Consumer demand for automobiles is far outpacing the ability of many borrowers to repay their car loans in a timely manner. In fact, a variety of economic indicators suggest that the total volume of automobile lending is going up while the ability of some borrowers to repay automobile loans is going down.
Just consider the following:
- More consumers have auto loans. The percentage of the U.S. population with car loans has increased from 20 percent in 1999 to over 33 percent today. Auto loan balances increased an additional $17 billion in Q2 2019.
- The number of past due auto loans is significant. By year end 2018, the number of U.S. car loans at least 90 days late exceeded seven million, with past due loans representing 6.5 percent of all auto loans.,
- Repayment delinquency rate increases may seem counterintuitive but are all too real. Despite record low unemployment rates, one million more 90 day past due loans exist today than at the end of 2010.
- Repayment rate fluctuations affect many types of borrowers, not just the least affluent. Of borrowers with credit scores between 620 and 659, 3.4 percent found themselves behind on their auto loan repayments at the end of the Great Recession (Q4 2009). This band indicated the most significant variation and is a warning that a score range just above sub-prime lending also carries substantial risk. Although this number dropped to 1.5 percent by Q1 2014, the rate for this group reversed again in the months that followed and continued to climb through 2018. During the same period, significant slow repayment fluctuations also occurred for borrowers with even higher credit scores.
In an environment in which late and slow repayment rates for many borrowers are rising and delinquency rates for some borrowers are spiking, efficient, effective debt management solutions are more important than ever before. Best in class solutions can mitigate the risks in auto loan portfolios by helping to assure timely repayments, to make it less likely that loans will fall into delinquency, and to prevent collection errors. That is why CGI Collections360, including CACS Enterprise and Enterprise Gateway, plays a vital role for banks and other automobile finance industry lenders.
CGI Collections360, CACS and Recovery Database Network integration
CGI Collections360 combines software, business processes and IT services to manage and improve the debt collections life cycle. CACS is an integrated, single platform for debt collections that enables creditors to eliminate their own redundant systems, to gain a unified customer account view and to make fewer mistakes in the collections process. Its multi-user processing hierarchy and built-in, role-based security also provides new levels of control over the management of multiple collection and recovery vendors. Flexible, table-maintained rules are used to define workflows and treatments, to make collector and third-party assignments, and to monitor performance and regulatory compliance.
While dramatic improvements in business process automation provide significant upside, this is only part of the story. A borrower’s repayment circumstances can quickly change. The most up to date information about account status is vital in preventing unnecessary repossessions. The ability to leverage advanced decisioning within CGI Collections360, coupled with integration with a repossession provider, such as the Recovery Database Network (RDN), optimizes the borrower’s road to recovery or, if necessary, enhances the actual recovery process. This is possible through integration with CGI Enterprise Gateway® (EG).
Enterprise Gateway, a core component of the CGI Collections360 suite, is innovative technology for secure third-party file and document exchange and a one-stop, thoroughly integrated vendor portal for consistent, easy-to-locate and updated account information, as well as more effective debt collection. Software and solutions provider RDN helps the automotive finance industry recover assets, connecting lenders to repossession, field visit, skip tracing, forwarding and auto auction companies.
Using CACS, authorized user service requests pass from EG to RDN for distribution to the repo agencies. EG periodically runs a process to retrieve and post these updates back into CACS. RDN integration means that CACS collection and recovery workflows operate with real-time information. Programmatic notifications minimize the chance that repossessions no longer warranted by repayment status mistakenly take place. In addition, better information improves process consistency, reduces expenses, and reduces the potential of extreme customer dissatisfaction.
Companies select CGI for better bottom line performance. In the debt management arena, the sophistication and innovation of CGI Collections360 are making a clear difference to over 300 clients in a range of industries, including banking, consumer finance, telecom, utilities and more. For lenders with auto loan portfolios, CGI Collections360 emphasis on timely information, appropriate treatments, third-party collection agency management controls and strict regulatory compliance can mean:
- Reduced net credit loss
- Greater revenue and more recoveries
- Lower debt collection operating expenses
- Fewer delinquencies and write-offs
- Enhanced consumer relationships and greater customer satisfaction overall
With CGI Collections360, CGI clients gain the insights, information and tools they need to take greater control of their debt management operations. By doing so, they produce better collections results and enjoy much more collections certainty—no matter how repayment rates fluctuate.
CGI offers leading organizations the strategic vision, seasoned experts and flexible solutions needed to transform today’s accounts into tomorrow’s loyal customers. When it comes to truly customer-centric debt management, our proven approach combines the right people, processes and technology to deliver both short-term and long-term results.
About this author
Director of Consulting
With 25 years of experience in the financial services industry, Jill Kathman fills many roles at CGI, including working on client delivery projects and with CGI solutions. She collaborates with CGI sales teams to support client proposals and solution demonstrations, and with CGI development teams ...