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Bank of America Grows Prime Portfolio 6% in 3Q


Via Shannon Clark/ Flickr

Bank of America grew its auto portfolio by 6% year over year in the third quarter, despite rising charge-offs across the industry and an increasingly competitive prime marketplace.

Average auto loans and leases outstanding climbed to $52 billion in the quarter, compared with $49 billion during the same period the year prior, according to the bank’s earnings on Friday.

The lender remained a leader in prime credit quality during the quarter. Experian said Bank of America is the No. 1 originator of new loans to consumers with a Fico score of 740 or higher as of July, according to the report.

Because the bank doesn’t take on much risk in its auto portfolio, analysts have questioned whether the bank can continue to grow in an environment where lenders are fleeing subprime for prime and super-prime credit. Chief Executive Brian Moynihan said this quarter shows that the company can.

“The auto standards have always been high, we’ve always made that a business that we took very little credit risk in,” he said on the call. “The debate has always been, can you grow [with that low of credit risk]? And the answer is, yes. But you’ve got to grow in a rational, responsible basis, and that’s what’s playing out for us this quarter relative to other people.”

Charge-offs and delinquencies have been rising for nearly every auto lender in the space for the past few quarters, but Moynihan said he’s not concerned about the losses in Bank of America’s portfolio. While the lender does not break out specific auto losses, charge-offs were down overall across the bank’s various consumer credit categories, particularly in non-credit card categories.

Bank of America Dealer Financial Services launched it’s own direct lending portal at the start of 2017, which has likely contributed to the increased portfolio. However, it’s unclear how much volume the bank has originated through the service to date.  

David Hollodick, senior vice president of consumer vehicle lending and product executive for the bank’s dealer financial services division, led the bank’s direct lending push and will discuss trends in direct lending at the 2017 Auto Finance Summit, which runs Oct. 25-27 at the Wynn Las Vegas. To learn more about this year’s event — or to register — visit the Summit’s homepage here.



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Heritage Navigates ‘Growing Pains’ From Surge in Originations


Heritage Acceptance Corp. is still recovering from a greater-than-expected surge in loan originations last year, Vice President of Sales and Marketing Mike Monaghan told Auto Finance News.

Heritage Acceptance began 2016 with the goal of boosting originations, but the lender did not expect the volume it received, Monaghan said.

“Our goal last year was to ramp up originations,” he said. “We were surprised with the response. We grew both vertically and horizontally,” meaning Heritage was receiving more applications from its current dealer base and signing more dealers.

While Monaghan declined to offer a growth percentage, he said the surge stemmed from the lender’s focus on franchise dealers. “We grew very, very fast last year, and we had a lot of growing pains,” he said. “We are trying to figure out the staffing for the volume we want to get,” he said, referencing that the company did not have enough people on staff to handle the volume.

Heritage’s “renewed focus” is to balance volume yield with staffing growth to service the new business, he added. Elkhart, Ind.-based Heritage Acceptance originated 263 loans in December 2016. It makes loans for a network of 600 dealers in five states.

For more content like this, check out the 17th annual Auto Finance Summit, which will take place on Oct. 25-27 at the Wynn Las Vegas. To learn more about this year’s event — or to register — visit the Summit’s homepage here.



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Turn Your Bulk Auto Notes Into Cash

PNC Reports Rise in Delinquencies Due to Hurricanes


PNC Financial Services Group Inc. reported a “moderate impact” on auto delinquencies in the third quarter due to the recent hurricanes, according to the bank’s earnings call today.

Auto loans 30 to 59 days past due rose 87% to $71 million from the same time the year prior. The increase was primarily due to higher delinquencies in the auto, home equity, and credit card portfolios in hurricane-affected states, the company reported in earnings.

Additionally, accruing loans 60 to 89 days past due increased 45% year over year to $16 million in the third quarter, also due — in part — to hurricane-affected states. Loans 90 days or more past due increased by $1 million year over year to a total of $5 million, according to the report.

Meanwhile, the Pittsburgh-based bank saw auto outstandings increase 10% year-over-year to over $12.4 billion. PNC was the 21st largest auto lender in the U.S. in 2016 with a portfolio of $12.3 billion, according to Big Wheels Auto Finance 2017.

