<ul style="font-weight: 400;"> <li data-leveltext="" data-font="Symbol" data-listid="4" aria-setsize="-1" data-aria-posinset="1" data-aria-level="1">Developing a compliance program to meet supervision requirements</li> <li data-leveltext="" data-font="Symbol" data-listid="4" aria-setsize="-1" data-aria-posinset="2" data-aria-level="1">Promoting compliance buy-in from the top down</li> <li data-leveltext="" data-font="Symbol" data-listid="4" aria-setsize="-1" data-aria-posinset="3" data-aria-level="1">Adapting policies to conform to stiffer regs</li> </ul> [toggle title="TRANSCRIPT"] <div class="transcript-scroll-box"> 00:14am I working there we go. Hello, everyone. Thank you for joining us. This is the operation spotlight track sponsored by Linux. In this room we're going to be going into the weeds and some of the operational trends that most affect your company on a day to day basis. 00:29 through three sessions this afternoon we'll be covering 00:35 collections and servicing from our next speaker, the latest in securitizations and the various ways lenders are tackling direct lending. Be sure to check your schedules and plan to join us here immediately after this first session for capital markets presentation from Robert McDonald, Vice President of structured finance and the investment banking division of Goldman Sachs. After the lunch break, I'll also be moderating a direct lending panel here with executives from ally financial bank Bank of America State Farm bank. So you don't want to miss those. Please join us back here later on after the break. First up, I'm very excited to introduce our first presenter here from Hunter capital America for a presentation entitled default management strategy and methodology. He'll be getting more specific numbers in a moment. But it's no secret that delinquencies and charge offs are on the rise in the industry. I cover public earnings, especially this week and past week, and I can tell you that nearly every finance company out there is dealing with some of the same issues. here discussing the ways to mitigate losses best practices for tracking defaults and innovations in collection practices. Bill Miller, Senior Director of collections and recovery for Hyundai capital America could join the captive last year after spending some time at wristband and associated capital recovery. Prior to that he worked at General Motors between 2001 2012 as an analytics and performance manager leader. Please welcome him on stage 02:04 Thank you very much. You know, I I will tell you my first experience at DFS actually my first time here, I was very excited to get this opportunity. Although I will say I am not an ops guy. So getting dressed in a suit, it's not exactly my thing. So plus I have sort of one of those physiques that doesn't exactly slide right in, so you know what I'm talking about. So, so it's a little uncomfortable with me, but I'll manage. So I think we'll get into content. My hope is that there's there's a few nuggets, we're going to cover a lot of ground. We'll talk a little bit about default management. Then we'll move into a little bit about forecasting, operational planning, and we'll also cover employee engagement. So a few of the areas that I will tell you are top of mind for us at HCA. So quick background, I think William gave a good background on me personally. And he I think most of you are probably aware we're the captive finance arm of Hyundai, Kia and jack Right. So, you know, become we become a much bigger brand than we were, let's say 10 years ago. And one of the things I think that most of you probably walked through with Dan, this morning, we give a big bit of a profile in the industry is we've actually been through fairly significant growth over the past 12 years. You know, we started out as a very, very small auto OEM with this small captive finance arm, and we went through significant growth. And so we were able to keep pace with that, I think, operationally, we were able to keep pace just to basically keep funding new originations. I will say collections default management wasn't necessarily a problem because we kept increasing our denominator, right? We had new new originations coming in fairly quickly, over the course of last couple of years. That's become more of a focus for us. I know many of you out there that work for other captives, banks independence, certainly default management's become a little bit more top of mind. Some of that's macro, some of that's internally influenced Ryan, so big Dan can Both well this this morning. Yeah, many of us got a little bit aggressive on I will say, you know, extending term and advances. And one of the challenges with that is, especially on the collection side is that you know, now you're dealing with a different profile than what you were dealing with before. And I could say, for for HCA, one of the challenges we faced is that, you know, we faced the challenge of not knowing the profile of the account that was coming in the front door. So yes, it was a similar customer we experienced, but because advances were higher, because term was longer. The pattern, the payment pattern of those accounts, and the lifetime loss models were slightly different in the past. And so the biggest challenge with that is, from an ops perspective, managing how you staff your groups, right, how many people to put into early stage collections, how far to ramp up your vendors. How many repos to forecast for late stage collections from Right, what's your risk of accounts rolling into loss and then subsequently recovery, if your risk models are off to a certain degree, because you don't have history on this new profile of account is sort of hurt you quite a bit operationally, you know, outside of just the impact of losses overall and the impact and the PnL. You also have the double whammy impact of provisions long term and those of you who work in the risk based understand this full well, right you have going into the year, you've got a loss forecast, right. If you fall off that loss forecast, you now have a double impact due to provisions that had to be planned going on the further 12 months. So it can certainly hurt you significantly more than than just a slight bit, let's say on the origination side. So we'll get into some some content here. And my hope is we have a few nuggets that you can take away back to your operations. 