Auto loan application approved with a dollar and coins laying over it.


The defi Team Compliance, defi INSIGHT, Fraud, Managed Servicing, Servicing Systems, Simplifying Processes

Auto loan application approved with a dollar and coins laying over it.

Approximately 90% of new retail auto sales are financed via a lease or loan, and at the moment, Americans owe approximately $1.4 trillion in auto loans

For many individuals, events from the past year have significantly eroded their ability to make monthly payments. According to TransUnion, about 10.9% of subprime borrowers with auto loans or leases were 60+ days past due in February, up from 10.7% in January. 

Depending on the market segments that an auto lender serves, delinquencies and defaults may be reaching levels that exceed an auto lender’s ability to cost-effectively manage the collections process. As a result, operating costs are increasing and not much is being recovered from delinquent accounts. If you’re facing that problem, it may be an opportune time to consider the advantage of a managed servicing (business process outsourcing (BPO) for leases and loans) collection process.

Benefits of a Managed Servicing BPO Collection Process   

The best managed servicing BPO collection process management offers auto lenders three distinct capabilities. 

  1. Access to a team of experienced professionals that can competently handle the full spectrum of collections responsibilities. 
  2. IT infrastructure and systems that can easily accommodate changing collection demands. 
  3. Best practices developed and refined over the years. 

Let’s take a closer look at how each of these makes a managed servicing BPO collection process more efficient and cost-effective compared to an auto lender managing collections in-house.

Experienced Professionals Reduce Staffing Headaches and Risk 

By working with an established managed servicing BPO collection process provider, you won’t have to worry about hiring competent staff to handle the full range of collection activities. This includes borrower contact verification, preferred contact channels, education regarding payment options, knowledge of debt collection rules and regulations, industry-specific collection strategies, and repossessions.

One of the most significant challenges for auto lenders today is remaining compliant with lending regulations. Top-notch managed servicing BPO collection management teams track these regulations and any changes to ensure employees are fully informed and systems are programmed to reflect the relevant regulations. 

Rules and Regulations Governing Collections Can Be Overwhelming
The number of regulations that auto lenders need to comply with can be overwhelming. In addition to the brief list of regulations mentioned below, auto lenders may also need to comply with additional state and local regulations.
Fair Debt Collection Practices Act (FDCPA)
Fair Credit Reporting Act (FCRA)
Telephone Consumer Protection Act (TCPA)
Servicemembers Civil Relief Act (SCRA)
Unfair Deceptive and Abusive Acts and Practices 
Gramm Leach Bliley Act (GLBA)
Reg E (Electronic Funds Transfer Act)
Reg M (Consumer Leasing Act) 
Reg V (Fair Credit Reporting Act)
Reg Z (Truth In Lending Act) 

An established, experienced provider of managed servicing BPO collection management eliminates staffing headaches and helps ensure the collections process complies with all relevant auto lending rules and regulations. 

IT Infrastructure and Systems 

The best managed servicing BPO collection process providers invest in IT infrastructure and systems and continually update these resources to promote efficiency throughout all phases of the collection process. This gives them capabilities and capacity far beyond what most auto lenders can afford. Some of the specific ways that these IT resources and systems improve collection efficiency and effectiveness include: 

  • Fraud detection, which can help uncover discrepancies that can be early indications of eventual delinquencies or defaults.  
  • Integrated bankruptcy monitoring services, which provide automated notifications regarding accounts filing for bankruptcy.
  • Dialer workflows and communications channels optimized by segmenting delinquent accounts according to key attributes.
  • Business rules and workflows, which track and manage delinquent accounts.
  • Strategic predictive analytics using behavioral scoring and alternative data obtained through in-depth skip-tracing activities.

Behind the scenes, these systems are collecting data that are used to assess collections effectiveness and efficiency throughout all collections processes. Regular analyses of these metrics refine skip-tracing techniques, identify the most effective contact methods based on borrower behaviors, and fine-tune workflows to better meet changing collections needs. 

Best Practices in Collections Management 

The right IT infrastructure and systems are essential in enabling collections professionals to efficiently and effectively carry out their responsibilities. Equally important are the specific strategies and methods that the managed servicing BPO collection management provider has established. 

The most effective collection management takes a systematic approach in addressing each stage of the collection process. Activities in each stage of the process are supported by an integrated account servicing platform that facilitates extensive automation for critical tasks to boost efficiency and ensure consistent and compliant processes. The servicing platform provides experienced collection agents with the tools and information to support four distinct stages of the collection process. 

  • Missed First Payment: Focuses on early intervention and borrower education.
  • Early Stage: Involves communication strategies that utilize internal performance models to determine which channels—voice, email, text, chat, post—are most likely to be effective.
  • Mid-Stage: Segments delinquent accounts by key attributes and employs additional alternative data to improve dialer workflow efficiency.
  • Late Stage: Initiates the recovery process—legal, repossession, and settlement—when a delinquent account reaches a predetermined level.

Each stage uses data, automated processes, and the skills of collections specialists to implement best practices that have been developed, tested, and refined to minimize auto lending losses. 

Struggling With Your Collections Process? Think Managed Servicing BPO

Business process outsourcing is a growing trend among many industries. It allows a business to focus on its core business competencies and delegate non-core responsibilities to providers who have the resources, expertise, and experience. As collection volumes increase or the complexity of dealing with federal, state, and local lending regulations exposes you to unwelcome risk, many auto lenders are finding that replacing in-house collections with a managed servicing BPO collection process is the most effective way to improve collections efficiency without incurring higher operating costs. If you find yourself no longer able to efficiently and effectively manage collections, it’s time to think about BPO.

Getting Started

defi SOLUTIONS provides configurable lease or loan origination systems, loan management and servicing, analytics and reporting, and a wide range of technology-enabled managed servicing services. For more than 30 years we have been helping auto lenders collect more and minimize losses with proven processes and experienced recovery specialists. If you’re struggling to manage collections, contact our team today or register for a demo to learn how a managed servicing collection process can benefit you.

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