Streamlining Credit Dispute Investigations for Auto Financing in 2019
Even amid rising interest rates, the U.S. automotive industry has seen continued growth in vehicle sales, with more Americans taking out loans to purchase cars than ever before.
For creditors and lenders, this means not only a higher volume of loan disbursements, but a higher volume of credit disputes to resolve. The challenge: manage credit disputes on a large scale, while keeping costs low and compliance high.
That’s where technology solutions like Sonnet come into play. An automated credit dispute resolution system centralizes data and streamlines workflows, so creditors and data furnishers can work smarter and faster.
More Sales, More Loans, More Delinquency
In 2016, vehicle sales reached an all-time high with 17.55 million vehicles sold in the U.S., and this number has only taken a slight dip to 17.27 million vehicles sold in 2018. Unsurprisingly, as the number of vehicles sold increased, so did the volume of auto loans. In the fourth quarter of 2018, 85.1% of new and 53.6% of used vehicle purchases were financed and auto loan balances reached $1.27 trillion, a record high for the industry. More people are buying more expensive cars and taking out larger loans for the purchases. And, many of these individuals are nonprime borrowers with credit scores between 601 and 660. A recent Experian report found that nonprime auto loan borrowers make up 19.2% of total vehicle risk distribution.
This increase in vehicle sales and auto loan disbursements has resulted in more borrowers taking on loans they cannot afford to pay. The Federal Reserve Bank of New York reported that more than 7 million Americans were 90 days or more behind on auto loan payments at the end of 2018. And, while Experian found that 30-day delinquency rates have improved over the past year, 60-day delinquency rates have gone up and make up 78% of all auto loan balances.
What Does this Mean for Data Furnishers?
Ongoing customer service is critical to the success of any data furnisher’s business, and a large part of this is managing credit disputes from borrowers and credit bureaus. Investigating disputes has historically been cumbersome for furnishers, requiring multiple steps and communication touch points between the furnisher, the credit bureau and the borrower.
And, the increase in auto loans and delinquency—particularly among nonprime borrowers—poses additional challenges. When an auto loan borrower files a credit dispute, the investigation process can be so lengthy that the borrower avoids payment responsibility and repossessions get delayed. Data furnishers then miss out on revenue and incur additional costs associated with facilitating the investigation.
Furnishers are looking for technology solutions to automate the credit dispute and investigation processes, so these processes are easier to manage and more beneficial to their business, especially given these changes in the auto finance market.
Palinode recognizes the challenges data furnishers face when it comes to managing credit dispute investigations surrounding auto loans. That’s why we’ve built Sonnet, our automated credit dispute resolution system.
Sonnet is a single-source platform that integrates with your indirect (e-OSCAR) and direct dispute workflows to minimize manual steps in the investigation. Below are some of the top benefits Sonnet provides furnishers looking to streamline credit dispute investigations, whether you receive disputes directly from borrowers or indirectly from bureaus.
Increased Productivity
By integrating with e-OSCAR, your system of record and other required sources (data repositories, etc.), Sonnet displays information from all systems on one screen. This means you don’t have to go back and forth between the different systems to find the dispute data you need. It’s all in one place, allowing you to work more efficiently. Additionally, the Sonnet Rules Engine highlights suggested responses for you to use based on your policies and procedures.
Sonnet allows you to focus on the discrepancies and newly submitted information in the auto loan investigation process, reducing the time spent on disputes by more than 50%. You and your team are then free to handle more mission-critical tasks for your business.
Improved Accuracy
With Sonnet, data furnishers minimize the risk for human error in processing the disputes. You’ll be able to see all the auto loan data you need in one place and more easily review it for validity as you review the dispute.
Additionally, we work with you to determine which manual steps in the investigation should be automated. When automation is applied, it cuts down on the opportunities for staff members to make data processing mistakes that impact the status and timing of the resolution.
Greater Compliance
Through automation, Sonnet makes it easier to complete the requirements of all regulatory agencies involved in your disputes.
For example, Sonnet’s built-in response time monitoring keeps you accountable to the Consumer Financial Protection Bureau (CFPB) regulation requiring furnishers to respond to each dispute within 30 days. Additionally, our system does not allow an investigation to be completed unless a user has viewed any dispute images — a measure that helps ensure you’ve adhered to the CFPB regulation for demonstrating “reasonable investigation.”
Sonnet also keeps a seven-year history log of each dispute you encounter. The log tracks every step of the automated and manual processes, and date/time stamps each event in the investigation. This documentation allows you to easily reference and report on disputes for compliance.
Faster Resolution
Increased productivity, improved accuracy, and greater compliance all equate to faster resolution times—something everyone wants. Resolving disputes quickly can lead to higher customer satisfaction and stronger partnerships with credit bureaus.
And for you, it means a healthier cash flow. Sonnet helps you move disputed accounts into a “Ready to Collect” status more quickly so you can start receiving payments on the auto loans that had been paused during disputes.
Partner with Palinode
The Palinode team is ready to help you better manage your credit disputes as you take on more and more auto loans. We’d love to show you how Sonnet integrates with your direct and indirect dispute workflows to support your business. Request a demo of Sonnet today, and we’ll tell you all you need to know about the system.