05:52 So let's talk a little bit about the market. I mentioned this a little bit. So when you look at volumes, this is a bit dated some of this data From from Jen Julian does it does an excellent job of some research into into current trends. So into q1 we saw an increase by 1% overall and new volume, the dollar volume those accounts was up about 2% delinquency 30 plus overall up about 11%. So what does that tell you? It tells you we're bringing in more volume, but the volume that we're bringing in has slightly higher severity to a certain degree. And then of those they're they're they're performing slightly worse, right? A lot of that depends upon how you look at your different vintages. So one of the challenges I would say, a lot of captives independents are having now is that in the collection space, right, we're not collecting on accounts we originated yesterday, or even first quarter this year. We're collecting on really accounts that we originated a year, two years, two and a half years ago. Those are the accounts that we're working on. So many are forecasting higher losses, certainly this year, some of the next year because If you want to call it some of the sins of the past, and so that's something that that's particularly relevant because it tells you how long the lead time is between your changes in credit policy and what it actually means downstream to collections operations, recovery operations. There's a long tail to that. And going into some of the challenges everybody faced last year, many were further ahead of the game, I'd say some were further ahead of the game than others, are those changes in credit policy that are starting to prove out some benefits this year. But again, those were changes made a year year and a half ago, be making changes now, you're not going to see real benefit to that for a good while. So moving into treatment, I'll talk about some of the things that that I've seen in the industry. You know, from a collection standpoint, most would would segment accounts generally into your early mid and late stage buckets and then post charge up for covering in general right How you decide to treat those accounts in terms of, you know, moving from self care into potentially some some softer lighter collections, for example, SMS, or just some light outreach channels, predictive dialer channels, right? And then on into manual collections that everybody here probably has a slightly different entry and exit based upon their predictive analytics. And so for some of you who may have a very light predictive analytics infrastructure, you may have fairly boxed treatment channels, where you look at accounts based on cycle dates or month end, and you'll look at work should we manage these accounts with dialer and bucket one right one payment past due to payments past two will go into manual collections, three payments past two, we'll look into more of the repo timing. I think that dynamics changed a little bit over time. It really has, I'd say probably even seven, eight years ago, many started looking at predictive analytics to tell you when you should have entry and exit out of yourself cure strategies. I think I 09:04 always tell people this on the collection side, at least, you know, it's a necessary evil if collections didn't need to exist and we could price the risk into originations, then ultimately, you wouldn't have to have a collection stream. But years ago, people found value and adding a collections work stream and allocating objects to it to drive down losses, right, and overall increases profitability. And the extent that you can do that and still keep your cost of servicing low, ultimately, that's the goal. Right? So let's talk about some of the trends that we're seeing. One I think that's more reason is is utilizing early stage first party vendors in the later stages of delinquency. Now, let's say a five years ago, probably the thought of looking at first party collections vendors, in an area where you may consider the repossession process is not something anybody was doing, I would say. Now, I would say it's commonplace, but more Considering that activity, so based upon your experience with your vendors, how skilled they are, how adherence how adherent they are to compliance, and your policies procedures gives you more and more comfort that they're an extension of you, and you can consider them and more of the repossession, timing aspects of things. The other complexity is, as most of you aware that that work with the repossession spectrum is that you have the interactions with the repo agents or your forwarders. That interaction is really critical. And it's very frequent. And so if you've got outside vendors doing that, you've got to have a very, very robust process with a lot of controls to make sure you're managing it well. So the big upside is obviously obex save, right? So if you're looking to use a vendor in early stage, that's going to be moving into potential repo timing. There's an optic save for sure, in most cases, but the risks are fairly significant. The biggest risk I would say is compliance and controls. The other risk is you could you could potentially influence skip losses in a negative direction, meaning that you're not picking up vehicles you normally would have in house, and you're seeing increases in skip losses overall. And in general, what does that mean to net losses? Right? So let's just say your typical repossession, you lose $10,000. Right? Overall credit loss impact, right? Skip is going to be double that if not more. So, the sacrifice is pretty significant if you don't set it up properly. But I think more are considering that in this stage. The the risk base repo assignment timing, you know, a lot of this is kicked off by your cure strategy, right? So if you're sending out cure notices very early on in the process, right, then you've got an opportunity potentially to repossess earlier and what some are looking at in terms of repo is are looking at whether or not first I have the ability to contact someone So if I have someone that I'm working with, right, this is a customer, whether it's a good customer or not, right? If they're moving into, let's say, two payments past two, and I don't have the