Tag Archive | "Auto Finance"

Judge Again Rules in Favor of Trump in Battle for Control of CFPB


WASHINGTON, D.C. — A federal judge once again sided with the White House in the battle for control of the Consumer Financial Protection Bureau, denying last Wednesday a request by CFPB Deputy Director Leandra English for a preliminary injunction to remove President Donald Trump’s appointee as acting head of the agency.

The ruling comes less than 50 days after U.S. District Judge Timothy J. Kelly denied English’s request for a restraining order to block President Trump’s appointment of White House Budget Director Mick Mulvaney as acting director. It now sets the stage for an appeal by English, who has said she is the rightful acting director.

“The Court finds that English is not likely to succeed on the merits of her claims, nor is she likely to suffer irreparable harm absent the injunctive relief sought,” Judge Kelly wrote in his 46-page decision. “Moreover, the balance of the equities and the public interest also weigh against granting the relief. Therefore, English has not met the exacting standard to obtain a preliminary injunction.”

Judge Kelly originally denied English’s request for a temporary restraining order to block Mulvaney’s appointment on Nov. 28. The ruling, however, pertained to the restraining order and not the merits of the case, with English’s attorney Deepak Gupta hinting that Kelly’s ruling “would not be the final answer.”

Gupta then filed an amendment complaint on behalf of English on Dec. 6 requesting a preliminary injunction. Unlike the temporary restraining order, the injunction can be appealed to the U.S. Court of Appeals for the D.C. Circuit if not granted.  Gupta gave no indication that Wednesday’s ruling would be appealed, although he expressed disappointment in Kelly’s decision in a Twitter post.

“The law is clear: President Trump may not circumvent the Senate confirmation process by installing his White House budget director to run the CFPB part time,” Gupta wrote. “Mr. Mulvaney’s appointment undermines the bureau’s independence and threatens its mission to protect American consumers.”

When Cordray formally resigned as CFPB director on Nov. 24, he elevated English, his former chief of staff, to deputy director. The move established her as acting director until the Senate confirms Trump’s permanent appointee.

Hours after Cordray’s announcement, Trump appointed Mulvaney as acting director, citing his authority through the Federal Vacancies Reform Act (FVRA). English filed suit two days later to block the appointment, arguing that she was the rightful acting director due to a successor statute in the CFPB-creating Dodd-Frank Act.

English’s attorneys also questioned whether allowing Mulvaney, who once characterized the bureau as a “sick joke,” to continue serving as a White House official would compromise the bureau’s independence. The argument was backed by the former lawmakers who championed the CFPB-creating Dodd-Frank Act.

“That was our intent, to strip this away from the politics of the moment, to give consumers the sense of confidence that there was one place here — when it came to their financial services — [where] there would be people watching out for them, regardless of political party or partisanship,” said former Sen. Chris Dodd during media call on Nov. 30.

Dodd joined former Rep. Barney Frank and more than 30 current and former members of Congress in writing one of five separate amicus briefs in support of English’s position. In Wednesday’s ruling, however, Judge Kelly said that argument is completely without support in the text of the Dodd-Frank, adding that the court “declines to create such a restriction out of whole cloth.”

“Simply put, Dodd-Frank does not prohibit the director of the OMB from also serving as the acting director of the CFPB,” Kelly wrote in his ruling.

“The President has designated Mulvaney the CFPB’s acting director, the CFPB has recognized him as the acting director, and it is operating with him as acting director,” Kelly continued. “Granting English an injunction would not bring about more clarity; it would only serve to muddy the waters.”

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Business Leaders Cautiously Optimistic About Trump, Economic, Auto Sales


ALPHARETTA, Ga. — Twenty senior industry leaders expressed cautious optimism about the economy and the automotive retail industry in White Clarke Group’s annual U.S. Auto and Equipment Survey.

The chief executive officers, directors, chairmen and president surveyed by the technology firm were optimistic about new-vehicle sales, which are on the decline but should remain among the highest on record in 2017. What has them cautious is President Donald Trump, whose communication style has them wondering if his administration can deliver on its pro-business campaign promises.

