Beneficial State Bank, founded by 2020 presidential candidate Tom Steyer, is updating its collections policies on the heels of 1,800 defaults by consumers nearly four years after the lender acquired Pan American’s auto unit.
Lynn Marie Auzenne, chief marketing officer at Beneficial State Bank (BSB), told Auto Finance News that the bank is always in the process of revamping its collections practices “to better align with the bank’s approach to lending overall.” In 2016, BSB acquired and began to transform Pan American Bank in California’s Central Valley to offer regional used-car borrowers with poor credit a “responsible” financing option.
Since the acquisition, BSB has made over 22,000 auto loans available to underserved consumers, of which 1,800 have failed to pay, resulting in myriad lawsuits. The average interest rate of the Oakland, Calif.-based lender’s auto loan portfolio sits at 12.99%.
Moreover, according to reports filed to the Federal Financial Institutions Examination Council, the bank has dropped delinquencies more than 30 days past due to 9% of the total portfolio as of September 2019 compared with 18% in December 2016.
However, as BSB works to revise its collection practices over the years, the lender has continued the “underwriting and collection practices already in place,” said Mark Chavez, a Mill Valley, Calif.-based consumer law attorney at Kemnitzer, Barron & Krieg.
BSB’s auto lending has come under heightened scrutiny because of Steyer’s high profile as a presidential candidate.
“This isn’t predatory lending,” Chavez explained. “What happened here is [BSB] bought a portfolio in the auto [lending] field — where they had not previously been involved — and when they purchased it, they didn’t [revise] the previous company’s practices aligned with [BSB’s] core objectives and philosophy.”
Yet, despite the volume of consumers undergoing litigation cases due to BSB’s collection practices, the Consumer Financial Protection Bureau’s consumer complaint database shows zero comments against the bank. Notably, former CFPB Director Richard Cordray is on BSB’s board of directors, according to the bank’s website.
Still, the “level of litigation” against consumers is concerning because the cases are likely to result in judgments against borrowers already struggling to pay, Chavez noted.
“The problem is most of these cases tend to end up as default judgments, meaning the consumer doesn’t make an appearance in court and the lender adds additional fees and court costs on the consumer, and then the judgment potentially hangs over the head of the consumer,” Chavez explained.
Moving forward, BSB has goals to improve its offerings and “continue to address the auto loan needs of underserved populations,” Auzenne said, without disclosing a timeline or details.
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