ability to reach out to them. So there are do not contact, not just a Do not call, do not contact, many are looking to advance the repo timing spectrum on those accounts, because you don't have the ability to reach out to them over time. And if those tend to move in a negative direction, you're just delaying the inevitable. And so that's something I'd say some are looking at. Outside of that. Overall, I think when you're looking at advancing the repo process, you really have to be very, very cognizant of the impact on reinstates. So your reinstatement rates, depending upon how early you're picking up vehicles will go up. The earlier you pick those vehicles out, right. So the upside of that is in most cases, most if you have policies that will require someone to pay the full amount due, if indeed they reinstate the vehicle. So you are advancing the account to a cure by going through reinstates The downside to doing that is that you're advancing a fairly aggressive repossession action on an account that should have otherwise been able to pay. And I think that most look at that and sort of question, if I've got really high reinstatement rates, why is that? Let's say your reinstatement rates are north of 30%. 13:25 Okay, 13:26 that means that of every 10 vehicles, you repossessed three of them actually had the ability to secure the funds to bring that account not only one payment ahead, but all the way to current plus repo fees, right. It's generally a fairly significant amount of money. And so if that's the case, why weren't you able to collect that prior to that repossession action taking place? Right, so people in favor that the repo process would say, Wow, the repo itself, right, encourage them to go out and secure those funds because they can't get their car to get to work? I don't disagree with that. But the funds were there and available. And looking at the right collections activity earlier on, might allow you to, to, to delay the repo activity, right, still pick up those tiers, and not have to go through that repo process overall. In house recovering, so we've talked a little bit about early stage collections, and I'll talk about some some pull forward strategies that you may want to consider going forward. But when you look at in house recovery, I would say in many cases, a lot of us have looked straight to the agencies after charge off. So the general thought is, is that you tried to collect on this account for let's say, 100, hundred and 20 days, right? Some cases more, right. So after that point in time you sort of cut your losses, you've gone ahead and recognize the full balance charge off. Now you're sending it out to a specialist to try and collect that money back. In many cases, we've found through some of our analytics, we've been able to staff I specialized in house in house Recovery Team that's doing similar things that we were doing pre charge off. That's in some cases able to outperform the agencies, especially for low hanging fruit soon after charge off. And the treatment strategy would generally look like this. You have an accounts normally would go at 120 days straight out to agency, right primary agencies. We're looking at extending that timeline further out the start of that timeline. And for select accounts based upon recovery scores, you can look at starting the in house recovery with a specialized in house team that only works charged off accounts, is able to pick up the low hanging fruit at a very low cost. You're not paying contingency fees to do that. And then where we have more challenges with those accounts, then you go straight to agency, right. One of the other changes that I've probably seen over the last few years and agency treatment, and this goes back to my days at ally and this was this is going Back seven, eight years ago, no, we would we would push out agency placements for call at six, eight months, you talk to agencies now, they have that account more than 90 120 days, you're not going to get a lot of activity on that account after that period of time. Right. So what's an agency can do, they're going to focus on a lot of the new volume coming in. So turning, flipping those agencies over a little bit sooner, and that lifecycle is something that many are considering now. 16:27 Skip recovery. So I would say this. I think that in the past, many have looked at skip as a tie into collections. One of the challenges with skip is that if I've got an account that I want to skip an early stage collections, do I really want to invest a fairly significant amount of money right into chasing down an account that might pay on its own? Probably not, right? But if you look at certain attributes of accounts, and you look at whether or not you've had an RPC within X number of days, or you look at whether or not You've had a promise to pay with an X number of days, certain profiles of accounts may fit the need, even in one payment past due to look at skip strategies. And we're looking at that today. So we start skip strategies really even as early as bucket one. Especially if there's no contact bad phones. And so for those of you who have, you know, early stage treatment strategies where you're farming accounts out to vendors, I'd highly encourage a bad phones, no phones strategy. If you don't have good contact numbers, why are you rolling those accounts through a dialer system? Why are you rolling those accounts out to collectors or only making phone calls? You've got to carve those accounts out and put those into a skip profile. The other challenge with skip is that you can't have more than one person working at account at a time if they're making phone calls, right. So if I've got an account that I want collections activity on, but I don't have good phone numbers, and I've got it farmed out to a collector right And I've also when I also want to do some skip tracing efforts, we're reaching out to try and find location, I can't have both of those individuals trying to reach out to the same person at the same time. So the best way to manage that is to go ahead and take those accounts out of active collections, put them into a specialized skip tracing pool, find good contact information, then throw them back into the pool, right? So that you don't run the risk of multiple rpcs. And you can stay compliant