president of consumer lending, told Auto Finance News.

Customer service tools are also being optimized based on data analytics. Specifically, USAA is “putting the right instrumentation in place and understanding where we’re running into either fallout in the [loan] process or friction, and taking member feedback,” she said.

These insights help the bank understand what causes a member to abandon an application and improve the cycle time from “application to ignition,” she added.

For direct lenders, customer experience takes on an even more important role in the financing process, Horne noted. “We ultimately invest and place talent to meet member demand and, more recently, it’s been around experience,” she said. “It’s important to focus on the product but, in this day and age, especially given our operating model of being direct, and digital first, we’re making sure we’re providing the right experience.”

Changing consumer expectations and the millennial demographic will also influence USAA’s omnichannel strategy going forward. “Whether it’s a boomer or a millennial, it’s about being relevant and showing up where they prefer,” Horne said. “Be it social media, digital, or traditional avenues, we’re really omnichannel. For us, that’s what’s most important.”

Check out the exclusive interview below, which is part of a special video series sponsored by White Clarke Group.

[vimeo 299124292 w=640 h=360]

Source link

Turn Your Bulk Auto Notes Into Cash

General Motors Co. is reportedly hitting the pause button on its vehicle-subscription service, Book by Cadillac after launching nearly two years ago in Los Angeles, Dallas, and New York.

A GM spokesman confirmed the OEM plans to shut down the service by yearend, the Wall Street Journal reported. However, there is still a chance that the subscription service could make a comeback. “We are hitting the pause button for a brief time to make some tweaks to Book [by Cadillac] based on our learnings,” the spokesman said.

The OEM is notifying subscribers — who are currently paying $1,800 a month for the service — that they have 30 days from the time they are told to turn in their vehicles.

Though the exact reasons behind GM’s halt on its luxury subscription service are not known, the shutdown could reduce the hype around subscription services.

As long as direct-to-consumer leases or indirect leases are available to consumers, then that’s a more financially viable transaction than a subscription lease, Jim Houston, senior director of auto finance at J.D. Power, told Auto Finance News. “It’s the cost,” Houston added. “A [consumer] can lease a Cadillac for significantly less than $1,800 a month.”

However, Cadillac’s high subscription prices could be a move to offset residual values, said Larry Dixon, senior director of valuation services at J.D. Power. “Maybe Cadillac didn’t adequately prepare for the residual hit when [subscription] options are three months or six months, and the OEM is used to dealing with an average [term] of 36 months.”

The trend of luxury subscription programs started to take off at the beginning of last year, and GM was a trailblazer with the launch of its Book by Cadillac service in January 2017.

The Porsche Passport and Mercedes-Benz Collection programs followed suit, starting at or near $1,600 per month and ranging as high as $3,000 per month. There is also Access by BMW, which recently cut prices to $1,100 per month due to consumer demand.

Toyota Finance Services‘ Lexus Complete Lease program, slated to launch in the first quarter of 2019, is the captive’s take on a short-term lease option for consumers. The 24-month, 20,000-mile limit program would bundle lease payment, car insurance, and maintenance coverage.

Nissan Motor Acceptance Corp. has plans in the works to offer consumers a subscription service if that’s where the market continues to shift, company President Kevin Cullum previously told AFN.

While Cullum doesn’t believe subscriptions will have a substantial impact for another “20 to 25 years,” NMAC will join other OEM subscription services exploring the field, including Ford Motor Co., Hyundai Motor Co., and Volvo Cars.

“It comes down to getting money for the used vehicle,” Samuel Ellis, principal consultant for Auto Experience, told AFN. “These programs are just going to struggle until they can make the economics work. The discussion needs to center around, ‘What needs to be innovated?’ Describing [a lease] different doesn’t necessarily make it better.”

Source link

Turn Your Bulk Auto Notes Into Cash

© Can Stock Photo / 4774344sean

Everyone has been in the consumer’s shoes when shopping for a vehicle. And, Everyone has experienced the excitement and relief that comes with knowing that the first loan payment is often not due for 90 days. But, lenders probably make it a priority to begin paying down the auto loan as soon as possible, i.e., make the first payment within 30 days, and then make the 90-day payment as well. They also probably counsel their family and friends to do the same.

Why? Because that additional payment helps to further reduce the principal, which also lowers interest payments in the long run. It’s common in the auto finance space to use that 90-day “waiting period” before the first payment as a further incentive to buy a vehicle.

This type of “advisory” selling provides two opportunities. First, the customer locks in a loan that better fits their needs while minimizing risk. Secondly, the life-long financial advice cements the relationship between customer and lender, rendering dividends for years to come.

Role Play The Risk

Consider walking through a role-playing session when faced with a customer eager to bypass that first loan payment. Some options to recommend:

Open a savings account with the lender and save for the vehicle they want. Additionally, encourage the consumer to commit to saving the equivalent of the first 90-day payment plus the accrued interest rate. Then, when the first payment is due, the payment is easily in hand.

Recommend investing in consumer protection products to be prepared for life’s inevitable situations. Who knows what life might be like 90 days from now? Is employment stable? Could a significant illness derail payment plans? Consumer protection products, like vehicle return protection, reduce the risk of missing auto loan payments and defaulting on a loan.

Recent research from the Federal Reserve showed that the average American could not easily cover a $400 emergency payment. Having a vehicle protection package in place can guard against unforeseen emergencies. Worrying about having a ride to work on Monday is not a comfortable position for the consumer and increases the risk of default for the lender. However, with a vehicle service contract, consumers can repair their vehicles without straining their budgets, allowing them to continue making their monthly loan obligations.