“As a result, business is falling back into cautious and hesitant state,” said Pacific Rim Capital CEO David Mirsky, noting the economic outlook was favorable following the November election. “The coarseness of our President’s communication style hasn’t helped. Even though most businesses agree with a lot of what Mr. Trump wants to do, we don’t like the way he has operated so far.”

According to the National Automobile Dealers Association, new-vehicle sales should end the year at 17.1 million units. During the first six months of 2017, the report noted, 8.4 million new cars and light trucks were sold. That’s down 2.2% from the year-ago period. Despite the decline in vehicle purchases, economic experts remain optimistic about the market.

One of the reasons is the $1.1 trillion auto finance market, which has fueled the industry’s rebound from the financial crash and recession of 2008-2009. Since then, U.S. light vehicle sales have delivered seven consecutive annual gains — the longest upward streak in decades, with sales peaking at 17.55 million new-vehicle registrations in 2016.

The concern, however, is affordability. According to Experian, the average finance amount for a new vehicle reached a record $30,621 in 2016, while the average finance amount for used also achieved new peaks at $19,329 per car. And in order to lower monthly payments, consumers are extending loan terms. In the fourth quarter of 2016, for instance, the 73- to 84-month term band rose 29% from the prior-year period.

“With the average loan amount for new and used vehicles hitting all-time highs, we are seeing the need for affordability drive consumer purchasing behavior,” said Melinda Zabritski, senior director of automotive finance for Experian Automotive. “Our latest research shows an $11,000 gap between the average loan amount on a new and used vehicle — the widest we have ever seen.”

Then there are hurricanes Harvey and Irma, which market analysts are still assessing but are believed to have damaged up to 1 million vehicles — 300,000 to 500,000 in the Houston area alone. This, analysts said in the report, could lead to a substantial increase in demand for new vehicles. It may also help with the oversupply problem in the used-vehicle space, which remains robust.

As for the U.S. economy, the report noted it grew at an annualized rate of 2.6% during the second quarter, with some financial institutions, such as Goldman Sachs, estimating it grew 3%. On the global stage, the International Monetary Fund and the Organization for Economic Cooperation and Development predicted that the global economy will expand by 3.5% this year.

The report also looked at regulatory threats, specifically those posed by the Consumer Financial Protection Bureau. Since opening its doors in 2011, the regulator, which oversees banks, credit card companies, and lenders, has returned about $12 billion in restitution to almost 30 million Americans. If Trump delivers on his promise of less regulation, however, the bureau faces a reduced role in 2018, the report noted.

The report touched on several other topics, including the impact of mobility on ownership models, the equipment finance market, new technology, and the impact of rising interest rates. However, most economic outlooks seemed to rest on the ability of a Republican White House and Republican Congress to deliver on their pro-business promises.

“It’s becoming clearer now that there is dysfunction in the White House and the Republican Party is fractured, so all early attempts to pass meaningful economic legislation have failed,” said Adam Warner, president of Key Equipment Finance. “Business confidence has eroded and will likely continue to be challenged in 2018.”

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S&P/Experian: Auto Default Rate Registers Largest Increase Since December 2011


NEW YORK — Auto loan defaults in increased nine basis points from July to August, the largest month-over-month increase since December 2011, according to the S&P/Experian Consumer Credit Default Indices.

Despite the drop, the auto loan default rate remains low relative to historical levels. In fact, the rate is closer to levels recorded one year ago. The same is true for the composite rate for overall consumer defaults and first mortgage defaults, both of which increased three basis points from July.

“Overall, consumer credit defaults show no reason for alarm,” said David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices. “Defaults on first mortgages are flat to down while defaults on auto loans have risen slightly in recent months. Consumer credit defaults on bank cards continue their upward creep since the end of 2015 despite a recent drop. The combination of an improving labor market, low inflation, and low interest rates are the principal factors behind currently favorable consumer credit conditions.”

