Auto lenders lean on human connection for collections

Human connection is key to improving collections in an environment marked by inflationary pressures and deteriorating credit performance. 

Subprime borrowers are feeling the squeeze of higher costs for groceries, gas, rent and other everyday expenses. Auto lenders must be diligent when it comes to collections and monitoring for higher delinquencies and losses as consumers struggle to pay their auto debt.  

Delinquencies 60-plus days past due sat at 5.75% across nonprime securitized auto loan pools during the August collection period, up 13 basis points (bps) month over month and 53 bps year over year, according to Kroll Bond Rating Agency‘s September auto loan index. Nonprime annualized net losses climbed 82 bps MoM and 19 bps YoY to 9.02%.

Sandy, Utah-based subprime auto lender Arivo Acceptance, for one, employs a relationship-focused approach to collections, Landon Starr, chief risk and information officer, told Auto Finance News. 

Arivo has a “cradle-to-grave customer account manager relationship with the individual consumers that we’re lending to,” he said. “They curate a relationship, and we have a connectedness of that individual to the same account manager. We take a very human-first approach.”  

Arivo’s account managers build rapport with borrowers and offer options such as adjusting the timing of payments to get ahead of potential collection issues and keep customers in their vehicles, Starr said.  

“We have that relationship not only from [the view that] we need to get the payment, but … being an advocate for them,” he said. “It’s about helping them understand that they have options and being a form of financial adviser and consultant.” 

Meanwhile, Irvine, Calif.-based subprime auto lender Consumer Portfolio Services has tested a voice bot for collections, but found that human employees had more success, Mike Lavin, president, chief operating officer and chief legal officer, said in October during Auto Finance Summit 2023. CPS hired 92 additional collectors over 10 months, he said. 

“Human beings are still better,” Lavin said.  

Early and frequent contact is essential to manage collections in the subprime space, Jim Murray, president of Western Funding, a subsidiary of Westlake Technology Holdings, said during the summit.  

“Every phone call, text, e-mail, you’ve got to be on top of it,” he said. “We’ve ramped up our efforts to increase those third-party contacts.” Auto lenders lean on human connection for collections

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