May 11, 2022
According to FICO, 28 million Americans have credit files with insufficient data to generate credit scores — and another 25 million Americans have no file at all. With traditional underwriting methods focused on credit, how can credit-invisible consumers get the auto loans they need?
It’s up to lenders to look beyond credit scores. With AI-powered risk analysis, financial institutions can identify qualified credit-invisible borrowers and provide wealth-building opportunities — all while earning a commensurate profit for the risk.
Gesa Credit Union and CapEd Credit Union both wanted to tap into the credit-invisible market without adding more risk. That’s what brought them to Open Lending.
Gesa Credit Union implemented Open Lending’s Lenders Protection™ program to buy deeper paper but maintain the same margins while offering the instant loan decisions consumers expect today. With automated decisioning and advanced risk analytics, Lenders Protection™ offered the tools they needed to serve qualified borrowers with thin or no credit files.
“Lenders Protection™ was one of those things that felt too good to be true,” said Kevin Willborn, VP of Consumer Lending at Gesa Credit Union.
CapEd Credit Union came to Open Lending with similar goals. Jeremy Sankwich, VP of Consumer Lending at CapEd, shared, “I bought in immediately because we could see how strategic it was for growing our portfolio.”
“We’re […] a conservative credit union,” CapEd’s Sankwich shared, “so [convincing] us to buy deeper was a challenge. Lenders Protection™ helped us convince the CFO that you can mitigate some of that risk, and you can also help more members. That’s really the value we saw.”
The platform’s 20+ years of proprietary data and sophisticated risk analytics help institutions price loans just right to achieve their desired yield while ensuring an applicant’s borrower potential.
“Lenders Protection™ is a really good strategy for us to help more borrowers, grow our portfolio, and mitigate all that A paper with some better yield,” Sankwich added. “Lenders Protection™ allowed us to continue helping those borrowers and feel confident that we were protected because we had that partnership.”
Sankwich concluded, “I think the biggest thing from a new Open Lending client perspective, wanting to join Lenders Protection™, is you have to go all in. You have to be committed to it long-term.”
Gesa’s Willborn recalled the credit union’s first meeting with Open Lending in 2018. The credit union’s CEO, CFO, and Chief Risk Officer spent hours reviewing their concerns with the Open Lending team, and there wasn’t a single question Open Lending couldn’t answer. This level of service made Gesa comfortable committing to Lenders Protection™.
The partnership’s success rests on Open Lending’s business practices and personal touch, Willborn said. Gesa can call their account manager at Open Lending with confidence they will handle any request quickly and professionally, he added.
“There’s nothing that we have ever asked that has not been done,” Willborn said of Open Lending.
A poll conducted by the Morning Consult in 2021 found that 10% of Americans are unbanked, and 24% of Americans are underbanked. These Americans have more difficulty securing auto loans from institutions that use traditional methods to determine creditworthiness. Often, their only options are predatory lenders and high-price Buy-Here, Pay-Here automobile dealers.
The Consumer Financial Protection Bureau encourages lenders to seek innovative ways to increase fair, equitable access to credit and serve the credit-invisible population.
Lenders Protection™ is an innovative answer to this need. Our proprietary data analytics platform and A-rated default insurance allow our clients to earn 300% to 400% higher ROA on average versus their prime-exclusive auto loan portfolio. And more unserved and underserved consumers can affordably get the cars they need.
Open Lending is so confident in our platform’s capabilities that we provide default insurance for these loans. This program allows institutions to approve more of their existing auto loan applications while helping to keep regulators at bay.
With Open Lending’s Lenders Protection™, lenders can serve underserved borrowers while predicting risk with 99% accuracy and earning a greater return.
Open Lending has helped hundreds of lenders, like Gesa Credit Union and CapEd Credit Union, increase auto loan volume and yield by tapping into their existing pool of automotive loan applications – no additional marketing required.
Our proprietary platform allows financial institutions and other auto lenders to model their specific overhead and funding costs and set a target ROA for their insured portfolio. The lender maintains all the control they want and need.
Lenders Protection™ works for lenders of all sizes and features no up-front costs. Lenders only pay for the loans they choose to insure. And your institution can be up and running in as little as 30 days.
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