The Consumer Financial Protection Bureau (CFPB) took action against Xerox Business Services, LLC, now called Conduent Business Services, for software errors that led to incorrect consumer information about more than 1 million borrowers being sent to credit reporting agencies.
The company also failed to notify all of its auto finance clients about known flaws in its software that led to the errors. The consent order requires Xerox to pay a $1.1 million civil penalty, explain its mistakes to its finance clients, and fix its faulty software.
Xerox Business Services operated and customized a third-party software application for five auto creditors. The software automatically generated and transmitted information about borrowers’ auto loans to consumer reporting agencies. Lenders use information furnished to the consumer reporting agencies when considering whether to issue a loan and on what terms, so it is essential the information is accurate.
Widespread defects in the finance-servicing software that Xerox used led creditors to report inaccurate information about consumers’ performance on their contracts. In 2016, its reports for more than one million of the auto creditors’ 6.4 million customer accounts had one or more errors.
Xerox had acquired the rights to this software from its creator, an independent software developer. When creditors asked for certain features, Xerox would modify the software’s source code.
Between 2004 and 2010, one modification was supposed to enable three of Xerox’s clients to provide consumer data in the Metro 2 Format. Metro 2 is the standard industry format used for furnishing this information in a uniform way to credit reporting agencies.
However, Xerox’s modifications were based on a flawed, unreleased version of Metro 2 source code that led to the reporting of incorrect consumer information. This violated the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Swapalease.com unveiled results of its latest survey on incentives, with dealers saying they’re offering roughly the same incentives on financed vehicles in 2017 compared to last year, but are offering three times as much incentives on lease deals today versus a year ago. Swapalease.com presented an online survey to approximately 550 dealers across the U.S. during the end of October asking about what kind of incentives they’re offering on financed and leased deals. More than 50 percent of dealers said they averaged $1,500 per vehicle incentives for financed deals in 2016, and that number jumped to 60 percent in 2017. However, 44 percent of dealers polled said they offered an average of $500 per vehicle incentives on leased deals in 2016, whereas 58 percent in 2017 said that number was $1,500 on lease incentives.
Ally Financial announced that ClearGuard, which provides protection coverage of up to $2,500, is now standard on all eligible vehicles dealers sell through SmartAuction, Ally's online wholesale vehicle auction platform. There is no fee for auto dealers to post a vehicle on SmartAuction, but once it sells, a standard $200 fee is charged and ClearGuard is automatically included. Nearly all dealer-owned passenger cars and trucks with a sales price of less than $75,000 are eligible for the ClearGuard coverage. With ClearGuard, all arbitration claims up to $2,500 would be covered. Standard arbitration guidelines apply to all ineligible vehicles and claims over $2,500. SmartAuction worked with the Ally Insurance team to develop the ClearGuard protection product.
America’s Car-Mart reported net earnings of $6 million for the quarter ended Oct. 31, up from $5 million for prior year quarter.
Revenues were $149 million compared to $150 million for the prior year quarter. The current quarter includes a $1.7 million increase in interest income and same-store revenue increase of 0.6 percent.
Sales volume productivity was flat with 28.4 retail units sold per store per month.
Average retail sales price decreased $73 from the prior year quarter to $10,418.
Gross profit margin percentage increased to 42 percent from 41.4 percent for the prior year quarter.
Collections as a percentage of average finance receivables decreased to 12.2 percent from 12.6 percent for the prior year quarter. The weighted average contract term increased to 32.5 months from 31.7 from the prior year quarter and decreased from 32.6 for the July 31 quarter.
Net charge-offs as a percent of average finance receivables were 7.5 percent, down from 7.7 percent for prior year quarter.
Accounts over 30 days past due decreased to 4.1 percent from 4.8 percent at Oct. 31, 2016.
Average percentage of finance receivables current was 80 percent, flat from Oct. 31, 2016.
Provision for credit losses was 29.7 percent of sales vs. 29.6 percent for prior year quarter.
Selling, general and administrative expenses were 18.2 percent of sales vs. 17 percent for prior year quarter.
Western Funding Inc. recently named Jim Murray as its new president.
In this role, Murray will oversee all aspects of Western Funding’s sales, servicing and operations. He will focus on implementing strategic and compliant operational efficiencies and to drive growth.
Murray comes to Western Funding with nearly 20 years of specialty finance experience in both the consumer auto and commercial small business lending sectors.