The bank card default rate fell 12 basis points from July to 3.19% — the lowest level since December 2016. Bank cards were the only loan type to register a decrease in August.

Out of the five major cities analyzed by S&P/Experian, three registered increases in their default rates in August. New York recorded the largest increase, up 13 basis points from July to 0.95%. Los Angeles reported a rate of 0.66% for August, up three basis points from the previous month. Chicago came in at 0.94%, up four basis points from July.

Dallas reported a decrease of three basis points from the previous month to 0.74%, while Miami’s rate fell 10 basis points from July to 1.13%.

“Some future developments could affect consumer credit defaults: Auto sales have fallen since December 2016 and are down 11%. Declining auto sales and the normal end-of-model year push to make room for new cars may encourage easier credit conditions and raise concerns about future defaults,” Blitzer noted. “Hurricane damage in Houston and across Florida is creating substantial financial stress. The impact on mortgages on damaged or destroyed homes is not yet clear. Job losses and rising spending needs could lead to increased consumer credit defaults in coming months.”

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Swapalease: Q2 Dominated by SUVs, CUVs, Sports Cars


CINCINNATI — Swapalease.com released its quarterly lease trends report for the second quarter of 2017. The report shows that only three brands increased in search traffic from the first quarter. Infiniti, Ram and Chrysler saw a rise in search traffic by 10%, 5% and 3%, respectively.

Among domestic brands, GMC saw the largest decrease in the quarter for search traffic (-12%). A year ago, GMC’s brand searches were up by 14%, showing that consumers may be turning their attention elsewhere for leases. For European brands, Volkswagen saw the biggest dip in search traffic, decreasing by 11% compared with the first quarter. Not a single brand in the European category increased in search traffic this quarter. Within the Asian category, Acura performed the worst, decreasing in traffic by 11%.

Infiniti claimed its position as the largest share of overall traffic (10%). A year ago, it was Ram that boasted the most search traffic out of all categories.

The average monthly payment on a lease was registered at $474.39, a slight change from the first quarter, when the average payment was $436.35. BMW is currently the most expensive brand to lease with an average monthly payment of $862. Conversely, Volkswagen is the most inexpensive brand to lease with an average monthly payment of $318.

The report also shows that higher-priced leases (monthly payments above $500) saw increases in the second quarter compared with the first, possibly indicating continued strength in the economy.

“Our second quarter lease trends report shows that leasing remains strong in the automotive marketplace today, with increases in value of payment and number of leases in the driveways,” said Scot Hall, the company’s executive vice president. “We’re also seeing growth in SUVs, crossovers, and sports cars interest, which mirrors much of what is taking place in the broader automotive market today.”

To read the full text of the report, click here.

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Credit Tightening at Wells Fargo to Continue Into 2018


SAN FRANCISCO — In 2009, the year before Wachovia Dealer Services officially became Wells Fargo Dealer Services, the finance source was listed as the No. 1 subprime auto lender by market share. It also held the largest share in the used-vehicle financing segment. Times have changed.

During the bank’s second-quarter earnings call on July 14, Wells Fargo executives reported auto originations of $4.5 billion. That’s down $2.5 billion from the first quarter and $4 billion from the year-ago quarter. The reason: tighter underwriting standards.

“As we’ve discussed previously, we’ve tightened credit underwriting standards in auto, which has our origination volume down 17% from the first quarter (45% from a year ago),” said CFO John Shrewsberry, noting that the average FICO for auto loans originated during the period rose from 696 in the year-ago period to 719. “As we focus on improving execution and efficiency through increased standardization and centralization, we expect auto loans to continue to decline in the second half of this year.”

Reflecting this tightening was an $82 million decline in consumer credit losses, with net charge-offs down $41 million from the previous quarter. The improvement in overall consumer credit allowed the bank to releases $100 million in reserves for credit losses, officials said.