with federal regulations. So I mentioned some strategies to consider relative to treatment. And one is, you could call them pull ahead strategies, some call them fast forward strategies. But the general idea is that if you have a profile of an account, and I mentioned do not contact as an example, where you've got an account that's ready to move into call it a more intense treatment. delaying the inevitable is somewhat of a waste time, right? So just because an accounts not let's say 75 days past due if that's when you want to go ahead and issue repo assignment to wait that long when you already know the account is going to go down that path, what are you waiting on. And so we've found significant value in looking at this profile of accounts, and moving them forward in the process. Recognizing that we've got to get into the repo process a little bit earlier, we found value not only in picking those accounts and avoiding skip losses, but also we've seen some improvement or reinstatement rates on those accounts by advancing that process forward. So there's a couple of things it helps skip losses. The other thing it does is it makes it a little bit easier to find the vehicle when you go a little bit earlier into that process, that the risk you have is that you don't want to get too aggressive. I will tell you, there are others in the industry that have a much more aggressive solution. Right. And you know, I work for a captive and so as a captive, we're always trying to look to find ways to help our customers and our dealers and so do Just because a customer is delinquent doesn't make it a bad customer, anybody could fall into a difficult patch in their life, right? So we want a long term relationship with that customer. We have a very consultative collections approach, right? We would get more intense if the individual working with doesn't choose to connect with us, right isn't willing to get on the phone with us isn't willing to talk to the situation, if we've got someone who's engaged, we'll be engaged. And we want to move to that next account. And we offer retail and lease so particularly on the lease side, we're looking to move into that next lease account. And so we want to find all ways to do that. So for us as a captive, we may delay the repo assignment process even a little bit later than some because of that relationship because of that consultative approach. But it's it's a view towards the end game. And if I wasn't a captive may look at it a little bit differently, Ryan, but because we are and many in this room are it's something to deeply consider. 21:01 So contact strategies. 21:04 You know, I mentioned this a little bit. 21:06 You can have a lot of wasted efforts on phone calls if you're not properly segmenting your dialer. And so there are many vendors out. Now I will tell you if you're talking to vendors about one thing right now, it should be around getting me good phone numbers and getting me good contact information on customers. And that's location information as well. There are fantastic solutions out there. If you're talking to the right people about getting you that information, not only can you be supplied a good contact number, you can also get a score right? many vendors offer this a score, that number tells you here's a level of confidence we have you get the right person on the phone when you call this number. So that does two things. One is it gives you a phone number so that you have the ability to put that account inactive collections. The other thing it does is it gives you the ability to prioritize your work streams. And I will tell you when you've got collectors even call it mid late stage that are working very Hi accounted collector ratios, and managing that staff. One of the challenges is how do I know that my staff is working the most important accounts, most will look at those queues and say, I want you working the accounts First and most likely to roll to loss. Okay, that seems sensible behind that maybe the accounts that just came in that day. But in the middle, you've got this large band of accounts that are worked or not worked, it's very difficult to manage the workflow, if you've got the ability to score your probability of contact, and allows you to stack rank where you should prioritize those workstreams. And so we've found some success in that we actually have a long way to go in that area, too. I'm not sure everybody has this solved. But there are fantastic solutions out there. If you're willing to invest in those and you're willing to integrate some of those solutions. It doesn't need to be a full integration, even if you're able to take some of those analytics, even if it's offline from the account that are collected. can go out and source that tells me here's the accounts I should go after first. It allows you to prioritize your day, even if it's disconnected from your core servicing platform. All it is is a guide, right doesn't give you all the answers, but it helps you organize your day. And you can get the right accounts early on. 23:23 So we talked about this a little bit, what's the goal overall, the goal overall, is to mitigate losses greater than the extent of what you paid to do it, right. We all run total cost organizations. So if I'm going to invest $10 million in a strategy, I need to save 11. And it probably needs to be more than that. My general rule is it's got to be three x, right? So if I'm going to invest $2 million, I need to see three x and last production for that to pay off. And the best way to go about managing those things is number one, I would argue is champion challenger strategies. 