Auto Finance News recently caught up with Turner Acceptance Corp. President and Chief Executive Jonathon Levin. He shared candid insights on his Chicago-based company and the industry as a whole, addressing trends in the entire auto finance process, from originations to collections.
Auto Finance News: What’s been going on at Turner in the past few months?
Jonathon Levin: Recently, our focus has been to build up our personal loan branches and build out that capacity. Less focus on auto, as far as the indirect side goes. We’re not dismissing trying to expand our territory, but it’s very competitive out there, so we’re choosing not to compete in the sense of yield. We’re sticking to our program, what we feel is right for the risk we’re financing, and with the heavy competition, we’re in a position where we’re not necessarily going to meet the pricing or the structures that the dealers can get from other sources.
We don’t want to get to a point where we’re having earnings pressure simply because we’re trying to compete in an environment [where] the risk doesn’t match the yield, or the yield doesn’t match the risk.
Look, we’ve been in the direct loan business for a long time. A couple years ago, knowing that the [indirect] environment was going to get really competitive, we made a conscious choice to build on that and open up a few more brick-and-mortar [direct loan] branches. We have five personal loan branches now, and we’ve made a conscious choice to put our resources in that product.
AFN: Is this competition cyclical? On a relative basis, how heated is the market today?
JL: I think this is the most aggressive I’ve seen since I came to the business in 1992. But it is cyclical, it’s more just a question of how long does each cycle last. I think this cycle is lasting longer than I would have predicted. Coming out of the recession, everyone realized that the auto industry, auto credit specifically, was very positive. When you look at it from a purely investment vehicle, where are you going to invest your money? You’re going to invest it in one of the products that proved positive in one of the worst recessions ever.
Fast forward the clock, everybody wants to build up their auto portfolios, there’s a lot of private equity in the mix, and now they’ve got to build capacity.
AFN: Does being local and focusing on local business give you an edge with customers?
JL: It gives us an edge, but it doesn’t dismiss the competition out there that can be more aggressive than we can. From a customer perspective, we’re very close to our customers, and we try to treat everyone like a partner. Working specifically in the Chicago market, our ability to retain customers, both dealers and consumers, because of that local presence is very high.
AFN: With the increased regulatory pressures from all corners, what steps have you taken to strengthen Turner’s compliance efforts?
JL: With the increased regulatory environment, specifically the Consumer Financial Protection Bureau, we’ve put a lot of effort and work into examining, monitoring, testing and auditing our policies, reevaluating them, enhancing them, making sure they are compliant. We do have an in-house attorney, who is a certified consumer credit compliance professional, and we constantly work with our staff. We made the conscious choice that our size doesn’t really dictate that we should have an attorney, but we feel that with the opportunity to grow, it’s a good position to be in. We constantly make sure all our employees know what all the rules and regulations are.
Most importantly, we make sure we’re there for our customers. With any complaint that comes in, there’s this desire to make sure you have the complaint-management system and log it all, but the one thing people have to remember, and this is something we really pride ourselves in, is making sure that no customer is left un-serviced, or feels that way.
AFN: What is the biggest challenge facing the subprime industry in the next year?
JL: There are two things that are on my mind: regulation and competition. With regulation, we’re still trying to find that balance between what is known and what’s unknown. What are clear definitions you can work with, and what are definitions that are still vague?
Competition is still a big concern. When might it cool down or subside a bit, when will it correct itself? That’s important because there are those that can compete, those that have the capital infrastructure where that’s just part of the formula, and also, adapting to the reality that the subprime environment has changed because of the competitive landscape.
I think another thing on our horizon is technology. How is technology changing what we do as lenders, as dealers become more social media-driven and having social media centers, having virtual showrooms to make it easier for customers to get to their place of business? What do we, as finance companies, have to do to participate in that? How do we make it easier to have the deal sent to us, to work with the customers to the degree that we’ll have to have a finance company virtual lending program? That’s definitely on our mind.
Texting is something our company has just brought on, and we’re really happy with the progress. It’s really just one more way we can make it more comfortable for the customer to communicate with us. There are people who just don’t want to ever speak verbally over the phone, but if you text them, you get an instant response.