The industry is seeing a formidably high percentage of auto loans in late-stage delinquency: a whopping 1.60%, as of Q2 2023. Defaults in general are .20% higher this year compared to 2022. As consumers amass more credit card, medical, and student loan debt, auto loans tend to get knocked out of the budget. High interest rates are also making monthly payments eclipse budgets for many deep and subprime borrowers.
As auto loan defaults rise, it is critical to locate collateral in a timely manner. License plate recognition technology is changing the recovery game by doing just that. Here’s how this technology builds the story of a vehicle - where it’s been, where it may be going, and how to make contact with borrowers to ultimately cure more loans.
- “Smile, you’re on camera.” Capturing vehicle data with LPR technology.
License plate recognition (LPR) technology is placed in agent vehicles to take still images of the front and back of a license plate, as well as the side of the vehicle. These images can be captured on a vehicle with speeds up to 60 MPH, from 100 yards away. The technology scans the license plate information into an algorithmic software that extracts the geolocation of the vehicle (including latitude and longitude) and the time and date of the sighting. This extracted data is stored in a central data hub and can be compared to historical data. - Anybody home? The significance of address verification.
At the height of the pandemic, risk experts assumed that we would see an uptick in vehicles no longer residing at the address on file. Little did we know how significant that uptick would be. In a migration study, DRN discovered a 125% increase of borrowers found more than 50 miles from their given address. As remote work continues long beyond the pandemic, less vehicles are residing at the address on file.
License plate sightings build the story of a vehicle. It tells where the vehicle has been historically sighted compared to where it is currently. Is the vehicle in the same state that is listed on the loan file? Or even the same address? More and more LPR technologies gather data across states to capture the entire vehicle journey. Without cross-state data financial institutions won’t be able to find every vehicle that has moved. - Don’t miss a beat. Building the vehicle journey story.
As soon as a borrower misses one payment, your collections team should waste no time in initiating the recovery process. In early-stage delinquency license plate sightings data can be leveraged to cure the loan and create a payment plan. The earlier that borrower contact can be made, the better the chances of creating a payment plan.
However, the recovery journey often requires multiple attempts to reach the borrower. If contact with the borrower can be made, the data uncovered from LPR can support truthful conversations. For example, “you mentioned that your vehicle is in ABC, but we picked up your license plate in XYZ.” These data points can encourage honesty and help work towards a workable payment plan with the borrower. This brings numerous efficiencies to the recovery process. License plate recognition technology can keep track of your portfolio from the first loan missed through loan payoff, so your recovery team never misses a beat. - Leverage data for recovery decision making.
Across the board, data is driving better decision making. Specifically, knowing where your collateral is located is a data point for recovery decisioning. License plate data that is fed into a data hub, like DRN’s analytics platform, can be used to complete the recovery process. For example, if a vehicle hasn’t been recently sighted with LPR, a reverse VIN lookup can be done to determine where the vehicle was last sighted. These data points can help locate vehicles that are in late-stage delinquency and are nearing charge-off. LPR data also builds year over year, creating deep data that can be used as a roadmap to locate the hardest to find vehicles and make swifter recovery decisions in the long game. - Find what is lost (or charged-off) for safe asset recovery.
When repossession becomes the necessary next step, LPR data can be given to repo agents. Public record data only tells a partial story, so agents with access to geolocation and timestamped vehicle sightings are more likely to succeed in recovery.
This is vital as repossession agencies are becoming more scarce. In fact, this time last year there were 30% more repo agents in the market than there are today. If your financial institution can offer agents competitive rates paired with vehicle sighting data, your jobs are more likely to get worked.
Have legal concerns? Using compliant LPR technology helps lenders compliantly find, settle, and charge-off a repossessed vehicle, without fear of legal backlash. - Helping drivers keep their vehicles.
When contact with the borrower can be made, and honest conversations lead to the loan being current, drivers ultimately get to keep their vehicles. This is powered by license plate recognition data that goes beyond publicly available contact information.
More contact made means more loans cured, making for less loss and less need for outsourced skip tracing and repossession services.
If your risk management team is finding that auto delinquencies on your portfolio are rising, it is time to rethink your recovery strategy. Consider how implementing license plate recognition technology could help delinquent drivers – and your portfolio.
Download this risk checklist to make sure your financial institution isn’t missing any critical risk management protocols.
About DRN Data
DRN Data is a leading provider of license plate recognition technology and data solutions for financial institutions, helping users to manage their portfolios, collections, recovery, and fraud challenges. With DRNsights, an industry-leading analytics platform, users can access comprehensive vehicle stories based on LPR data. With over 2.5 million vehicles recovered and valued at more than $25 billion, DRN is a trusted partner of some of the largest industries, including lending, collections, repossession, insurance, auto recall, commercial, and crime prevention and security.