Fairbanks Concedes Cap One’s Past Auto Finance Shortcomings
In a notable admission, Richard Fairbanks, the chairman and CEO of Capital One Financial Corp., yesterday acknowledged that the company made notable mistakes in automotive finance.
Fairbanks called Cap One’s financial modeling when its auto finance unit moved beyond the super-prime and prime sectors a couple of years ago as “among the worst in the market.” Fairbanks said Capital One made the mistakes as it “expanded to parts of the business we hadn’t been in before.”
The acknowledgement is a remarkable turn for Capital One, which was built with the strategy of banking on analytical underwriting models. Fairbanks said yesterday that Capital One was using more “judgement” in its underwriting and strategic planning today.
“Models are good at rank ordering risk,” Fairbanks said. “They are not good at predicting absolute risk.”
Capital One was the 11th-largest auto finance company in the nation last year, with $25.1 billion of outstandings, according to the Auto Finance Big Wheels data report.
