Lenders, Collectors Challenged by Late Auto Loan Payments

There are a number of avenues collection agencies can take to address the 25 percent rise in 60-day past-due accounts in auto loans that occurred from the second quarter through the fourth quarter of 2007, according to a new report from TowerGroup Senior Analyst Bobbie Britting.

Maintaining the status quo is not an option, writes Britting in “Stay in Your Car Ma’am: Best Practices in Automotive Finance Collections.” Lenders are becoming overwhelmed, and their collection agencies must act swiftly before the situation brings significant long-term consequences. 

There is gloom and doom all around in the credit markets, but auto loans are different from such disaster areas as mortgages, writes Britting. Keep in mind that a delinquent auto payment typically is a sign of trouble in other aspects of the borrower’s life. Still, lenders don’t want the cars and the car owners want to keep the auto for transportation.

Collectors must take a three-prong approach to best practices, covering people, process and technology, according to Britting.
 
The People aspect covers training, moving the right staff to cover the right accounts, using technology where possible, offering incentives, considering outsourcing, and creating performance benchmarks.

Process covers the proper segmentation of delinquent borrowers, offering where necessary loan restructuring such as a rewrite of repayment terms, a ‘skip-a-pay’, or some type of deferment. Lenders should also rethink their front-end process to better prepare for the collection process, including gathering supplemental contact information from borrowers.

There is a growth of technology available to handle collections and auto collections specifically, writes Britting. “Broad spectrum collection platforms offering extensive capabilities for the automotive industry are available from … ACS, CGI, CSC, Chordiant, Experian, Fair Isaac, Fidelity National Information Services, Fiserv Lending Solutions, Metavante, Provenir, and Shaw Systems Associates.”

These platforms offer a mix of rules management workflow, scoring, call center system dialers, reporting, business process outsourcing, vehicle remarketing and other programs.