Delay Now – Or Default

As a lender, it is critical to understand the customer’s reason for choosing to wait to make their first payment until 90 days have passed or extended the length of the loan.

Again, education is critical when discussing the 90-day window. What should the customer know about an auto loan with no payment for 90 days?

• The first payment is typically due 90 days after the sale is finalized.
• Interest will accrue on the loan during that time.
• Making their first payment on the 30-day mark, and again on the 90-day mark, reduces the principal and therefore long-term interest.

The value of the first dollar paid on a new car loan is less than the last dollar paid – thanks to accrued interest. Lenders need to do themselves and their customers a favor by explaining the real value of that first 90 days.

With more than 40 years of experience in innovating profitable solutions in the dealership space, EFG Companies knows how to differentiate your business and create sustained loan volume. Find out how, today!

Source link

Turn Your Bulk Auto Notes Into Cash

The digital revolution has triggered a number of major changes for the auto industry over the course of the past two decades.  We are now seeing cars at the center of a new wave of technology — autonomous vehicles, artificial intelligence, machine learning, miniaturized sensors, 3D printing, new fuel sources and engineering, robotic manufacturing processes, and more. All of these technological developments have created a whole new spectrum of IoT possibilities, and have had a profound impact on manufacturers and drivers alike.

But the biggest source of disruption for the auto industry is still right around the corner, stemming from changes in the traditional models of ownership.  In the 1900s, car ownership became a ubiquitous goal for people in most of the industrialized world.  Ever since Henry Ford introduced the Model T, families strove to own their own cars, and having two or more in the driveway was viewed as a sign of prosperity. In modern times, it became nearly impossible to make a living without commuting to work in many parts of the United States, and in some places, people are now spending more time in their cars than at home.

But over the last two decades, the dream of car ownership has started to change, with the trend toward the Sharing Economy. This has already had an enormous impact on the automotive industry, but the biggest seismic shift is still on the horizon.

For the first time since 1960, the percentage of US no-car households increased slightly in 2015.  By 2030, private car ownership in the U.S. is predicted to drop by as much as 80%, and the annual growth in new car sales is expected to drop from 3.6% to 2%.  The number of passenger vehicles on American roads is predicted to decrease from 247 million in 2020 to 44 million in 2030.

These pending changes in consumer behavior may sound ominous for the auto industry, but they actually represent one of the biggest business opportunities on the short-term horizon for disruptive services and technologies.

Uber, Lyft, and ZipCar are three of the most successful companies to have already emerged from the sharing economy. Ride-sharing, in which car owners drive passengers around in exchange for a fare, has already become the norm in most major cities across the U.S. A recent survey of almost 7,000 people in the U.S. indicated that 53% of people used ride-sharing services in 2017, an increase from 38% in 2016.  In addition, to ridesharing, we’ve seen a rise in car sharing, where commuters either share the rental fee for a vehicle to drive to and from work or rent out their cars for others to use and drive (much like a private rental car service).

As millennials become the dominant force in the consumer market, we will undoubtedly see creative approaches to fractional ownership, as well.  Another product of the Sharing Economy is car subscription services, in which customers can have access to an entire fleet of cars for a monthly fee.  Globally, 1 out of 10 cars sold in 2030 will potentially be used as a shared vehicle.  By 2025-26, vehicle subscription programs could account for nearly 10% of all new vehicle sales in the U.S. and Europe. Experts predict that over 16 million vehicles will be part of vehicle subscription services by 2025.

This trend presents some interesting challenges and opportunities for auto financiers.  If 1 in every 5 cars offered through subscription services are new, it stands to reason that financing models may start to look more like dealer floorplan financing models, in which resellers are given a grace period of 30-90 days to sell or lease the car, then have to start paying back the OEM on steeper loan terms. It will be interesting to see who will step up and start to provide innovative financing models to the table.

An early example of innovative auto financing is Fair,  which recently acquired Uber’s Xchange Leasing portfolio, will now provide leases for Uber drivers in the US who want to lease cars for 30 days or more.  This business did not prove to be financially fruitful for Uber, but Fair believes that they can turn it around.  The plan for Fair — which is backed by strategic investors that include Penske and BMW — is to be one of the companies at the center of how cars will be used by consumers in that future.

Fair’s existing business model is predicated on the idea of an “all-in” service, where customers’ monthly fee for leasing a vehicle also includes maintenance and some roadside assistance, with the option also of purchasing insurance through the platform, “both to protect the driver and protect our assets.”

As these new models of car ownership take hold, fleet management will also become even more complicated, especially when it comes to inspection, maintenance, and repair.   As the auto and fleet category continues to evolve through the, more vehicles will be used for business-related purposes. Keeping those cars operational and on the road will become even more crucial. When fleet vehicles need to be taken out of service for maintenance and repair, it results in unforeseen costs, lost productivity and other suboptimal results in terms of brand perception and customer satisfaction.

Experts predict that by 2019, approximately 17.3 million light vehicles will be sold to customers in the United States. Globally, this figure is expected to come to around 103.5 million units.  Fleet management is already a complex business and there are very real safety issues and costs associated with deferred maintenance, repairs, and out-of-service vehicles.  The growth in car and ride-sharing services has already inspired a host of new solutions that use AI and predictive analytics designed to proactively diagnose potential issues.

But regardless of how issues are diagnosed, cars will still need to be serviced.  This has created a booming market for mobile fleet maintenance, in which fleet managers can access affordable and convenient car repair on site from a vetted network of mobile mechanics.

Let’s face it, change is inevitable.  As with all major disruptions, opportunities abound in the sharing economy for disruptors that can move quickly enough to offer solutions to the new problems that change creates for consumers and businesses.

Source link

Turn Your Bulk Auto Notes Into Cash