Charge-offs are growing at a slower pace than delinquencies, most likely because of a change in repossession policy, said Amy Martin, senior director and lead U.S. analyst of auto ABS at S&P Global.
“Overall, subprime delinquencies were 5% at yearend, the highest we’ve seen since January 2010,” she said last week during the rating agency’s Auto Extravaganza webcast. However, charge-offs remain “below peak,” because lenders are waiting longer to repossess the delinquent borrower’s vehicle, Martin said.
“Some have said, ‘We’re going to repo at X number of days,’ and maybe that’s 75, for others it’s 90. Some are waiting up until 120 days if they have received a minimum payment from that customer within the last 30 days,” she said. “They were maybe repossessing too early, and realized they could still obtain payments from those customers if they gave them more time to get back on their feet.”
Loss rates may also be low when compared with the delinquency rates, because regulatory bodies are making it harder for lenders to repossess, Martin said. Regulators have cracked down recently on lenders calling delinquent borrowers too early, too many times, too frequently, and for reaching out to references to locate the consumer, she added.
“Some of these things they have been doing, they had to scale back or not do anymore, and that has contributed to making it more difficult to find that obligor and the vehicle early in the process,” Martin said. “Many lenders have told us they have changed various collection practices in response to increased regulatory oversight.”
