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RouteOne Debuts Online Contracting, Processes First Deal With Toyota

The dealership F&I software company RouteOne LLC says it has processed the industry’s first remotely executed auto finance contract via a deal through Toyota Financial Services.

The “remote eSign technology” allows dealers to send a contract package electronically to the borrower so they can sign all credit application and ancillary product documentation at home, according to a company press release. Alternatively, consumers can choose to review the documentation before coming into the dealership to sign, thus speeding up the in-store process.

RouteOne designed the technology with security in mind by requiring a two-step verification process and a unique pin number for consumers to enter the “virtual signing room,” according to the release.

“Consumer expectations are justifiably higher than ever,” said Pete Carey, group vice president of sales, marketing, and product development at Toyota Financial Services. “This exciting technology is an important step in allowing us to make financing even more convenient for customers while maintaining data security.”

When reached for comment, Toyota pointed out that this technology does not cut out the dealer from the financing process.

“It doesn’t change the fact that we are an indirect lender, tied closely to our dealer partners,” a Toyota Financial Services spokesman told Auto Finance News. “This is an evolution in customer convenience and isn’t designed for direct lending. We do have an online credit application, but it isn’t changed as a result of this.”

Many companies have started to offer e-contracting, but often those solutions require a signature in the dealership on a tablet. Other startups such as AutoGravity and AutoFi offer some online signage but still require consumers to come into the dealership to close out the deal and sign some paperwork. Other online dealership models such as Vroom that offer home delivery also provide some online e-contracting solutions. 

“AutoFi has completed online, remote auto finance contracts for used cars in the past,” an AutoFi spokesperson told AFN.  “Moving forward, we’re excited to leverage this technology for both new and used car sales through our integration with RouteOne. We feel this is an important step for the industry and glad that Route One is taking the lead.”

AutoGravity, RouteOne, and Vroom did not respond to a request for comment by press time. 

It’s unclear at this time what the technology means for RouteOne’s partnership with Toyota Financial Services going forward. TFS told Auto Finance News last week that it plans to launch a consumer-facing online portal on its website in 2018 that will allow consumers to better manage their personal information and make payments online.

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Mercedes-Benz Financial to Construct New Fort Worth Operations Center

© Can Stock Photo / mflippo

Mercedes-Benz Financial Services announced plans to construct a new national business operations center in Fort Worth, Texas, not far from its current location.

Construction on the 200,000-square-foot facility is slated to begin in early 2018 in the business park of AllianceTexas. The building is scheduled to open in early 2019 and will retain 900 direct and indirect jobs in the Fort Worth area.

While the captive’s parent company Daimler Financial Services Group is headquartered in Stuttgart, Germany, Mercedes-Benz Financial Services has held a presence in Texas since 1991. The lender centralized its national operations in Fort Worth back in 2007.

“Identifying the ideal, local solution was a priority, reflecting our commitment to the talented team in our operations center,” said Peter Zieringer, president and chief executive of MBFS. “The location for our new business operations center, less than one mile north of our current office, offers amenities, such as a scenic lake and walking trail, not feasible in our current location. We believe these environmental improvements, coupled with technologically advanced facilities, will help us maintain a strong and inspired employee community.”

Earlier this year, reports claimed Daimler AG may look to split up the Mercedes operation into three separate entities: Mercedes-Benz cars and vans, Mercedes-Benz trucks and buses, and Mercedes-Benz Financial Services. The move is not related to these reports, a spokeswoman with Mercedes-Benz Financial Services told Auto Finance News

The company is also involved in a number of mobility solutions including  Car2Go, MyTaxi, and Moovel as well as investments in mobile lending solutions such as AutoGravity and Turo.

This story has been updated to include comment from the company. 

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Ally Financial to Appoint New CFO Amid Chris Halmy’s Retirement

Chris Halmy, chief financial officer of Ally Financial Inc.

Ally Financial Inc.’s long-time Chief Financial Officer Chris Halmy is retiring from his post in March as Jenn LaClair steps up to take his place, the company announced in a press release today.  

