Lenders Focus on Collections, as Delinquencies Tick Up | Auto Finance News Lenders Focus on Collections, as Delinquencies Tick Up | Auto Finance News
Auto Finance News
Subscribe
  • Home
  • News
    • All News
    • Exec of the Year
    • Innovation & Technology
    • Management
    • Compliance & Regs
    • Risk Management
    • Capital & Funding
    • Powersports
  • Events
    • DEMOvation Challenge
    • Auto Finance Summit
    • Auto Finance Innovation Summit
  • EXCELLENCE
    • Best Practices
    • Topics
      • Compliance
      • Customer Experience
      • Technology
    • White Papers
    • Glossary
  • Magazine
    • Latest
    • Magazine Issues
  • Data
    • Lender Ranking
    • Fixed Rate Outstandings at Banks
    • Securitizations
    • Market Share Monitor
AFN PLUS
Tuesday, January 26, 2021
Log In
No Result
View All Result
Auto Finance News
  • Home
  • News
    • All News
    • Exec of the Year
    • Innovation & Technology
    • Management
    • Compliance & Regs
    • Risk Management
    • Capital & Funding
    • Powersports
  • Events
    • DEMOvation Challenge
    • Auto Finance Summit
    • Auto Finance Innovation Summit
  • EXCELLENCE
    • Best Practices
    • Topics
      • Compliance
      • Customer Experience
      • Technology
    • White Papers
    • Glossary
  • Magazine
    • Latest
    • Magazine Issues
  • Data
    • Lender Ranking
    • Fixed Rate Outstandings at Banks
    • Securitizations
    • Market Share Monitor
AFN PLUS
Log In
No Result
View All Result
Auto Finance News
No Result
View All Result

Lenders Focus on Collections, as Delinquencies Tick Up

Larissa Padden by Larissa Padden
May 31, 2017
in Management, Operations
Reading Time: 4min read

Although delinquencies benefited from tax refund season, according to S&P Global’s March U.S. Auto Loan ABS Tracker, 60-day subprime delinquencies in February — at 4.28% — were up from 3.75% during the same month a year prior.

Meanwhile, the subprime recovery rate in February was 37.6%, down from 40.6% in February 2016, and 45.8% in 2015. To put it in perspective, the subprime recovery rate has been trending downward on a year-over-year basis since it hit 53.1% in February 2013, according to S&P.

What that means, is that the industry is currently experiencing higher overdue payments and lower vehicle values. So, lenders are going to have to start focusing on collections, said Daniel Parry, chief executive and co-founder of Praxis Finance Corp.

Lenders Focus on Collections, As Delinquencies “If you’re in an environment where delinquencies are going up, losses are going up, and you’re trying to make sure you’re controlling that, you can’t do anything about the paper that you’ve already put on your books, except manage it as effectively as possible,” Parry said.

Most importantly, with collections, lenders need to get in front of the customer early, and get in front of them often to make sure they don’t get into a worse state, Parry said.

“Some lenders don’t begin calling until five days past due, some don’t begin calling until 10 days past due — it’s called a delayed treatment strategy,” he said. “You can save some money doing that, but for us, the earlier you can get in front of the customer, [the better], and help them realize you’re not there to beat on them, you’re there to help them resolve the problem.”

Praxis now calls customers after payments are three days past due, where in the past the company reached out between five and 10 days.

“It’s generally courteous to give them a few days, but for us, being more in the nonprime area, not every phone call is catching the customer every time,” Parry said. “They may be at work, or you get the answering machine or a relative, so you just have to start earlier in the process.”

Communicating with consumers in the way they want to communicate has been a focus for Ford Motor Credit Co., the captive’s Communications Manager Margaret Mellott told AFN.

“As part of this, we have ramped up digital capabilities in recent years, including online account management and online chat, as well as continuing to use email, telephone, and other more traditional forms of communication” she said. “We continuously work to respond to the way customers want to work with us, because that is important to making sure they have a great overall vehicle financing experience.”

Ally Financial Inc., a full-spectrum lender, saw first quarter retail auto delinquencies rise to $1.5 billion — or 2.36% of the company’s total auto portfolio — compared with 2.20% in 1Q16. Similarly, retail net charge-offs were up 45% year over year in 1Q, to $251 million, the company reported in April.

The company was keeping an eye on the “progression of delinquencies,” and expected them to come down as a result of tax refunds, Dave Shevsky, the company’s chief risk officer, said during a financial outlook call in late March.

“We’re seeing it seasonally come down, as well,” he said on the call. “Not quite to where we would expect it, it’s a little bit out there, but we’re seeing good movement there.”