Average wholesale prices in October were down only modestly month-over-month and up year-over-year, bolstered by lingering impacts from hurricanes Harvey and Irma.
According to ADESA Analytical Services’ monthly analysis of Wholesale Used Vehicle Prices by Vehicle Model Class, wholesale used vehicle prices in October averaged $10,977. That is down 0.6 percent compared to September and up 4.2 percent relative to October 2016.
Prices were flat or down on a month-over-month basis for all model class segments, but were up year-over-year for all but full-size cars.
Prices were up on an annual basis even when holding constant for sale type, model-year age, mileage, and model class segment.
Auto finance originations reached $150.6 billion, according to the Federal Reserve Bank of New York.
That is up slightly from the second quarter and marks the second highest level in more than a decade.
Auto finance flows into delinquency also rose. The percentage of auto finances more 90 days delinquent rose to 2.4 percent from 2.3 percent in the second quarter.
Delinquencies have been steadily increasing for several years.
Median credit scores of auto buyers increased slightly in the third quarter.
Digital auto loan applications have the power to increase customer satisfaction, but wide variance in the execution of the digital application process has created a significant performance gap between top and bottom performing lenders, according to the J.D. Power 2017 U.S. Consumer Financing Satisfaction Study.
The top-performing mass market and luxury lenders rate significantly higher than the lowest performers (8.75 vs. 7.93 and 8.85 vs. 7.54, respectively, on a 10-point scale) in the most heavily weighted website attribute in the study: range of services that can be performed online.
While the digital application channel generates significantly higher levels of overall satisfaction among both mass market and luxury customers, many are waiting longer for a credit decision than those utilizing dealer representatives. Just 30 percent of customers applying online received a credit decision within 15 minutes vs. 46 percent who filled out a paper application with a dealer.
Time given to make first payment provides greatest impact on onboarding experience: High-ranking mass market and luxury lenders perform highest on time given to make first payment, allowing an average lead time of 21.2 days for mass market customers and 18.4 days for luxury customers prior to first payment due date.
Autopay and Web-based payment drive highest customer satisfaction: Mass market customers paying by hard-copy check are significantly less satisfied than those using autopay (800 vs. 851, respectively, on a 1,000-point scale).
Lincoln Automotive Financial Services ranks highest among luxury brands, with a score of 890. Lexus Financial Services (875) ranks second and Acura Financial Services (869) ranks third.
Ford Credit ranks highest among mass market brands, with a score of 857. BB&T/RAC (855) ranks second and Honda Financial Services (855) ranks third.
Enterprise Holdings will honor 14 automotive auction partners from across the country with its 2017 Auction Achievement Awards.
This annual program recognizes auto auction partners for exceptional services that support Enterprise Holdings' efforts to remarket late-model, low-mileage, well-maintained rental and fleet vehicles to potential buyers.
Regional Enterprise Holdings teams present the awards to the auction partners in their area, in two categories: whole-car auctions and damaged-vehicle auctions. Recipients are recognized for exceptional performance in the areas of communication, customer service, marketing and reconditioning, operational success, and strategic planning.
The 2017 Auction Achievement Award winners in the whole-car category are:
ADESA Los Angeles (Orange, Calif.)
Manheim Central California (Roseville, Calif.)
Manheim Dallas (Irving, Texas)
Manheim Fredericksburg (Rockville, Md.)
Manheim Omaha (Davenport, Iowa)
Manheim San Diego (Orange, Calif.)
The 2017 Auction Achievement Award winners in the damaged-vehicle category are:
Dealers Auto Auction of the Rockies (Highlands Ranch, Colo.)
IAA Atlanta (College Park, Ga.)
Manheim Dallas TRA (Irving, Texas)
Manheim NJ TRA (Wayne, Pa.)
Manheim Southern California TRA (Orange, Calif.)
Manheim Tampa TRA
Metro Salvage Pool (Davenport, Iowa)
Wholesale used vehicle prices (on a mix-, mileage-, and seasonally adjusted basis) increased 1.02 percent month-over-month in October.
This brought the Manheim Used Vehicle Value Index to 136.3, which was a record high for the sixth consecutive month and an 8.1 percent increase from a year ago.
On a year-over-year basis, all major market segments again saw gains, including midsize cars. SUVs/CUVs, pickups, and vans outperformed the overall market.