LaClair, 46, will take on the role of chief financial officer designate, effective Dec. 18, until the transition is complete.

At 49 years old (according to a Bloomberg executive profile), Halmy is poised to remain active in retirement. He recently joined as a board member for the clean energy financing company Mosaic Inc.  

“Chris has been a driving force in nearly every important and transformational initiative we’ve successfully undertaken as a company,” said Chief Executive Jeffrey Brown. “From funding the business during the height of the financial crisis, to our initial public offering, to our efforts to grow and diversify Ally with new lines of business and offerings, he has been instrumental.”

LaClair comes from a 10-year stint at PNC Financial Services Group Inc. where she was CFO and most recently head of business banking. She has dealt with all of PNC’s lines of business, and in her most recent role she set strategy, drove performance, and managed risk.

“Jenn brings significant experience from the financial services industry which will be key as we accelerate our growth and evolution as a leading digital financial services company,” Brown said. “Beyond her deep financial acumen is a strong cultural fit with the leadership team which will enable a seamless transition with Chris.”

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Toyota Promotes 2 Executives in Risk, Treasury

Scott Cooke group vice president and chief risk officer, at Toyota Financial Services.

Toyota Motor Co. announced Friday that Scott Cooke and Cindy Wang have been promoted to new positions within Toyota Financial Services, effective Jan. 1.

Cooke was named group vice president and chief risk officer while Wang takes the title of group vice president of treasury.

Since joining Toyota in 2003, Scott has held a number of roles including director of market risk, economic capital, and international treasury; head of strategic planning and competitive intelligence; and corporate manager of dealer credit. He began his most recent role in August 2015 as vice president of risk, dealer credit, and information security, and in his new role will have even more control over the risk department.

It was not clarified to Auto Finance News by press time as to whether Cooke’s role is new or if there is a predecessor he is replacing.

Wang will be leading the Treasury and Vendor Management Office (VMO) business units within Toyota Motor Credit Corp. (TMCC), according to the company press release. She joined Toyota in 2014 according to LinkedIn. Her predecessor is also unknown at this time.

Toyota’s new Plano, Texas, headquarters officially opened in July and aims to bring the OEM and captive arm closer together. The move from California to Texas has prompted several executive changes over the years building up to the move, including more than 300 employees in various rungs of the company that agreed to relocate, the company previously told AFN. By yearend the lender expected all employees to have relocated.

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Alternative Data Spurs Record-Low Delinquencies for American Cycle Finance

Ben Donnarumma, managing director of American Cycle Finance, participated in a panel discussion at PowerSports Finance 2017 in October.

American Cycle Finance reported its lowest delinquencies on record last month, after the lender ramped up use of alternative data for credit decisioning, Managing Director Ben Donnarumma told PowerSports Finance.

“We have made some improvements with technologies,” he said, referencing the company’s use of alternative data, which has “given us more information to do our job.”

American Cycle has been testing alternative data for the past couple years, but is now honing the data more efficiently. “Over the past eight months, we really made some strides in putting all of the pieces of the puzzle together to do our job in the best way we can,” he said.

American Cycle Finance — which specializes in subprime and nonprime financing — is “mitigating [subprime] risk, analyzing it,” on a day-to-day basis, Donnarumma said.

American Cycle has had “really good luck with subprime,” he said, noting the company’s record-low delinquencies in late October. “We are doing a lot of things right,” he added.

The subprime lender was acquired by public holding company Cardiff International in February.

American Cycle Finance — formerly known as Ride Today Acceptance — began making loans for on-road motorcycles in 2015. The lender makes loans for 265 dealers in 15 states and ended 2016 with a portfolio of more than $7 million.

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Toyota Financial Adds Consumer, Dealer Portals to New Loan Management System

Toyota Financial Services is “in production” with a customer-facing “self-service channel” that will give borrowers more control over their accounts and auto loans, said Gordon McGrath, the captive’s division information officer.

The new consumer-facing system comes on the tail end of an internal replacement of the lender’s customer relationship management (CRM) system. Now that the legacy system has been sunsetted, and the captive’s 4,000 employees are using the new CRM, TFS is opening it up to consumers.

