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January 29, 2009
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Attendance Tops 300 for Vehicle Finance Conference
AFSA Vehicle Finance Board Plans Strategy for Uncertain Times
New Member Welcome
Daimler Explores Vehicle Finance Arm Option for India
Mariner Finance Announces the Recent Acquisition of Loans USA
Suzuki Partners With GE Money to Help Dealers Finance Powersports Customers
AIG to Sell Latin American Consumer Finance Units
Harley-Davidson Seeks Federal Aid to Make Loans
Tax Firms Try Prepaid Cards for Revenue Lift
If Cash Is King, Do We Still Need Credit Cards?
Banks' Mortgage Cramdown Fight Persists in House
Portfolio Limit for Freddie, Fannie to Ease
New FICO Credit Score Debuts
International Student Loans Yanked, CUs Step In
More Consumers Ready to Buy Cars, Data Show
Crisis Shouldn't Stop Banks From Readying for Red Flags
Attendance Tops 300 for Vehicle Finance Conference
Despite tough economic times, AFSA’s 13th Annual Vehicle Finance Conference and Exposition held in New Orleans Jan. 21 – 23 attracted more than 325 industry executives. The exposition included 18 new exhibitors who showcased their products and services.
In addition to panels with industry CEOs and dealer representatives, the conference program included interactive roundtables and a keynote presentation by political commentators James Carville and Mary Matalin. A session on “The Next Big Idea: A Discussion with Innovators and Game Changers” wrapped up the meeting.
This year’s meeting, held two days after the presidential inauguration, provided an ideal opportunity to discuss what may be ahead for the industry as it begins a new year. In addition to its Vehicle Finance Advisory Board and planning committee, the association extends a special thanks to Marguerite Watanabe, George Halloran, Kim Pulliam, Nancy McDonald, Elizabeth Webb and Jakki Geiger for their work on the conference.
“The numbers demonstrate that, now more than ever, industry executives need the support and insight of their colleagues,” said Chris Stinebert, AFSA President & CEO.
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AFSA Vehicle Finance Board Plans Strategy for Uncertain Times
In conjunction with AFSA’s 13th Annual Vehicle Finance Conference in New Orleans last week, the association’s Vehicle Finance Division Board met to discuss critical issues facing the industry in the current climate. Overseeing the meeting was division chairman Steve Smith, Senior Vice President, Financial Services, American Honda Finance Corp. Smith, who took over for Preston Miller last month, will continue chairing the division for another year.
The discussion centered on AFSA’s role in helping the industry meet challenges such as the impact of the high cost of funds, lack of available funds, low residual resale value, high credit losses, and regulatory reform affecting consumer credit.
The board heard from guest speaker Alton Adams, Senior Executive, Accenture, on “Competing in an Uncertain Industry – Applications for Auto Finance in 2009.” Adams discussed key trends that present challenges but also offer opportunities, from maintaining short- and long-term sustainability to focusing on the consumer to economic volatility to the continued reshaping of industries. Steps that Adams recommended the vehicle finance industry consider in 2009 included integrating the entire value chain, employing multi-channel marketing, improving integration of the automaker, finance and dealer experience, and improving the end-to-end customer experience.
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New Member Welcome
AFSA welcomes new active members ACC Consumer Finance and Military Credit Services, LLC, as well as new associate member Veritas National Field Service.
Headquartered in San Diego, ACC Consumer Finance is a focused consumer finance company that buys and services subprime auto retail installment contracts originated by automobile dealers. Web site
Located in Norfolk, Va., Military Credit Services provides same-day servicing of retail installment sales contracts for active duty and 20-year retired military, civil service and government employees. Web site
Veritas National Field Service, located in the Dallas area, has been in the finance business since 1990. Web site
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Daimler Explores Vehicle Finance Arm Option for India
Business Line (01/24/09) Toms, Manu P.
Daimler AG is considering expanding its vehicle financing arm in India. The potential plans for Daimler Financial Services come at a time when the economic slowdown is impacting the sales of trucks and buses. Sales of the Actros heavy truck have risen 53 percent to 240 units since its introduction in 2007, and 16 inter-city luxury buses have been produced over the last four months. Also, Daimler has a joint venture with the Hero group involving commercial vehicles, and a new plant near Chennai will initially have a capacity of 70,000 units per year. "Financing is one aspect which we are actively looking into and we are evaluating the prospects of our own arm," says Suhas Kadlaskar, director of corporate affairs for Mercedes-Benz India. "We want financing options for our prospective customers in place by the time we launch our products in the market."
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Mariner Finance Announces the Recent Acquisition of Loans USA
Mariner Finance News Release (01/28/09)
Mariner Finance has acquired Loans USA, adding four locations to its branch network. The new branch offices are located in Pasadena, Md.; Harrisburg, Penn.; York, Penn.; and Wyomissing, Penn. Mariner will service Loans USA's customer accounts and business partners.
