BMO Harris is expanding its credit band down into near-prime as the market opens up amid pullback from larger banks, Craig Harter, the company’s head of indirect auto finance, told Auto Finance News.
“Traditionally, as a reputation, we’re a prime and super-prime lender,” Harter said. The changes will impact a “wide variety” of underwriting standards, but it won’t push the bank down into the subprime category, he added.
“We’ll be looking at wider availability, an expansion of mileage, and an expansion of loan to values as we go down into that lower tier for Fico scores,” Harter said.
Loan terms are unlikely to lengthen but more long-term loan volume may be done, especially given the changes BMO is making to its flat-rate dealer compensation model.
As of June, BMO Harris switched to a tiered flat rate — offering 1%, 3%, or 5% to dealers — rather than a single flat rate of 3%. The shift has already increased application volume 20% to 25% in the first month.
“We feel we have done a very good job of managing the dealers we’ve had, and enjoy a consistent return over the years,” Harter said. “But we feel, as we’ve seen other players retract from the market, that we have a great opportunity to not only better our business strategy with our commercial partners, but also just take advantage of the current market. We have the ability — with the experience and expertise we have — to build deeper.”