“Our initial focus was on our internal team members, now we’re looking for ways to expose that to customers through self-service channels on web and mobile devices, as well as to dealers so that [customers] can see directly into that dealership,” McGrath told AFN.

“We’re doing a pilot right now with 25 dealers on some dealer-facing capabilities, and with our customers we’re in production today with integration to our website and our mobile application for that same sharing platform.”

There’s no timetable for a release, but TFS already uses the system to manage every touchpoint it has with borrowers. The new system is also part of a broader effort to upgrade the captive’s technology such that changes and innovative initiatives can be enacted faster.

Since launching the platform last year, TFS has already implemented 20 enhancements; with the old platform it would have been years before the team “would even touch it again,” McGrath said.

“Our goal is to keep rolling out new functionality on a quarterly basis for our dealers and customers,” he said. “No longer will they have to wait two to three years for a new transformation project. It’s a matter of prioritizing which initiatives we want to work on next.”

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Banking’s Auto Pullback Proves Beneficial to Captives, Credit Unions

© Can Stock Photo / focalpoint

Credit unions and captives have gained marketshare amid pullback from banks, according to Experian’s third-quarter Automotive Finance Report.

Banks in the auto lending space control 32.9% of total financing, down from a 35.1% marketshare during the same period the year prior, according to the report. Meanwhile, captives managed to grow their share of total financing by 150 basis points and credit unions added 140 basis points to their share of the market.

This shift in marketshare is all happening during a time when the pot has never been bigger. Total automotive balances fit $1.1 trillion in the third quarter, up 6.2% compared with the same period the year prior.

Independent finance companies also experienced a decline in marketshare, but it was a more muted 50-basis-point decline.

Additionally, delinquencies across the industry continue to climb even as average Fico scores rise. The average Fico score for new-vehicle loans rose to 716, compared with 714 during the same period the year prior. Likewise, the average used-vehicle Fico score is 659, up from 655 the year prior.

This has, in part, led to the increase in delinquencies to “taper off,” Experian said in the report, yet the number of delinquent consumers continues to rise. Total loans and leases 30 days past due as a percentage of balanced only had a one-basis-point rise as independent finance companies and credit unions actually lowered their rate. Yet, rising delinquencies from banks and captives outweighed those effects.

Delinquencies 60 days or more past due had a more pronounced impact rising to 0.76% of total loan and lease balances, up from 0.74% during the prior-year period.

Finally, loan terms also continue their ascension to an average of 69 months for a new vehicle — six-tenths of a year higher than 3Q16. Similarly, used-vehicle loan terms rose to 63.9 months.     

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Ford’s Financial Arm Left Out of Alibaba Deal in China

Via YouTube

Ford Motor Co. signed a letter of intent Thursday with the world’s largest retailer — Chinese e-commerce company Alibaba Group — which will allow the companies to explore new ways to purchase and finance vehicles in a fast-growing market.

However, in the current unfinalized version of the deal, financing will be provided through Alibaba’s affiliate Alipay rather than Ford Motor Credit Co., according to Reuters, which broke the news of the deal late Wednesday.

Earlier this year, Alibaba’s retail arm Tmall announced the development of a car vending machine, in which consumers can use their phone to browse through cars stored in a tall windowed building and have the car brought down to street level via elevator lifts. This new deal makes it likely that Ford vehicles will be prominently displayed in these vending machines.

Consumers with a “good credit score” — Alibaba has previously said a score above 750 through its own credit scoring model called Sesame — can purchase the vehicle with a 10% down payment and a commitment to monthly payments through Alipay, according to Reuters.

Ford Credit noted that it has operated in China since 2005 but declined to comment on the new arrangement. 

The cars could come directly from Ford or from its dealer network — the details are still being worked out, Reuters reported.

Should Ford choose to provide the cars directly to Alibaba, the deal could anger dealers who are losing out both on potential car sales as well as the financing behind it.

Additionally, the letter of intent between the two company’s commits them to “explore areas of cooperation” over the next three years in connectivity, cloud computing, artificial intelligence, mobility services, and digital marketing, according to Ford’s press release.  

