Increasing competition in the auto sector has prompted risk analytics firm Open Lending LLC to set its sight on banks, after having “cut its teeth” in the credit union space since 2000, said Chief Executive John Flynn.
Open Lending’s program combines risk-based pricing models configured to lenders’ individual cost factors and financial targets with loan default insurance that enables lenders to move further down the credit spectrum and recover funds from defaults.
A bank in Omaha, Neb., is in the process of coming on board, Flynn said. Meanwhile, Pentagon Federal Credit Union launched the company’s program in January, and a Des Moines, Iowa, holding company for 10 smaller banks signed up last year, Flynn told AFN.
“[Lenders] had been so comfortable with the prime paper,” Flynn said. “And then most of the manufacturers came out with 0% financing, so all of the new-car loans that were typically going to banks and credit unions went away, and they were left with: ‘How can we compete?’ ‘How can we get some yield?’”
Flynn called Open Lending a “safety net,” and said it would also help lenders price loans for subprime borrowers. Open Lending has helped its 200 clients fund more than $2.5 billion of auto loans, Flynn said.
Learn more about risk and compliance in auto finance May 18 and 19 at the Auto Finance Risk & Compliance Summit 2015 in San Diego. Register here.
