Got Complaints? Here’s a Review of Lender Extension Policies

Lenders should revisit their policies for working out fresh payment arrangements with borrowers who fall behind.

The downside of the Consumer Financial Protection Bureau’s complaint database is, it’s easier for customers to criticize their lenders. Potentially, though, the complaint database also offers lenders ideas for strengthening customer relationships.

For instance, more consumers are registering complaints about “problems when you are unable to pay.” That category accounted for 28% of the 470 vehicle finance-related complaints filed with the CFPB in the past six weeks. In 2013, that category accounted for just 19%.

Typically, extensions waive a specific number of upcoming payments and add them to the back end of the loan. Borrowers may not be required to make interest payments during the waived period, but the interest will continue to add up and will be worked into the extended payments.

Extension terms vary among lenders, driven in part by the lender’s risk appetite. Some lenders cap the number of extensions granted in a 12-month period or over the life of the loan, while others set criteria for how frequently they can be issued or how long they will last.

Here’s a look at the extension policies of five finance companies, as delineated in rating agency presale reports this year. To provide context, average loan amounts and average credit scores are listed for each company.

American Credit Acceptance
Average loan amount: $12,662
Average credit score: 540

• Maximum of one extension every 12 payments
• Must bring the account current

CarFinance Capital
Average loan amount: $19,831
Average credit score: 603

• Must bring account current
• Minimum six payments made prior to granting 30-60 day extension
• Maximum one extension event per 12-month period
• Maximum extensions equal to annual term less one over the life of the loans

First Investors Financial Services
Average loan amount: $21,712
Average credit score: 579

• Minimum six payments since the last extension
• Minimum of six payments made on the loan
• Must have full coverage auto insurance and it must be verified
• Maximum of eight extensions over the life of a loan or one extension for every six months of payments

GO Financial
Average loan amount: $10,640
Average credit score: 535

• Must bring account current and must show proof of hardship and income
• Maximum four months in a 12-month period
• Maximum of eight months over the life of the loan

United Auto Credit Corp.
Average loan amount: $7,411
Average credit score: 552

• Minimum six months of payments on the loan
• At least one payment since the last extension
• The company generally grants no more than one extension every 12 months with no more than six over the life of the loan
• A separate agreement is completed for multiple versus single-month extensions