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Suzuki Partners With GE Money to Help Dealers Finance Powersports Customers
SubPrime Auto Finance News (01/27/2009)
American Suzuki Motor Corp. and GE Capital's GE Money division announced a partnership to provide financing for the former's inventory of motorcycles, all-terrain vehicles, and scooters. Under the operation of GE Money's Sales Finance arm, the Suzuki Installment Finance program will provide consumers an easy and efficient way to purchase Suzuki powersports vehicles, company officials stated. "Working with GE Money to provide a comprehensive installment loan financing program is a vital part of our growth and customer satisfaction strategy," American Suzuki's Dirk Gould said about the multi-year deal. The sales support and finance manager added that his firm is pleased to partner with GE Money because of the finance unit's "long-held reputation of excellence."
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AIG to Sell Latin American Consumer Finance Units
Insurance Journal (01/26/09) Bansal, Paritosh
American International Group (AIG) is selling its Latin American consumer finance businesses, including units in Mexico and Argentina, in order to pay back the U.S. government. The assets for sale include Inversora Pichincha, a Colombian consumer finance company that AIG bought in 2008. The units are small compared to AIG's other operations and are not expected to raise much compared to how much AIG owes the government. The company plans to sell everything except its U.S. property and casualty business, foreign general insurance, and an ownership interest in some foreign life units in order pay off the approximately $152 billion that the federal government provided to help AIG avoid bankruptcy.
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Harley-Davidson Seeks Federal Aid to Make Loans
Milwaukee Journal Sentinel (WI) (01/26/09) Barrett, Rick
Harley-Davidson hopes to tap the Term Asset-Backed Securities Loan Facility program so its consumer lending arm will be able to make more motorcycle loans. The $200 billion federal program makes use of asset-backed loans to boost credit availability, and includes retail motorcycle loans as eligible assets. "We are actively evaluating the program to further understand the details and learn how we may benefit from it," says Thomas Bergmann, interim president of Harley-Davidson Financial Services (HDFS). The financing unit will need about $1 billion in funding to make new motorcycle loans this year. HDFS funds more than 50 percent of all new Harley motorcycle purchases. The motorcycle company is also exploring whether it is eligible for the Temporary Liquidity Guarantee Program (TLGP), which guarantees newly issued unsecured debt. With TLGP, defaults on motorcycle loans would be covered by federal funds. "Without access to unsecured debt, HDFS has been forced to rely on bank credit, which is unreliable in our current economy and is more expensive than opportunities available through the TLGP," writes Sen. Herb Kohl (D-Wis.) in a letter to Federal Deposit Insurance Corp. Chairman Sheila Bair.
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Tax Firms Try Prepaid Cards for Revenue Lift
American Banker (01/27/09) P. 5; Lowe, Frederick H.
Several major tax-preparation firms are attempting to boost their revenue by entering the prepaid card market. "Loading tax refunds on to reloadable debit cards is a niche market that tax-preparation companies and the card networks discovered and are pushing," says Aite Group analyst Adil Moussa. Moussa says reloadable prepaid cards can help tax preparers sustain and broaden business relationships with their clients. Liberty Tax Service has entered into a multiyear contract with NetSpend in which the prepaid card marketer will push the All-Access Liberty Prepaid Card and process the transactions. Liberty and NetSpend are collaborating to spur American consumer interest in depositing tax refunds into prepaid card accounts, and Liberty intends to establish a multifunctional card that customers can use all year. Meanwhile, H&R Block CEO Russ Smyth says his firm's banking unit distributed 2.6 million Emerald MasterCard-branded reloadable payment cards last year and expects to issue 3 million this tax season. H&R Block encourages customers to use their cards after they have spent their tax refunds by allowing them to load their payroll and money orders onto their card accounts.
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If Cash Is King, Do We Still Need Credit Cards?
MarketWatch (01/25/09) Waters, Jennifer
Many Americans are reining in their card spending in response to increasing unemployment, foreclosures, and an anticipated rise in credit card defaults, says America's Research Group CEO Britt Beemer. Beemer says some consumers are cutting back on credit card spending voluntarily, while others are being forced to due to restrictions placed by financial institutions. Such people are using debit cards that will not take transactions that exceed the available funds in the account, or alternative payment methods such as PayPal and eBillme. EBillme says its fourth-quarter online spending index showed that nearly half of customers said they would use alternative payments more often to finance purchases. The recently released first-quarter index estimates that 42 percent of consumers have used non-credit payment options more frequently than credit cards in the last 90 days. This marks "a clear shift in attitude" in favor of pay as you go, says eBillme CEO Marwan Forzley. Even so, the benefits of using a credit card remain clear, experts say. Credit card use helps to establish a good credit history, which can help consumers more easily obtain a home or automobile loan at a low rate. Furthermore, many credit cards offer perks such as redeemable mileage for airline travel, hotel stays, and other benefits.