For more content like this, check out the 17th annual Auto Finance Summit, which will take place on Oct. 25-27 at the Wynn Las Vegas. To learn more about this year’s event — or to register — visit the Summit’s homepage here.



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Wells Fargo Expects Auto Declines to Continue for Another Year


Via Shinya Suzuki/ Flickr

For the fourth quarter in a row, Wells Fargo Dealer Services’ delinquencies and charge-offs have grown amid a rapidly declining originations volume environment, and the company expects the volume declines to continue into the second half of 2018.

Originations were down 47% in the third quarter compared to the same period the year prior, marking the third consecutive quarter of double-digit originations declines. As a result, auto outstandings dropped 12% year over year to $55.5 billion in the third quarter.

“The decisions we made last year have really worked because the average Fico scores of our customers have now increased, and that’s exactly what we wanted,” said Tim Sloan, president and chief executive of Wells Fargo & Co., during the earnings call. “That said, I think you should expect that portfolio, even if we turn things up a notch, to decline through the fourth quarter and to bottom out sometime in the second half of next year. We like that business, don’t get us wrong, and our expectation over time is that we will regain share in that business. But right now we’re cautious and we have a lot of changes that we have to execute on.”

Chief among those changes is the consolidation of its 57 collections centers into three regional facilities.  

“While that’s happening we’d rather have a higher credit profile of the average customer just so that we know we’re dealing with fewer defaults as we deal with that change,” said John Shrewsberry, senior executive vice president and chief financial officer, during the call.

Additionally, indirect loan delinquencies 30 days or more past due grew to $1.5 billion in the third quarter, compared with $1.3 billion during the same period the year prior.

Indirect loan net charge-offs were up 49% during the quarter to $198 million, largely driven by a “moratorium” on the repossession of borrowers vehicles who have been impacted by the bank’s forced-insurance policy, according to Wells Fargo’s earnings report.

Last year, Wells Fargo self-identified that its collateral protection insurance policy had force-placed insurance on consumers who had already purchased outside coverage. The company stopped placing the policies in September of 2016 and disclosed the practice a year later.

The company began sending remediation checks to the 570,000 consumers impacted by the policy this month to the tune of $80 million total. However, an earlier report identified some 230,000 additional consumers who could be impacted and the company is currently under investigation by both the Consumer Financial Protection Bureau and Office of the Comptroller of the Currency.

For more content like this, check out the 17th annual Auto Finance Summit, which will take place on Oct. 25-27 at the Wynn Las Vegas. To learn more about this year’s event — or to register — visit the Summit’s homepage here.



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Turn Your Bulk Auto Notes Into Cash

Chase Auto Finance Charge-Offs Climb 47% in 3Q


Chase Auto Finance’s charge-offs rose to $116 million in the third quarter, up from $79 million the same time the year prior, according to the bank’s earnings call today.

Yet, delinquencies were down. Delinquencies 30 days or more past due dipped to 0.93% of the portfolio in the quarter compared with 1.08% in 3Q16.

The bank’s third-quarter loan and lease outstandings reached $80.8 billion, a year-over-year increase of $5.3 billion. Meanwhile, auto loan and lease originations for the quarter were $8.8 billion, down 5.4% from the same time the year prior.

“While we felt like we got ahead of the issues and tightened early, you’ve seen the industry generally moving in that direction [pulling back],” Marianne Lake, JPMorgan Chase & Co.’s chief financial officer, said on the call. “We have been pressure-tested … and I think the industry and our portfolio performed really quite well.”

Additionally, Chase has not seen a “significant impact” from the Equifax security breach, Lake said. “[We are] under constant attack on the fraud side,” she said. “We have been constantly evolving and refining … and looking at data to better leverage our underwriting decisions.”

The recent Equifax breach revealed that sensitive personal information — including the Social Security numbers of an estimated 145 million consumers, almost half of the U.S. population — were stolen by hackers.

For more content like this, check out the 17th annual Auto Finance Summit, which will take place on Oct. 25-27 at the Wynn Las Vegas. To learn more about this year’s event — or to register — visit the Summit’s homepage here.