23:54 I think many have been doing this for 23:57 a number of years, you know, GE really pioneered this Concept along with Capital One years ago, it's a fantastic way to horse race, different strategies together. One of the advantages we have in auto that mortgage really doesn't have as we've got scale, right credit card even has more scale than we do. But being able to run a number of strategies without overlapping those, and finding some some information that tells you about overall loss reduction is critical to tell you what you should do as an organization going forward. The other the other bit of recommendation that I would offer is, is that for those of you who do more than just auto servicing, right, if you have a credit card arm, if you've got a mortgage arm personal loans, where there's some fairly significant volume and scale, I would reach out to those groups and see where they found some success. Those things especially when it comes to, to customer behavior, contact behavioral items. Those are very transferable over into auto. I would even propose that if we were to now we don't have a credit card arm at HCA. If we did I would look at potential strategies that I wanted to offer an auto servicing, I reached out to my partner's over and credit card and may have significant volume and scale. See if we can test some of those things over there. Then we can pull them over to auto, right. So something to think about as you as you those of you who work in large scale organizations. Okay, so we'll transition a little bit into into forecasting. So I'm happy enough to have our chief risk officer Marcello here who I partner with quite a bit at HCA. So we go through this quite a bit. We've actually made a number of improvements at HCA in our forecasting and loss process. I think it's it's a particular challenge to a lot of big organizations especially, right. So you when you look at overall loss forecasting, right? Generally, the way that works is you've got a risk team or a dedicated team that manages overall expectations around losses, a lot of that's driven by credit policy, as well as historical data. So you get historical data. basic issue of risk risk risk based vintage performance with loss curves. And you layer on top of that, what your new originations are going to look like going in the next year, that tells you overall what your expected losses are going to be. Okay? The only challenge is it's very top down approach. And generally, especially if you're using a vendor model sort of gives you a just an overall here's your loss number, and then it's up to the team just allocate, okay, that becomes a challenge because you're looking at percentages, what percentage normally falls into BK, what percentage normally falls into a total loss status, right, those kinds of things. And so where there's gaps is where operations can really come in. And so what we have at HCA is we have Strategy Analytics team embedded with an operations particularly in collections and remarketing. And those teams are able to offer guidance to our risk team so it doesn't change what we're doing from our risk risk loss standpoint forecast. What it does is it offers information that's not built into the model. So some of that information can include things like some of the monthly performance. Right? So one example is, if you're going to end a month on a Friday versus a Sunday, there's going to be a very significant difference in overall 30 plus delinquency finish. Right? Those of you who work heavily in delinquency know that, right, it's payday. And so that's not built in generally into a lot of lost models. The other thing is not built in his collection strategies, or recovery strategies or remarketing strategies, right. So some of that can be manual adjustments, but those manual adjustments need to be validated by the business. And the timing of those adjustments needs to come from the business. So having a process where you've got each of their respective departments that have influence on losses, providing input to your risk team or whoever puts your loss forecast together, it allows you to calibrate gives you a sense check on those those last numbers may allow those to line up a little bit better, not just in the overall number, but over In the in the monthly numbers as well, right? 28:07 Okay, I can't 28:07 skip over operations without talking about people. And so you know, this is sort of near and dear to my heart, I will tell you. And so you know, I'm a collection Strategy Analytics person, but I like to be out there on the floor. And there's nothing more important for us at HCA than our people. And, you know, I talked about some of the collection strategies pull forward strategies before and what that means, ultimately means we're going to put our best people on the highest risk accounts, and we really invest in our people at HCA. And I think many here do the same. And so, you know, one of the balances we have to strike is, you know, we're a high performance enterprise. Many of you here are, how do you balance that with high engagement? And so I'll go through some of the things that we look at and evaluate through some of our surveys to avoid having High Performance with low engagement, okay? Because one of the things you could start off with a team you get everybody's energized performance is what is good performance starts to go up. And then eventually, as you start to really hammer the team with performance, engagement starts to dip. And that's something you definitely want to avoid. So there's a few things you can do to try and help that a little bit. One is incentives. And so aligning the right ibp or variable pay program to to performance, you know, it helps a little bit. folks don't mind working harder if they're compensated more and ultimately, performance is better, right? So aligning ibp plans with overall corporate performance is critical. So not just I did this as an individual, and here's where I finished and I contributed well, but overall, if there's an add on that says the enterprise did this, then I gained this out of it, right. A lot of people really like that message, especially at the collector and recovery level. And it goes over very, very well. Some of the other things is our survey your team. So if you don't have a really good sense of how engaged your team is, you're probably missing the boat a little bit. So we go through a fairly rigorous survey process to understand how engaged the team is. And so I put a quick map up here from from Gallup, it just gives you a general idea and, and I'll have to kind of kind of walk you through this a little bit. But when we look at engagement, you generally have a series of questions tied to are you aligned with the organization? Do you believe where we're going? Does your boss believe in you do the you know the tools that you have allow for you to be successful? Right, those kinds of things. You want to ask someone if they were really engaged in the future of the company. And when you look at their responses we look at strongly disagree, disagree, neutral, agree and strongly agree, for best in class organizations. 