This article was originally published on AFSA.
Rising inflation.
High vehicle prices.
Escalating monthly payments.
These conditions are leading to financial stress for borrowers, and as a result, loan defaults are increasing. Lenders are in a precarious position to support borrowers while protecting their portfolio. Here are three key risk management areas to keep in the forefront in 2023.
A Repossession Renaissance
Repossession activities are back on the table and Cox Automotive reports that repossessed vehicle sales are trending towards normal (i.e., pre-pandemic levels). As repossession activities resume, the CFPB remains firm in its guidance on vehicle recovery best practices, particularly wrongful repossessions.
Despite repossession activity resuming, the industry is facing a rapid decrease in collection and repossession vendors, with many closing their doors due to ongoing pandemic-induced economic effects. Fewer resources combined with increased demand is resulting in significant hikes in service fees.
Refund Restitution
Regulators continue to heavily focus on compliant refund processes for ancillary products that no longer benefit the borrower. GAP, in particular, remains in the regulatory spotlight – both on the Federal and state level. California recently implemented a notable law that adds new requirements to the sales and administration of GAP.