Improvements in Default Management Processes Benefit Auto Lenders

Recent improvements in technology are having an impact on default management practices for captive finance companies, specialty lenders and large regional banks. Following the rebound of automotive leasing and lending in recent years, greater importance is being given to updating technology infrastructures. Due to today’s razor-thin margins, using cutting-edge technology to improve efficiency and cut costs in default management and other account servicing areas can dramatically improve the bottom line.

Those technological advances include interfaces with auction houses and repossession agency aggregators, collections management tools, electronic signatures that accelerate document execution and exchange, and borrower communication management tools.  For instance, some technology solutions have robust rules engines to determine borrower qualifications. Documentation tools that generate accurate and appropriate documents for the borrower, and account management tools to ensure the borrower is paying per the terms and timetable agreed to in the contract are now available. Flexible and automated technology is allowing industry participants to respond to changing demands while simultaneously improving customer support.

Gathering the consumer’s financial and employment information, verifying this information, determining a car’s value and the best fit collections and recovery option are all components of standard default management protocol. Technology providers, captives, banks and credit unions have united to help refine and improve the processes required to assist in all steps of default management. With the options outlined below, default management activities can be completed more quickly, more accurately and with better results on the bottom line.

Since it is usually far better to repossess and sell the asset for a greater return, utilizing interfaces with auction houses and repossession agency aggregators provide efficiency in tracking vehicles from location, repossession, grounding, transport and sale.  Rules-enabled software may enable automation of these processes by broadly or narrowly focusing the scope of the targeted consumers or assets with the appropriate contact type and frequency. Internally, it can take the guesswork away by providing work-request scripts that are matched to the skill level of the user to ensure fair and consistent interaction with the borrower as well as a repo or auction vendor.

It is also important to realize that collections depend on more than just balance and payment information. Some of today’s automotive account servicing platforms provide functionality that prioritizes collection activity according to user criteria, allowing lenders to track and manage delinquent accounts, and maximizes the effectiveness of collections staff.  Rules processing, such as that offered in technology from Fiserv, considers not only borrower attributes, but also the attributes of the asset itself, as well as company policy and process standards based on the servicer’s interpretation of regulations or internal policy.  Although an account servicing platform is not the enforcer of policy or process directives, technology can trigger specific scripts or affect downstream processes based on consumer or asset attributes, account history, policy and compliance.

Although the market momentum to adopt electronic contracting has a greater impact on the front end of a loan deal, the improved data integrity and access to electronic files, asset and borrower information allows for faster, more efficient processing on the back end too.  As regulators continue to evaluate how finance companies – and dealers – communicate with borrowers about late or delinquent payments, having a digital audit trail is becoming increasingly important.  Meanwhile, e-signatures are being used to reduce the time it takes to execute documents, especially those that must be shared with a delinquent borrower. This flexibility leads to more proactive engagement in default management activities that are suitable to each circumstance, provides a better customer service experience for the borrower, makes communication exchanges easier to track and results in an audit trail that likely will stand up to both internal and external compliance review.

Websites geared toward borrower self-service are also gaining ground as a means to ingest borrower information. By enabling consumers to access their accounts with 24×7 convenience, the finance company can benefit from a more streamlined process that reduces risks associated with data handling.

The ability to assess risk, prioritize tasks and overcome the challenges associated with distressed borrowers can significantly impact your business. It is critical to be able to ‘show your math’ when reaching a decision and communicating with the borrower. Focusing on the borrower’s unique circumstance and storing decision data so that you can recall specific information will help you identify the best course of action. And technology that allows you to have greater control over default management processes will help you accommodate forthcoming rules.  Auto lenders have found this approach to be far less stressful on staff and borrowers alike, and increasingly effective in both providing better service to their customers and staying compliant.