This article is part of the CreditUnions.com Risk Vendor Showcase, a collection of original Q&As that celebrates advancements in risk management. Learn how your organization can participate today.
Protecting against the risk of delinquency and default in their auto loan portfolio is a powerful tactic that credit unions can use to expand their services to borrowers with less than perfect credit.
“Credit unions face a multitude of challenges when venturing into non-prime auto lending,” adds John Flynn, president and CEO of Open Lending in Austin, TX. “However, non-prime lending could be the key to keeping a credit unions’ loan growth on track.”
Open Lending currently provides automated lending services to 426 financial institutions, 398 of them credit unions. Here, Flynn describes how his firm helps credit unions help more members without piling on risk.
How do Open Lending’s products address those challenges and opportunities credit unions see in non-prime lending?
John Flynn: We specialize in loan analytics, risk-based pricing, risk modeling, and automated decision technology for automotive lenders throughout the United States.
Our flagship product, the Lenders Protection program, is a unique auto lending program for direct and indirect loans that provides a powerful and safe way for lenders to increase near- and non-prime auto loan volumes and yields without adding risk to their loan portfolio.
Lenders Protection combines sophisticated risk-based pricing models, configured to each lender’s individual cost factors and financial targets, with reliable loan default insurance provided by two A-rated third-party insurance companies.
Please describe more specifically how your loan protection program works.
JF: After using our proprietary underwriting engine to price for risk, Lenders Protection loans are backed by our top-rated insurance carriers which in the event of a default, historically are covering 85% or more of the defaulted loan balance.
Our proprietary risk models combine 18 years of historical data with extensive third-party data on borrowers, vehicles, and loan attributes. This allows lenders to price individual loans based on various factors beyond a credit score. Those factors include geographic location, loan terms, loan-to-value on the vehicle, the applicant’s credit depth, whether the vehicle is new or used, and the make and model to determine depreciation on the asset.
By empowering an institution to look beyond a credit score, the Lenders Protection program gives a credit union the opportunity to provide competitive rates to more members while reaching ROA targets that are higher than their prime portfolio.
What differentiates your products and services from competitors?
JF: Lenders Protection provides a solution that not only mitigates risk but strengthens the relationships between a credit union’s membership and dealers. By providing the ability to offer more approvals with less stipulations for non-prime members, Lenders Protection increases overall look-to-book ratios for all channels of lending.
What kind of ROI can a credit union expect using Open Lending?
JF: Open Lending’s Lenders Protection allows credit unions to customize their ROI targets to achieve their own return goals. To date, Open Lending has insured more than 350,000 nonprime auto loans exceeding $7 billion with an ROA for our clients of more than 2.4% on average.
How can a credit union learn more about Open Lending?
JF: Credit unions can email us directly at firstname.lastname@example.org or visit our website at www.openlending.com. We also encourage people to check out our video testimonials and case studies to learn how other institutions have benefited from using Lenders Protection.