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Banks' Mortgage Cramdown Fight Persists in House
American Banker (01/29/09) P. 3; Kaper, Stacy
With the House Judiciary Committee approving legislation that would let bankruptcy judges discharge mortgage debt, industry lobbyists face a major challenge in narrowing the bill before it makes its way to the House floor. The industry won a provision that would force lenders and borrowers whose loans were reduced in bankruptcy to share appreciation, with lenders pocketing 80 percent in the first year and declining annually to 20 percent by the fourth year. However, its efforts to include language that would ensure that Federal Housing Administration or Veterans Administration insurance covers the discharged amount or that excludes these loans from bankruptcy cramdowns were unsuccessful.
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Portfolio Limit for Freddie, Fannie to Ease
Wall Street Journal (01/28/09) P. A3; Crittenden, Michael R.
The Federal Housing Finance Agency (FHFA) will permit Fannie Mae and Freddie Mac to boost their mortgage portfolios to as much as $850 billion by the end of 2009. However, under an agreement between the FHFA and the Treasury Department, the firms need to shrink their mortgage holdings by 10 percent per year starting Dec. 31, 2010, until they hit $250 billion. Separately, the FHFA issued a rule spelling out the definition of undercapitalized, significantly undercapitalized, and critically undercapitalized with regard to the Federal Home Loan Banks' capital levels.
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New FICO Credit Score Debuts
Wall Street Journal (01/29/09) Kim, Jane J.
Fair Isaac Corp. and TransUnion will begin offering to lenders the new FICO 08 scoring system on Jan. 29. Equifax is expected to offer the new score in the second quarter. The new scoring system is fine-tuned to better analyze subprime customers and those with young credit histories, and is supposed to be a better predictor of borrower defaults but more forgiving of one-time credit blemishes. However, it will be several months, if not years, before the new score will be widely available to consumers.
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International Student Loans Yanked, CUs Step In
States News Service (01/26/09)
The cessation of two major student loan programs has left thousands of international business students unable to finance their education, with few alternatives. Previously, the Sallie Mae and CitiAssist programs allowed students to take out loans of up to $150,000 without a co-signer in the United States. Credit difficulties have forced the lenders to withdraw financing, leaving students, and the prestigious schools that seek young talent, in a bind. The Harvard Business School, University of Michigan's Ross School of Business, the Chicago Booth School of Business, the Wharton School, and Columbia Business School are among the many institutions still seeking partnerships with alternate lenders. MIT's Sloan School of Management founded its own federal credit union, Cambridge, Mass.-based MIT FCU, to continue its financing program for international students, while the Stanford Business School is augmenting its existing Stanford FCU in Palo Alto, Calif., to accommodate new financing.
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More Consumers Ready to Buy Cars, Data Show
Automotive News (01/28/09) Thompson, Chrissie
According to the Conference Board's monthly consumer confidence survey, 5.3 percent of those surveyed said they intend to purchase an automobile within six months, the highest percentage seen since April 2008. Approximately 40 percent said they would purchase a new car, and 50 percent said they would purchase a used car; about 10 percent said they were unsure whether they would buy a new or used car. Edmunds.com has seen a sharp increase in purchase intent this month, and Kelley Blue Book has seen a spike in new-car traffic on its Web site. Thomas Weisel Partners analyst Matt Nemer says pent-up demand could be prompting the increase.
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Crisis Shouldn't Stop Banks From Readying for Red Flags
Bank Systems & Technology (01/23/09) Bruno-Britz, Maria
Despite the growing financial crisis, non-bank companies that are Federal Trade Commission-regulated creditors must still comply with the "red flag" consumer protection rules by May 1. The rules went into effect for commercial banks in early November, but smaller institutions were given an additional six-month window to get ready for the new law that makes the risks that can lead to identity theft public. The rules call for the formation of programs that help identify practices and activities that could be evidence of identity theft. Consultant Anthony Hernandez believes banks are already partially compliant with the legislation because of their existing prevention and protection practices. However, he adds, the real difficulty will be in drafting policies for recognizing the warning signs of personal data theft and what actions a bank will take to resolve such situations.
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Abstract News © Copyright 2009 INFORMATION INC.
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AFSA Newsbriefs is a weekly executive summary of AFSA initiatives and consumer credit articles. For more information,
please contact newsbriefs@afsamail.org.
AFSA's mission is to protect and improve the consumer credit business, maintain a positive public image, and create a legislative climate in which reasonable credit regulation can and will be enacted. The Association operates in the public interest, encourages and maintains ethical business practices, supports financial education for consumers of all ages, and provides other assistance in related fields on an as-needed basis. The American Financial Services Association has provided services to its members for over ninety years. The Association's officers, board, and staff are dedicated to continuing this impressive legacy of commitment through the addition of new members and programs, and increasing the quality of existing services.
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