Nicholas Financial reported a 39% year-over-year drop in contract acquisitions during the quarter ended Dec. 31, 2017, but the company anticipates that numbers will increase following changes made to its underwriting guidelines, Chief Executive and President Doug Marohn told Auto Finance News.
“The short answer [to the drop in contracts] is that this has been somewhat intentional,” Marohn said. “We are trying to return back to the core product that made Nicholas Financial so successful for so many decades that the company has gotten away from for the last couple of years.”
The company’s contract purchases declined to $27 million in the fourth quarter, compared with $46 million the same time the year prior. This reduction is mainly due to the change the company made to its underwriting guidelines, including the use of alternative data, in an effort to improve the quality of contracts being purchased, according to a press release.
Marohn joined Nicholas Financial as president and chief executive in December 2017 and is working on shifting the company’s focus back to its “niche” as a subprime lender, rather than “chasing competition.”
“Nicholas got away from [its core] discipline … and as a result, our originations this year and the year before that were very robust and greatly inflated, not only in terms of the number of contracts but the size of those contracts,” Marohn said. “So the volume number and the volume dollars were much higher in prior years, but we’re making a concerted attempt.”
Marohn predicts that the contract numbers will see a “mature increase” in 2018 now that Nicholas Financial has returned to its focus as a subprime lender.