Ally also adjusted its collection strategy “to be able to attack some of our riskier segments,” Shevsky said on the call. The company declined to comment in further detail about the adjustment.

Consumer Portfolio Services Inc. is also focused on collection improvement this year.

Collections at CPS improved in the first quarter, but not to the extent the company would like to have seen, Chief Executive Charles Bradley said on an April 20 earnings call.

“We have now sort of been able to recognize that our customers change,” Bradley said. “I used to get a call at home, the phone will ring on the wall, [but] today, everybody has an iPhone or some kind of smartphone, and they can see the calls. So, what we’ve seen more is an ongoing trend of customers being able to sort of put off making the payment.”

The “new dynamic,” he clarified, is that consumers pay when you threaten to repossess the car, as opposed to when you start calling. CPS was no exception to the rising delinquency trend, as delinquencies — including repossessions — rose to 19.74% in the first quarter, compared with 8.97% in the year prior.

In response, CPS is calling “a lot,” and communicating when the consumer must pay or lose his vehicle. Reinstatements are up “significantly” over time, he added. “When we have their car, obviously, they’re much more interested in getting it back,” Bradley said. “In the past, that wasn’t so true. If we repossessed a car, most times the customer wasn’t in a position to buy it back.

“The lender usually has tools to help the customer out: ‘Can you do this type of payment plan to get caught up, or maybe you can qualify for an extension.’ Or maybe you take the delinquent payments and you put them on the end of the loan and if catches the customer up, it just extends that loan out a little more,” Praxis’s Parry said. “The old-school perception is: It’s just harassing people for money, but what you really want to do is help them not get into a situation where they get so far behind that they can’t catch up.”

Tags: Ally FinancialcollectionsConsumer Portfolio ServicesCPSdelinquenciesfeatureFord CreditPraxis Finance Corp.S&P Global
Previous Post

BREAKING: Wells Fargo Dealer Services to Merge 60 Regional Collection Teams

Next Post

Allstate Eyes Carshare Insurance Offerings

Related Posts

CFPB’s new heads, and more staff moves
Management

CFPB’s new heads, and more staff moves

January 22, 2021
Dealers Feel the Pressure of Competition in Used-Car Market
Management

Flagship Credit CEO on the importance of communication

January 18, 2021
Chase Auto Looks to Boost AI Initiatives, CEO Says   
Management

Former USAA leader Renee Horne joins Chase Auto

January 5, 2021
Next Post

Allstate Eyes Carshare Insurance Offerings

Leave a Reply Cancel reply

Your email address will not be published.

Latest Magazine Issue

INNOVATION & TECHNOLOGY

Upstart partners with Oriental Bank, enlarges lending footprint

Upstart partners with Oriental Bank, enlarges lending footprint

January 20, 2021
GM jumps as Microsoft joins $2B self-driving venture

GM jumps as Microsoft joins $2B self-driving venture

January 19, 2021

Sign Up Email List

CORONAVIRUS

JD Power’s Mike Buckingham on Q4 vehicle finance trends

JD Power’s Mike Buckingham on Q4 vehicle finance trends

January 26, 2021
Huntington Auto sees Q4 decline in dealer floorplan

Huntington Auto sees Q4 decline in dealer floorplan

January 26, 2021

SPONSORED

Collateral Protection Insurance (CPI): What is CPI and what does it do?

Collateral Protection Insurance (CPI): What is CPI and what does it do?

January 8, 2021
US auto sales poised for crash after slowest pace in a decade

Driving Customer Loyalty, Retention After Total Loss

December 9, 2020
When tough times hit, proactive strategies pay

When tough times hit, proactive strategies pay

November 2, 2020

About

ABOUT US

PRIVACY TERMS

ADA COMPLIANCE

CODE OF JOURNALISM ETHICS

Contact Us

ADVERTISE

HELP CENTER

EMAIL SIGN UP 

Follow Us

twitter twitter linkedin podcast

©2021 Royal Media & Auto Finance News

No Result
View All Result
  • Home
  • News
    • All News
    • Exec of the Year
    • Innovation & Technology
    • Management
    • Compliance & Regs
    • Risk Management
    • Capital & Funding
    • Powersports
  • Events
    • DEMOvation Challenge
    • Auto Finance Summit
    • Auto Finance Innovation Summit
  • Excellence
    • Best Practices
    • Topics
      • Compliance
      • Customer Experience
      • Technology
    • White Papers
    • Glossary
  • Magazine
    • Latest
    • Magazine Issues
  • Data
    • Lender Ranking
    • Fixed Rate Outstandings
    • Securitizations
    • Market Share Monitor
  • +PLUS
  • SUBSCRIBE
  • Log In / Account

© 2020 Royal Media

Go to mobile version