Clark Outlines TD’s Growth Strategy: ‘Capability, Scale and Breadth of Relationships’

For Paul Clark, the competitive auto finance landscape offers an opportunity for TD Auto Finance to outshine its rivals.

A relative newbie in the sector, TD Auto (www.tdautofinance.com) made its national debut in 2011, when it bought Chrysler Financial. Now, with more than 9,000 dealers, two-thirds of TD’s originations come outside the bank’s main footprint. In recent months, TD has scaled back its network to focus on higher producing dealers, but Clark said the bank plans to circle back when its product suite is a better fit.

“We are first and foremost a bank focused on service,” Clark told Auto Finance News while in New Orleans for the National Automobile Dealers Association convention. “Our focus in the next couple of years will be around investing in tools and capabilities and training our people to deliver.”

Clark, who joined the bank when he was 16 and is coming up on two years as president and chief executive of TD Auto, said that the size and scale of the current auto business offers “tremendous upside” despite the increasingly competitive market. “This is where you can differentiate yourself,” he said. “Capability, scale and breadth of relationships matter.”

In an interview in the lobby of the Royal Sonesta Hotel, Clark shared insights into TD Auto’s efforts to strengthen its relationships with current dealers, the debut of its new scorecard, and why, ultimately, customer service trumps rate.

Auto Finance News: What are you seeing in the broader market? How can you possibly set yourself apart from all the noise?

Paul Clark: It’s intensely competitive. We’re seeing rates we’ve never seen before. It’s great for the consumer, great for sales. In the long term, markets move through cycles when it comes to rates. In an environment where the rates are really good, really tight, in every business ― I’ve worked in every business in this bank ― rate only gets you so far. In the end, the way you win is service.

For us as a bank, that aligns with our strategy. Everybody has a focus on strengthening their relationships with dealers, strengthening the service they provide, and I think that’s healthy. We’ve always taken a view that there’s not a product out there that can’t be duplicated in six months, there is not a price that can’t be matched But the one place you differentiate yourself is service.

AFN: TD has a healthy subprime operation in Canada. Would you dip a toe in the subprime bucket in the U.S.?

PC: It’s No. 1 in Canada, yes. It’s a place we’ve played in the past. But what I’ve said to our team at TD Auto, and what I’ve said to our dealers, is, ‘We won’t go there until we have the tools and capability.’

We’re building those tools right now with our customer scorecards, but equally, the capability has to be built across our teams, in our underwriting centers, our collections centers, and our relationship people in the field. It’s easy to rush to market, but you only get to do that once. We have that capability. I’d rather go slowly, and do it right, than rush and make a mistake.

Servicing for subprime and prime is night and day. But, when managed well, it can be a terrific business to be in, and certainly lines up with the dealer expectation around full spectrum offering. What’s interesting, what we’ve found in this market in the past two years because of the proliferation of services, there’s an opportunity for playing each of these segments, as long as your providing that service, as long as your knocking the lights out as far as turn times, consistency, funding, making the process simple for that F&I shop ― all that makes a difference.

AFN: What technological and mobile contracting initiatives are you working on? And any hints on the timing?

PC: We have a number of projects underway. Our view is that this is where the industry will have to go in the long term from a technology perspective. This where being a part of a large organization is a huge benefit. For us, it’s about balancing. It’s very easy to push e-contracting out to your dealer or customer, if you want to. The reality is, you have to do it on [the dealers’] schedule, as well. What we’re trying to balance here is our desire to see e-contracting take hold in the industry, with the dealer’s ability to deliver on that.

AFN: How about mobile apps and payments?

PC: The thing is, you can do things that are sexy, and that customers are attracted to, but when you put them on the market, people don’t actually use them because oftentimes they don’t do what you want. We have a new mobile strategy. In fact, we’re well down the road with it. To get there, we’re spending a lot of time with two groups: the dealers and the end consumer. We’re really understanding what they need and want out of a mobile app, as opposed to what it is we think they need. That’s the balance in this.

The great thing about mobile is it’s limitless; the bad thing about mobile is it’s limitless. You have to spend a good bit of time figuring out where you’re going to spend your investment dollars. That’s what we’re doing. Mobile payment will be a big part of our industry, but it’s more about what else can to make mobile more simple for the dealer to on-board that new consumer. To me the real strength of mobile, will be ways it actually strengthens a bond with that end-consumer when they leave the dealership.

AFN: The elephant in the room has been Consumer Financial Protection Bureau regulations. How are you preparing for closer scrutiny from the government agency?

PC: I was chief auditor at the bank for three years. Regulatory compliance and controls and compliance are the cornerstones of what a good business should be based on. Absent them, that’s when companies get themselves into trouble. My view on regulatory controls and compliance [is that] it is a necessity if you are going to run your business in an effective manner. Managed properly, ensuring that you’re adhering to regulatory controls and internal controls can be an advantage. We view regulatory controls as a means to make sure this industry operates in a manner in which it should.

When we bought Chrysler financial, it wasn’t under a bank regulatory environment. So for the last couple of years, we’ve invested heavily in our control infrastructure, our compliance capability. That’s made a huge difference as to where we are as a business today. We’re comfortable operating inside the regulatory environment. We’ve built out our control environment. We have strong relationships with our regulators with open dialogue about where we are as an organization, what we need to be doing.

I look at what we’ve done as an organization to strengthen our control infrastructure, and we wouldn’t have done it any different way.