“China is one of the world’s largest and most dynamic digital markets, thriving on innovation with customers’ online and offline experiences converging rapidly,” said Jim Hackett, Ford’s president and chief executive, in a press release. “Collaborating with leading technology players builds on our vision for smart vehicles in a smart world to reimagine and revolutionize consumers’ mobility experiences.”

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CFPB’s Dealer Markup Guidance Faces Repeal in Congress

U.S. Congress D.C.Congress’ investigative unit determined a controversial 2013 guideline from the Consumer Financial Protection Bureau — which holds financial institutions responsible for a discriminatory lending practice at dealerships. The guideline is subject to Congressional review and could be headed to Capitol Hill for a vote among deregulatory-minded Republicans.   

In March, Senator Pat Toomey (R-Pa.) requested that the U.S. Government Accountability Office (GAO) review the CFPB’s Obama-era regulation to determine whether it is eligible for a repeal, and this week the office ruled that it is subject to the Congressional Review Act.  

The CFPB’s original guidance sought to inform lenders that it would begin enforcing fair lending requirements of the Equal Credit Opportunity Act (ECOA) as it applies to the practice of dealer markup.

ECOA states that a creditor can not discriminate “in any aspect of the credit transaction” on the basis of race, national origin, or other characteristics outlined in the law.

The CFPB was concerned that these protected classes were receiving disproportionately high interest rates because of the incentives of “dealer markup,” which is when a dealer fits the borrower into a higher-interest deal than the lender had originally approved, and then the dealership collects the difference.  

At the time of implementation, the CFPB argued that the rule is not subject to Congressional review because it had no legal effect on regulated entities. The GAO did not disagree with that argument but found that previous decisions imposed Congressional review requirements on “general statements of policy,” of which the CFPB’s dealer markup rule applies.

The auto industry has spent tens of millions of dollars in consent orders to the CFPB over the years for violations of dealer markup including settlements with Ally Financial Inc.,  American Honda Finance Corp., Fifth Third Bank, and more.

The bureau opted to limit dealer markup to a lower cap, rather than force lenders and dealers to eliminate the practice altogether. BB&T Bank and BMO Harris were the only two lenders who opted into a flat-rate system in which the dealer doesn’t have the same flexibility to arrange a deal. Earlier this year, BMO Harris opted to revamp it’s flat-rate system into three tiers, bringing back some of that flexibility to the space.

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Prior to Business Exit, TCF Scores Pointed to Waning Performance

In announcing TCF Bank’s exit last week from the auto sector, CEO Craig Dahl said subsidiary Gateway One Lending & Finance “performed as expected” under the new direction set earlier in the year.

Yet, data from the 2017 Auto Finance Performance initiative paint a picture of a lender whose representatives were falling short of dealer expectations and whose pricing structure had declined year over year.

The Auto Finance Performance (AFP) data query and research service provides data on lender performance to determine which auto financiers are performing best. Dealers grade the three prime and three nonprime or subprime lenders with which they work most regularly on Pricing, Service, Representatives, and Products.

Gateway One’s overall performance score dropped to 7.40 out of 10, from 7.79 last year. The average AFP score across all lenders was 7.65.

Gateway One’s Reps score fell 43 basis points to 7.93. The biggest drag in the category related to reps’ willingness to help get deals done. In that area, dealers scored the Anaheim, Calif.-based lender 7.80, down from 8.52 last year. Gateway One’s scores declined for the remaining Reps category elements: accessibility, knowledge, and ability to act in a consultative manner.

Within the AFP’s Service category, Gateway One notched the biggest year-over-year decline – to 6.68 from 7.62 – for self-service options. Specifically, dealers were seeking an online portal to streamline aspects of the lending process.

As for pricing, advances, buy rate competitiveness, and reserve fees generated the largest year-over-year declines in Gateway One’s AFP scores.

On the flip side, Gateway One posted notable improvement for its loyalty program and co-marketing opportunities. Those items are elements of the Products portion of the AFP.

To learn more about Auto Finance Performance 2018, visit the homepage here.

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