Will credit card debt collections follow the lead of the auto finance industry?

Posted on: June 19th, 2018



According to the Federal Reserve Bank of New York’s Q1 2018 auto finance data, we now see a clearer view of risk and challenge in debt collections within the auto finance industry. We also believe every lending vertical faces similar challenges as we move into the halfway point of 2018. With auto finance historically leading the way when it comes to skip tracing expertise, we believe there is value for lenders in other verticals, from Credit Card to Student Loan, to follow the lead of the auto finance industry as it begins to refine and reinvent its skip tracing processes around FinTech.


The www.AutoIntelSummit.com July 24-26th in the “Research Triangle”; Raleigh, North Carolina is an opportunity for lending executives to come together in a strategic series of workshops and discussions to address challenges and solutions to control and reduce risk in debt collections across not just the auto finance industry, but across all lending verticals. This conference is a lender focused event with no 3rd party vendor booths and limited vendors attending. With the following auto finance results now in from Q1, we believe there are significant challenges and opportunities worth discussing, and we believe you’ll get value from attending and participating in the AIS due to the following factors:


• While the pace of same quarter YoY loan volume growth has slowed, auto loans continue to grow to new record high’s; $1.2 trillion across approximately 111 million auto loans in Q1 2018.

• Additionally, longer term loans that now average sixty-nine months, according to Experian, present unknown challenges as these loans mature.

• To validate this point, Fitch ratings points out that longer-term loans historically perform worse than shorter-term loans.

o We’re also seeing higher loan balances and payment amounts than ever before, another unknown risk factor.

o This is causing lenders to work diligently to identify innovative and nimble FinTech companies that can deliver product and innovative ideas their current legacy system vendors and internal IT departments can’t deliver.

Last, and most important, the largest risk indicator using FRBNY data on loan balances and percentage of loans flowing to 90+ days delinquent is the conclusion that approximately $52B of auto loans flowed to 90+ days past due in Q1 2018. Using the same methodology used to track these numbers in prior reportings from the FRBNY, this stands out in comparison to the previous peak of $36B just after the Great Recession. While a great deal of this is due to increased loan volume, the bottom line is more dollars are going 90 DPD than ever before, and if lending slows even more, numbers like this will magnify.


The important take away here is the growth of the dollars delinquent. Forget the percentages that some tell us are in line and not showing risk. The percentages are deceptive when record numbers of loans and other factors are in play, and we’ll discuss this in depth at AIS.


The good news is over half the total auto outstanding balances are tied up with a dozen or so major auto lenders, and the solutions will be driven by these larger players to combat the growing amount of dollars delinquent. This trend has already started as we saw several large auto finance companies cutting their YoY Q1 charge off dollars in 2018 versus 2017, and a few also showed only modest single digit growth of dollars charged off in Q1 18 vs 17. What these companies are doing is already being studied and shared, and the rest of the industry will eventually follow.


Currently, and unfortunately, there are still many large lenders still showing double digit growth in dollars charged off from Q1 2017 to Q1 2018. This isn’t the first quarter we’ve noticed this trend. This is why these lenders are now paying more attention to FinTech than ever before, and it’s also why some are changing leadership. In contrast, the lenders with less than double-digit charge off dollar growth have already started to make changes that are showing positive results in their Q1 2018 numbers, and at AIS we’ll share some of the solutions we’re seeing that are providing lenders a lift.


Bill Ploog, former head of loan servicing at Ally Financial, detailed this problem in a January 2017 blog on our web site https://intellaegis.com/collections-is-a-race-against-time/. Bill recently updated his industry analysis to include Q1 2018 results, and it became clear the problem he wrote about in early 2017 has continued to materialize.


We’ll be sharing the updated, detailed analysis from Bill at our masterQueue Auriemma Lender Workshop on July 26th at the Auto Intel Summit. Whether you’re in auto finance or you’re any type of lender that’s in need of a more efficient debt collection process, we’d encourage you come discuss what masterQueue and our integration partners have built to help you reduce delinquency and losses, and to improve your 3rd party vendor communication, compliance and efficiency. When asked specifically about masterQueue, Bill Ploog further states:

“masterQueue makes it easy to collect all phone numbers potentially associated with a customer; and it systematically prioritizes the order in which to call the numbers. This is key because often collections will spend significant time searching for new leads to call when seeking to make contact with delinquent customers. masterQueue does the heavy lifting so collections can do what they are hired to do… focus on speaking with customers to understand the reason for delinquency, influence the customer to pay more of what is past due, persuade the customer to pay sooner, and to recap the conversation and create a positive customer experience. masterQueue transforms how collectors spend their time and your (the lender’s) money”

Bill Ploog, Principal WLP Consulting


To show how important we believe this is, and to help facilitate a more active discussion amongst innovative companies reading this who wish to participate in this conference and this strategic discussion, we’ll sponsor the first two lenders using masterQueue and the first two not using masterQueue to attend the show at no charge. Just email me direct at jlewis@intellaegis.com and I’ll get you registered.


The goal of the strategy workshop we’re doing with Auriemma Consulting Group is to facilitate collaboration between senior leaders of lenders using masterQueue, or those companies in auto finance and other verticals who are looking to use masterQueue and other technologies we integrate, and to also discuss what’s working for them in FinTech, and what they’d like to see in 2019. We’ll discuss best practice debt collection strategies we see working, KPI’s, and how the front end of lending can be more closely tied to the back end collections strategies by using data as the conduit. We also will share with you some of the things our integration partners and masterQueue are planning for 2019.


Our chairman and former Exeter CEO Mark Floyd states:

“The masterQueue platform is one of the most innovative technologies I’ve seen in a while. From the moment I first saw what it could do on the collections side of the business, I saw it as a tool to tighten up the collaboration between front-end originations and servicing.”

Mark Floyd, Chairman, Intellaegis


Ed Falco, Senior Director of Collection Roundtables and Luigi Condina from Auriemma Consulting Group, pair up at our Lender Workshop with the masterQueue team to discuss how companies are tackling and solving the toughest industry challenges in early through late stage debt collection and skip tracing.  At this event, which will take place at the Marriott Crabtree in Raleigh, NC directly following the Auto Intelligence Summit. You can sign up for the rest of the conference HERE before June 22nd with the code “mQ18” to receive a discount on your admission.


In a few days I’ll post another blog about why we believe so many auto finance loans are going 90 DPD, from our perspective down in the weeds. At the conference we’ll talk in detail about how the solutions masterQueue and our integrated partners have built and deployed with lenders are having an impact on reducing the amount of no contact accounts and skips, and we’re excited to have Ed and Luigi from Auriemma joining us in this discussion. Space is limited for event on the 26th so please sign up early, and we look forward to seeing you in the “Research Triangle”.

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