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Turn Your Bulk Auto Notes Into Cash

Canadian Digital Buy-Sell Platform on Track to Hit Revenue Goal


Canada Drives, a digital buy-sell platform based in Vancouver, is on track to reach its revenue goal of about $100 million for the full-year 2017, Founder and co-Chief Executive Cody Green told Auto Finance News.

The platform, which launched in 2010, helps consumers gain access to various products including auto financing, personal loans, and credit-building solutions through the company’s online application. Last year, the company reported more than $50 million in revenue.

“We’ve been amazed by the response so far from Canadians,” Green said. “As an example, [in August] over 60,000 Canadians applied for loans through us.”

Within 24 hours of applying, customers are contacted by a dealership Canada Drives identifies as the best fit for their profile to discuss finance options and vehicle preferences. Therefore, the company works with various banks, credit unions, and independent financial institutions through its network of more than 350 dealer partners.

The platform’s growth is — in part — attributable to its strong focus on marketing. “We spend tens of millions of dollars on advertising every year,” Green said. “The data we collect allows us to be very efficient and effective in finding customers. This also lets us create highly customizable packages, even for smaller market dealerships. Even in a non-major market, a dealership can get 100 customers from their backyard which can have a real impact on their stores’ performance.”

In addition to auto loans, Canada Drives offers various products including personal loans, credit cards, and credit-building solutions for those who may not be able to qualify for a traditional auto loan, Green said. “While we’re popular with consumers with credit issues, really that’s a by-product of our ability to help all consumers with their vehicle financing options,” he added.

Canada Drives has over 350 employees, all located in Vancouver.” We expect to be double our staff in the next two years in Vancouver, in addition to opening international [U.K.] offices,” he added.

For more content like this, check out the 17th annual Auto Finance Summit, which will take place on Oct. 25-27 at the Wynn Las Vegas. To learn more about this year’s event — or to register — visit the Summit’s homepage here.



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Credit Acceptance is Served Subpoena From Mississippi AG


Mississippi Attorney General James Hood (Via Wikimedia Commons)

The subprime auto lender Credit Acceptance Corp. disclosed that it has received a subpoena from the Mississippi Attorney General for issues with the company’s origination and collection of loans. 

The subpoena was issued on Aug. 14 and the company said it is cooperating with the inquiry, according to a Securities and Exchange Commission filing late last week.

“We cannot predict the eventual scope, duration, or outcome at this time,” the company said in the filing. “As a result, we are unable to estimate the reasonably possible loss or range of reasonably possible loss arising from this investigation.”

Neither Credit Acceptance nor the state attorney general’s office responded for comment by press time.

In March 2016, Credit Acceptance received a similar subpoena from the Attorney General of Maryland “relating to the company’s repossession and sales policies and procedures in the state,” according to the company’s 10-Q filing.

Additionally, Credit Acceptance was tapped by the Federal Trade Commission in late 2016 for more information regarding the company’s use of kill switches.

Yet, this most recent disclosure adds another layer of complexity because it specifically cites the company’s originations. In March, Santander Consumer USA entered into a written agreement with Federal Reserve Bank of Boston over similar allegations. Santander paid $25.9 million to resolve an investigation in two states regarding the financing and securitization of subprime auto loans that were deemed “unfair” to the consumer.

Credit Acceptance has continued to originate higher loan volumes and extend terms, even while defaults and delinquencies rise, the company reported in second- quarter earnings. Still, the company’s total outstandings grew to $4.6 billion in the quarter — a 21% increase year over year.

For more content like this, check out the 17th annual Auto Finance Summit, which will take place on Oct. 25-27 at the Wynn Las Vegas. To learn more about this year’s event — or to register — visit the Summit’s homepage here.



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OneMain Financial Solicits Takeover Bids


Via Wikimedia Commons

OneMain Financial, a subprime lender specializing in auto and personal loans, is actively soliciting buyers for a takeover bid, according to news outlets citing sources familiar with the matter.

This proposed acquisition is the latest in a long line of successions. Citigroup’s former consumer lending arm, CitiFinancial, renamed itself OneMain in 2011 following the financial crisis. Then Springleaf Financial, an online personal loan lender, acquired OneMain in 2015 and converted its branding under the OneMain name.  