80 plus percent agree and strongly agree where those organizations are at as a very, very high goal. Average organizations are closer to that 60% Mark, meaning that out of 10 people, six of those folks agree or strongly agree that the organization is headed in the right path. It says a lot. I mean, that's, I was surprised to see that myself, because I think in a lot of ways, you know, depending upon what level you work at, and what you're exposed to in terms of communication, you may not agree with the path, the organization, especially if you're going through a lot of change, but 60% Plus is where you want to be right 80% ultimately, is the lead target. So some of the other things you can look at when it when it comes to, to, to engagement is communicating change very well. And I think at HCA, the way we do that is we actually have dedicated communication communication channels. And so we have a dedicated ob support team. Anytime there's a change in the organization. Anytime there's a change, let's say to, you know, disaster relief policy ibp changes, right? incentive plan changes, those kinds of things that affect people, all those came through the same channel. And that's critical because it's not coming from different areas, right? always come to the same two people know what to look at. So I think that's critical. Most of you probably have an intranet of some sort, posting that same information on intranet. So you've got your agents that log in every day, they can see that information, highly critical, so long as the exact same message, right? You start sending different messages, you're getting a lot of questions, that's the last thing you want within an ops division. 32:39 Last thing I'll mention is around strategic planning. So I would say this, one of the one of the paths, I would say that many organizations go down that sort of steers you in the wrong direction is if you go down a path of setting the course of the future, let's say a three and five year plan, by the end of every year, you tend to question those that future or You let other stakeholders or other drivers drive you in a different direction, it creates a lot of chaos. And so the best organizations are those that have a three to five year plan, especially around operations and it and don't switch gears regularly. So ultimately, if you can lay the course for the future, and not have that change the deal, but in reality, what happens a lot, and most of you are exposed to this is that, you know, around, let's say, the August timeframe, most go through your annual budgeting process. And so that's generally a very rigorous process when you know what our optics is what our plans are going in the next year. And so a lot of those start with a lot of pie in the sky ideas, right. And a lot of those are carryover strategically what we want to do, but as the year goes on, the obex pressure tends to drive a very finance driven exercise that sort of steers a lot of the decisions tied directly to op x, right and so while that's, you know, that that It makes sense, right? It's a lot, there's a lot of stakeholders involved, there's a p&l impact that has to be considered. To the extent you can avoid that and still make those investments on a three and five year plan, you're going to be better off, okay? It's very difficult to do. And ultimately organizations that have a very strong C level, very good relationships with your OEMs. and other stakeholders are able to lay the course for a plan years ahead of time and not deviate from that plan. If you find yourself at the end of the year, looking around saying what are we going to do this year? That's the worst place to be right. Because then you're going to make very reactive choices. You're making investments just for the near term, not the long term. 34:42 Okay, questions done. 34:57 Thanks so much, and I want to encourage everyone in the room to submit questions via the auto finance summit app. You can navigate to the agenda and find the session there. And there's a link to ask questions. If you're having trouble with that. You can also go to slider calm, enter the code m 950. That's m as in Mother 950. You can ask questions there as well. Somebody we weren't able to touch on in the presentation that I wanted to touch on that's sort of affecting everyone in the industry right now is the repossessions and delinquencies from the hurricanes that have affected various areas. Can you give us sort of an update on how you guys are dealing with that? What's sort of the industry perspective right now? 35:40 Yeah, I can barely hear me. Okay. Okay. I will tell you this. Probably my number one area of concern right now, for a lot of reasons. But for those of you who kind of work on the upside, there's been a lot of movement around hurricanes. We go through the cycle, I would say, I can remember last time I'm going to say it was 10 years ago. Maybe even Katrina that we went through this level of impact from from natural disasters, because starting in, say August 28, I think is when Harvey hit right behind that was Irma, right behind that was Nate. And then we had the California wildfires. So it's it's been a struggle. For most of us in the industry. You know, a lot of us talk about how we manage the volume, things like that. And so what you have to do when you manage that volume is you have to have a very clear natural disaster policy. And so that's a strong partnership with your Treasury team, your risk team, and then operations has to be able to execute assistance. And if you've never done it before, and all you're doing is taking a regular, let's say extension policy, to offer disaster relief. It's just going to fall into the funnel of general flow. And you've got people out there in Houston, and in Florida that really need assistance very quickly. And so for us, I can tell you, we prioritized all of those natural disaster assistance relief efforts, well ahead of anything else that was going on, and so when When the Hurricanes head, we hosted a daily call with each of our respective departments to go over exactly what we're going to be doing to plan out the future. But