Additionally, the bank’s total outstanding loan balance declined 4% from the first quarter and 6% from a year ago to $58 billion. Loans 30 days past due increased by $225 million from a year ago on weaker market conditions.

As for the bank’s commercial portfolio, loans increased 7% from a year ago to $11.5 billion on higher dealer floorplan utilization.

In 2015, Wells Fargo reported record originations of $31 billion. A year later, the bank originated more loans than any other finance source, according to Experian Automotive. In the first quarter of this year, however, Wells Fargo Dealer Services fell to No. 4 on Experian’s market share list, with originations falling 29% on a year-over-year basis.

Several members of the executive team that led the transition from Wachovia Dealer Services to Wells Fargo Dealer Services in March 2010 have also left the company. Tom Wolfe, who headed up the business during its transition to Wells Fargo Dealer Services as president, was named vice president of the bank’s consumer credit solutions in 2012 before retiring in October 2014.

Wolfe’s successor as head of Wells Fargo Dealer Services, Dawn Martin Harp, retired this past April, and Bill Katafias, another Wachovia holdover who served as Wells Fargo Dealer Services’ national product retail credit executive, left the company this past February. In May, he joined Irvine, Calif.-based CRB Auto, a division of Mechanics Bank.

Wells Fargo’s dealer services business unit is now led by 20-year company veteran Laura Schupbach, who was appointed to the post this past March. She officially assumed her new role in April. Shrewsberry mentioned Schupbach’s hiring during the bank’s recent earnings call, noting that consumer loan growth will continue to be impacted by the actions “we’re taking in our auto portfolio and expected runoff of legacy junior lien mortgage loans.”

Shrewsberry added that the bank is making “modest changes” to generate loan originations for its consumer loan segment, including offering interest-only jumbo mortgage loans to high-quality borrowers and testing credit card offerings through the company’s digital channels.

When asked during last Friday’s earnings call how far the bank’s tightening on auto loans will go, Wells Fargo President and CEO Timothy Sloan responded, in part, “My bet is it will probably stabilize sometime in the first half of next year. I think during that entire time, it’s reasonable to assume that’s the quality of the underlying customer … measured by FICO score will continue to improve.

“I don’t know if it will continue to improve at the levels we’ve seen, but it will continue to be very strong,” he added. “And then my guess is that’s where the business will stabilize sometime in the first half of next year.”

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Innovative Lending Releases Loan Management Tool for F&I Offices


CHICAGO — Innovative Lending Solutions LLC announced the release of Stip Trac, an automotive loan management system designed to help dealers track cash flow, collecting necessary loan documents, or stips, and keeping an open communication line with car buyers before and after their purchase.

Stip Trac features a dashboard that allows users to track cash owed by a bank, set “contact-in-transit” limits, and track money in transit by salesman. It also provides status updates on any deal in transit, held at dealership, funded, etc. Users can also look up the age of a deal and missing stips, as well as add internal notes that can be viewed by all parties involved with the loan.

Stip Trac also allows dealers to add additional stips to a loan at any time, push welcome calls to the bank, and gain real references and referrals from customers. It also provides users with a “contact list” on their cell phone, and the ability to approve or deny stips as they are received.

The new tool also features a custom messaging so users can send an urgent message to the car buyer. It also offers automatic push notifications and a dealer-branded app that allow users to monitor a loan’s progress on their smartphones.

For the consumer, Stip Trac helps protect them from identity theft. It can also eliminate additional trips to the dealership to drop off loan-related documents, speeding up the finance process at the dealership.

“Stip Trac is a needed tool to improve the automotive loan process for car dealerships and consumers. Using Stip Trac removes a lot of the stress that today’s finance managers are facing today,” said Ed Maisonneuve, president and CEO of Innovative Lending Solutions LLC. “We truly built this so the delivery process is a smooth one. As a finance manager, I can’t tell you how many times a deal came into my office with missing documents, bad references, missing signatures. StipTrac 100% eliminates that.”

For more, visit www.StipTrac.com.

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