people discussing modern auto financing
ComplianceFinanceJuly 01, 2017

The problem of modern auto finance

You may be at risk if you do not follow due diligence steps closely. Some lenders never protect their interests by perfecting their lien.

As we talk to VPs of Operations of auto finance companies that manage lien portfolios, they say that they are seeing a significant increase in the financing of used vehicles. That’s not surprising because it’s so much easier for people to 1) sell their cars through online channels like eBay and Craigslist, and 2) obtain lower cost loans in the current interest rate environment.

Many lenders recognize that these loans take longer to perfect and impose a higher administrative burden. However, they often underestimate the magnitude of this administrative burden. Let’s say a lender your size does an average of 10,000 person-to-person loans per month. If we take the low end of the numbers just shared, 25% of borrowers are causing loans to show up on your exception report which equates to 2,500 a month or 110 per day. To handle that administrative burden you either have to hire additional headcount or work your current staff overtime.

Also, while these loans remain unperfected, you are at risk in many different areas if something happens to the asset (like accidents, sale of the asset, the loan going into default, etc.). In the case of an accident, the insurance company pays out based on who is on the title. If your name is not listed as the lienholder, you may not receive the payout without a potential legal escalation.

So what’s the remedy? Well, the best defense is a good offense. Operation managers have found ways to reduce administrative burdens by understanding the root cause of why person-to-person loans go unperfected longer than other loans in their portfolio. They arm borrowers with the information and requirements needed so that the title gets recorded quickly and properly, regardless of where it’s filed across the nation. This reduces the administrative burden the lender has to do to perfect their loans, either freeing up internal CSR time or reducing the need to outsource to outside vendors. And, what’s more, you provide your borrower with a better experience as they are clear on what is needed to get their vehicle on the road and you listed as the lienholder.

The great news is we can help. At Lien Solutions, our iLien Motor Vehicle platform will enable you to reduce time to loan perfection, understand the full cost, and improve your borrower experience. Our expertise will ensure that both you and your borrower will know upfront what the costs and requirements are to title the asset in every jurisdiction in the nation. By thus reducing your time to perfection rate, you can greatly reduce the administrative burden caused by a reactive approach to titling versus a proactive approach.

Recommended reading

Lien Solutions has experience helping lenders with the used vehicle titling process. We’ve learned numerous best practices we’re now sharing in our new white paper, Title processing in person-to-person motor vehicle transactions – The value of best practices and expert support.” This white paper offers sound advice and guidance to help you better navigate the process, improve workflow, and mitigate risk.
Rick Vanko Senior Product Manager
Product Manager
Rick Vanko is the Motor Vehicle Solutions Product Manager for Wolters Kluwer Lien Solutions. Vanko’s responsibilities include developing automated lien perfection and portfolio management solutions. These solutions help the company’s customers more effectively complete lending transactions with a higher rate of perfected claims and minimized risk.