really not to start from there, we actually went through an effort where we went ahead and laid the course of a desired plan. The plan was already in place, we just implemented that plan and assign key stakeholders. So ultimately, when you look at your to your question about kind of long term impact, I think total losses are going to be higher. So normally, you'd see that call it 234 months out from those hurricane impacts, I think that's going to be expected. Overall, I think, you know, those of you who are offering assistance need to be very mindful of the impact on those on, on on securitized loans. And so those abs securities, if you're going to pass some triggers on those need to be very mindful of that working with your Treasury teams is going to be critical to to manage that as well. And then, you know, ultimately, you've got some bandwidth I would say on the collection side. So in most cases, most surprises Those calls and those repossession activities with vendors to begin pact vendors gotta give him a heads up, you know, there are not going to be X percent of calls that I made the next day. So what does that do? I mean, operationally gave us some freedom to go ahead and repurpose that staff a little bit. At the same time, you know, obviously, it's an impact of the vendors that are expecting especially repo forwarders, and repo agencies that didn't have any work for a period of time. So big impact on those groups, and they're waiting for that light to come back on. But we have to be sensitive to our customers and, you know, as a captive, obviously, we probably had a longer leash on that than most. And we still are today, our friend support. 38:38 Yeah, great update. Appreciate that detail there. We're getting some questions from the audience. How has recent TCPA litigation changed your use of dialers 38:50 I quite a bit in terms of cell phone usage. I will say so. You know, making sure you had consent not only I'd say in dialer, but also an SM mass. So those of you who are using SMS today, it's one of the only outreach channels that we've seen that's improved delinquency and losses. Because it's going after a group of individuals, mainly millennials, right? I think most of us speculate. And that's a group that doesn't want to talk to us over the phone would rather interact by SMS, especially if you have to weigh so but that's a group ultimately that that, that you're not able to interact with those customers, if indeed, you don't have the proper approvals to be able to do it. So we need to have a process upfront to be able to properly identify those accounts, need to have vendors and allied identify that it's a cell phone, need to be able to know whether or not the cell phone that's used and who owns it, right. There's some vendors out there that can tell you that and then from there, ultimately, I would highly leverage the SMS channel actually, on the collection side. And we do today and I think they'd most probably do. 39:51 Yeah. couple questions here with the acronyms I'm not as familiar with, but maybe you can, you can assess them what percent Have collectors pay is ibp or variable, what percent for assistant managers or team leaders. 40:06 So I will speak in general terms on this. Every collector that's in a call it a workgroup of 10 or more should be in an ibp plan, right. And so if you work in a work stream where you've got really small scale, then it's difficult to run, let's say a stack rank plan. So if you want collectors that are, let's say, a work group of 10 or less, then you could consider a goal based plan. It's a lot harder to do, because one of the challenges is you're setting goals every month. Are those fair? Are they not? You could overpay or under pay? It's difficult to plan op x i, I'm a particular fan of stack rank plans because I've got I've got a directly tied to op x. I know exactly how much I'm spending. I can't think of an area where you wouldn't want an ibp plan, even with your vendors, right. So if you've got first party vendors, I wouldn't work with a first party vendor that doesn't have an incentive. Variable pays based plan with their agents on the floor. 41:06 Have you seen an increase in FBC? O's? And if so, what are you doing to reduce these? Yeah, we 41:12 were talking about early stage, I'm assuming. So if we're talking about first payment, defaults, things like that. So if we're looking at that, we have seen probably going into last year, we saw an increase in first payment defaults ourselves, right? Some of that was fraud related. And so we were actually able to clean up a little bit of that going into this year. But first payment defaults. If you've kind of been an issue in the history for a while, Lisa's a little bit more difficult to tell, right? Because a lot of cases the dealer's making the first payment. So ultimately, it's a little bit more challenging. Plus, I think many are offering sort of different payment options with with with new accounts. And so if you're doing that it's tougher to get a sense of whether or not they're actually making their first payment. So one you've got to have really good data that tells you whether or not you've got some risks. They're the other thing we do in particular is we actually have regular sessions with our credit team will work going account level and risk as well. We're looking at account level on first payment defaults and second thirds, so that we can assess whether or not we had a collections gap with a servicing gap funding or onboarding gap, or we may just have a bad credit decision. And so it helps drive some of the changes in that regard, and maybe changes to collections treatment as well. But if you don't have a dedicated first payment default team, probably missing something there, right, because what happens is, is that you've got an account missing a first payment. If you don't have a carved out, it's going to look like any other account that's missing a payment. The problem is you've got a really high severity, higher risk of loss on that account as it rolls to the collections channel. And that gets back to kind of fast forwarding some of these treatment options. If you've got high risk, you need to be pulling forward those those more intense activities very early and change his credit policy to avoid that mapping the future is gonna be critical. 