Commerce Bank Watchful of Delinquencies, Tightens Credit

Watchful - OutlookDALLAS — Auto delinquencies are rising across the industry, but the increase has been most prominent in subprime segments. Although Commerce Bank mainly extends auto loans in the prime spectrum, it’s still keeping a watchful eye, said Robert Griffin, the bank’s indirect lending manager.

“It’s easy to say ‘that’s subprime, it’s not us,’ but when you see changes in subprime, there is always a little bit of a trickle effect into the lower portion of our paper, even if it just affects our nonprime paper — and that’s a small percentage,” Griffin told Auto Finance News during a meeting at CBA Live this week. “Prime banks don’t have much movement in delinquency without noticing it, so even if our lower paper doesn’t perform well, we see it as an impact.”

Last year, the bank intentionally pulled back on auto loan originations and tightened its underwriting to mitigate the effect of rising delinquencies, he added. But it’s not just delinquencies that can impact the portfolio, it’s also used-car values.

“That’s probably the No. 1 question I get:‘What’s going on with used prices?’” Griffin said. “Obviously, they are declining some, which will affect our loss per unit some, which does get attention. But, hopefully we can offset that because we haven’t gone to 84-month loan terms and that’s an intentional strategy as a restraint for our type of bank.”

Commerce Bank has also limited its loan-to-value ratios, particularly in regions where delinquencies have been high, in order to limit the impact as values depreciate, he added.

With used-car-values, “there are a lot of headwinds and tailwinds,” Griffin said. “It’s not just off-lease volume.”  

Learn more about the tech and disruption in the industry at Auto Finance Innovation 2017, May 17-18 in San Diego. Visit www.autofinanceinnovation.com and to learn more about the Auto Finance Risk & Compliance Summit, visit www.afrcs.com.

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As Assistant Editor at Auto Finance News, William specializes in covering compliance, operations, and subprime issues. As a Brooklyn implant by way of Ohio, he's happy to discuss the triumphs and pitfalls of Cleveland sports as well as the latest music trends. Former bylines include Candy & Snack Today, Inverse, and The Tennessean.

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