There are a number of parties interested in buying the company, including rival lenders and private-equity firms, according to anonymous sources cited by The Wall Street Journal.

OneMain did not respond to a request for comment by press time. Notably, the request was made during a bank holiday and this article will be updated appropriately.

Although the company does not break out auto loans in its earnings, President and Chief Executive Jay Levine said that auto comprised 24% of the company’s total originations in the second quarter, up from 18% in the fourth quarter of 2016. Given that the company’s total consumer and insurance originations totaled $3 billion in 2Q, that would place auto originations at roughly $720,000, according to the company’s latest earnings report.

OneMain’s growth in the auto sector has hinged on its direct lending product and title loan program.

“We are not in the auto finance business as the industry generally defines it,” Levine said back on the company’s first-quarter earnings call. “Our basic loan product continues to be the traditional installment loan, which — in certain cases — may be secured by the borrower’s title vehicle. Our loans are underwritten against the borrower’s ability to repay, and the presence of collateral serves to reduce the bulk frequency with law severity eating much less in the back.”

OneMain is one of the only companies on the secondary market securitizing this type of specialty loan, which makes it an entity to watch, Amy Martin, lead analyst for Auto ABS at S&P Global, said at the 2017 Nonprime Auto Financing Conference.

“The OneMain deal is very different from the others listed here,” she said. “These individuals did not go and secure the loan at the time they bought the vehicle; this is basically cash-out refinancing, so this is really a new type of financing being securitized and we do not consider it the same as title lending.”

OneMain also does not break out auto loan outstandings, but Levin said during the 2Q earnings call that the company holds $2.5 billion of secured direct auto loans representing 40% of the total portfolio.

For more content like this, check out the 17th annual Auto Finance Summit, which will take place on Oct. 25-27 at the Wynn Las Vegas. To learn more about this year’s event — or to register — visit the Summit’s homepage here.



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MotoLease to Release Live-Inventory Website for Motorcyles


LOS ANGELES — MotoLease LLC is preparing to launch a new live-inventory, real-time financing website for motorcycles called UsedMotorcycles.com, Powersports Finance has learned.

The website is a “nationwide classifieds website for MotoLease dealers for new and used motorcycles,” Mitch Palm, MotoLease’s marketing coordinator, said during the leasing provider’s dealer training seminars yesterday. Other powersports and marine units, such as boats and ATVs, will also be on the website.

UsedMotorcycles.com will only feature inventory from MotoLease-affiliated dealers, he added. Visitors can browse the live-inventory — which is updated daily at midnight — and be pre-qualified for a lease instantly.



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VC Firm Poised to Invest in Mobility Startups by Yearend


InvestmentAutotech Ventures, a venture capital firm that primarily invests in startups, will announce several investments in ground transportation companies within the next few months, Quin Garcia, managing director of the VC, told Auto Finance News.

“We are actively looking at several companies across the ground transportation spectrum, but unfortunately cannot go into specifics beyond that,” he said. Investments in ground transportation and auto finance startups have been heating up over the past few years, in part due to innovative technologies such as artificial intelligence, autonomous vehicles, and e-commerce.

Credit decisioning platform ZestFinance — which recently partnered with Ford Motor Credit Co. — raised over $67 million in funding, for example. Meanwhile, AutoGravity raised $80 million to date and counts Daimler AG and VW Credit Inc. among its investors.

Based in Menlo Park, Calif., Autotech Ventures’ first investment was in Lyft in 2016 and has since invested in seven additional startups. These include stakes in Outdoorsy, an online marketplace of shared recreational vehicles; Metawave, a developer of autonomous vehicle radar; and Volta, a free EV charging solution funded by advertising.

Overall, the company plans to invest in 10 to 15 more startups out of the current $120 million dollar fund, Garcia said.

For more content like this, check out the 17th annual Auto Finance Summit, which will take place on Oct. 25-27 at the Wynn Las Vegas. To learn more about this year’s event– or to register — visit the Summit’s homepage here.



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Turn Your Bulk Auto Notes Into Cash