43:00 We mentioned fraud, that's certainly an area that we cover a lot. high, high amounts of fraud right now in the industry record high. Last I saw. How are you dealing with that? You know, what, what are some best practices for mitigating losses there? 43:14 Yeah, I mean, some of that gets into the kind of the front end, front end policy straw purchases, I would say probably, we deal with most often on the collection side. One thing that helps with that is if you're using license plate rejection technology, there's vendors out that allow you to locate whether or not you know, you've got an account that originated in New York, but it ended up being the grandfather's account, but the son is actually the one driving the car and you've got a straw purchase. The vehicle is loaded located out in California, that happens that happens quite often and that's fraud. And so, but a lot of times what happens is is that you don't catch that until you get to your repo spot. Whether you've got a vendor using those those tools later on. You won't know that you've been calling the wrong person in the wrong state for so long. And you've missed about two, three months worth of activity. And so locating where that vehicle is early on lash in some cases to avoid some of those, at least identify a straw purchase early. Can you change it after you've originated? No. But ultimately you can figure out what's going on a little bit earlier. A 44:18 couple questions about vendors in the in the slideshow here the How are you? Do you recommend using multiple vendors for services such as bankruptcy or focusing on one national vendor? And do you start had any recommendations in terms of vendors, 44:34 I tend to like larger vendors only because I feel the in general, they generally are more compliant than then a lot of the smaller vendors out there, especially the upstarts, even if you've got policies in place that you can review, so there's, there's more history there, plus you've got other clients, I feel more comfortable. If I go into a client that's also working with BFA, that's also working with Wells Fargo, right because they've been through some degree Have a vetting process. So it helps. Where I, where I generally avoid vendors that do a lot, and they're new to my organization and operations is, is that if I've got a vendor that comes and says to me, I can do this at almost no cost or very little cost, right? My alarm bells go up a little bit. I actually had a conversation with a vendor last night, who was offering a solution at almost no cost. And the question I asked is, I said, How are you making any money? How are you making any money at this? And the answer was, well, the idea is, is that we could we could do this at a bit of a loss. The end game is we hope we get you on board with these other services. Okay, the problem is, is that if I'm not considering you for those other services, what's going to happen? You're going to do maybe well for short term period of time, the lights not going to turn on for those other services. And guess what, what you're doing for me now the cost goes up significantly or disappears altogether. And so it's never a good spot to be in. So if I'm considering for those other services, then maybe it's a good option, but I generally try and avoid those, those two as myself, okay. 46:02 What do you think is the cost of delaying loss reduction effects done to capital? Do you see that costs increasing? 46:09 The cost of the Lang loss reduction? 46:12 Yes. 46:14 Delaying loss reduction efforts? 46:16 Yeah, well, that depends on what you're what you're delaying. But you ultimately you're risking more skip losses. So if you allow an account to save effects, right, you're allowing the account to roll through your stream later, the risk is additional losses. And so you got to balance that with your optics goes back to the total cost equation, right? What am I investing in? What's the cost of doing this earlier on? And what do I think the impact is going to be on skips is a very simple equation, but you got to have good data. And the best way to test things out is to try things to champion challenger we 46:52 found 46:53 well in the presentation you had mentioned, you know, bad phone contacts or no phone contacts as a reason to implement a scam. Yeah, what are some other like qualities of the loan that you might, you know, seek out? Or what other analytics are you paying attention to when you're making that decision 47:07 pay rates are one. You know, a lot of people looking into that we're actually looking at that now, too. Can I get a sense of whether or not someone is going to pay always on the 12th are always in the 15th are always in the 22nd. We're not there. I don't think anybody else has solved that either. But if I know that in every instance, on this account, I don't mean to call a customer, I'll let them self care. It's not that they don't want to pay, that's just when they do pay. And so whether that's because they have a seasonal job, or that's when they get paid. That's ultimately something that that's up to them. So for us to call and continue to hammer phone calls away at someone that that really only wants to pay on this date. It's kind of a nonsensical effort, right. 47:50 kriebel I think that's all the time we have. Please give Ryan applause. Yeah. Thanks, everyone. 47:58 Thanks to William 48:08 We're going to move right into the next session here. 48:16 So, next up, we have a presentation to help focus on funding and assessment of today's capital markets. As you know, people are transitioning here. I know everyone's looking to go to other rooms as well as courage to stay here, of course, but I want to remind everyone to submit questions to the app. Again, you can if you can't find an app and go to slide Oh, enter the code m 950. That's slider. COMM SLI do code m 950. Or you can navigate in the app to this next session here. So obviously, every company needs funding. And one of the most common and most lucrative ways to do that in recent years has been through securitizations Auto Finance news we're constantly constantly sifting through ABS reports to glean insights on the latest underwriting trends and monitoring the capital markets for signs of rising demand. </div> [/toggle]
