Chicago-based BMO Harris Bank said its recent move to drop indirect auto lending in 12 “non-core” states is unrelated to its decision last year to switch to flat fees to compensate dealers.
BMO Harris considers Illinois, Wisconsin, Indiana, Minnesota, Kansas, Missouri, Arizona and Florida to be its core states, bank spokesman Patrick O’Herlihy said today.
Meanwhile F&I managers in North Dakota, Michigan, Georgia and Iowa complained in an online forum on Thursday they were abruptly notified the bank would no longer offer indirect auto loans after Oct. 31. O’Herlihy said today he couldn’t confirm which states the bank is exiting.
In a conference call with analysts on Sept. 10, the bank said it would be, “reducing a portion of our indirect auto portfolio over time.” Tom Flynn, CFO of BMO Financial Group, said the move was linked to the bank’s acquisition of the GE Capital Transportation Finance business in the United States and Canada.
The GE Capital business represents about $8.7 billion in outstanding loans and other assets, concentrated in heavy trucks and trailers, according to BMO Harris. Flynn said in light of the GE Capital acquisition, BMO Harris was looking to cut back on less-profitable business lines, which he said included indirect auto.
“The yields on the indirect auto portfolio are lower than on the acquired [GE Capital] portfolio and so we view this as an attractive repositioning of the balance sheet,” Flynn said in the Sept. 10 conference call. He said the GE Capital acquisition is expected to close by Jan. 31.
O’Herlihy told Auto Finance News in an email today that the bank would stay with flat fees in its core states. In April 2014, BMO Harris switched to flat fees, apparently to avoid potential problems with the Consumer Financial Protection Bureau.
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