Why your new Best Practice should be using vehicle location data to reduce charge-offs.
Insanity is doing the same thing over and over again and expecting the same results. Yet, that’s exactly what we are seeing with many auto lenders who turn to us for help. They employ the same collections practices and in return they are seeing higher charge-offs rates. In fact, we’ve seen some report an increase of 200% for skip charge-offs in the last month. Let’s face it, once you’ve charged-off a debt, you’ve lost – taken a hit to your bottom line.
Subprime borrowers are getting better at avoiding collections. In 2014, the Federal Reserve Bank of New York reported that more than 1 in 7 adults is being pursued by debt collectors in the U.S. And, these borrowers often owe multiple lenders. They know how to duck collections and as a result, charge-offs are on the rise.
“Close to one-third of the banks that originated or held on their books subprime auto loans anticipated some deterioration in the performance of such loans in 2015,” according to the Federal Reserve’s January 2015 Senior Loan Office Opinions Survey.
So how can vehicle location data help collect on your delinquent loans? Simply put, vehicle location data is new data that helps you outsmart borrowers trying to avoid payment. So you’ve tried contacting your borrower at all of the locations she provided, but that’s not working. What if you knew that her car hasn’t been seen at her home address for months, but has been seen at a new location? DRN Locations use vehicle location data to tell you whether the addresses you have for making contact are good and to serve up new addresses for making contact. And DRN has more vehicle sightings – over 4 billion, so there’s a good chance we’ve got new vehicle location data for loans in your delinquent portfolio.
Here’s an example: if you have 200 delinquent loans that charge-off and each loan is worth $10,000 and we have DRN Locations on 10% (or 20 loans), your charge-off reduction could be $200,000. Now imagine the possibilities if DRN Locations were available on more than 10%? It’s highly possible depending on the area.
And here’s where it gets interesting. We decided to take the brakes off our vehicle location data with a new, enterprise model that provides flat rate pricing. This gives you access to DRN Locations throughout the lifecycle of the loan. You can make contact during servicing, locate cars for repossession and even make contact to prevent charge-offs. That’s a new best practice that pays off – fast.
ICYMI: See a full break-down of a collection scenario with DRN Locations and scores in our recent blog.