Ryan Collins, CIO & CTO In today’s auto lending space, most lenders and credit unions behave in two extremely opposite emotions according to the market conditions— aggressive during the good times and conservative in the strenuous times. Credit unions have become more conservative since the 2008-2009 Great Recession. Auto dealers are challenged to stay on course with the right funding when lenders’ approaches have been inconsistent. Most lenders prefer making auto loans to prime members instead of members with less-than-stellar credit based on the FICO score. Members with low credit scores are generally disqualified from borrowing. Texas-based Open Lending is changing the game through its Lenders Protection platform, a risk-management solution for making better lending decisions. Lenders Protection allows lenders to offer loans to nonprime borrowers with the confidence of secure recovery. “Lenders Protection has significantly improved auto-lending processes for financial institutions. Open Lending allows lenders a safe and sound way to make loans in lower consumer credit score tranches, increasing profitability for financial institutions and providing improved rates as well as consumer service for those who would otherwise turn to unscrupulous lenders,” says Ryan Collins, CIO and CTO of Open Lending.
Open Lending’s Lenders Protection is the only solution in the US that backs its proprietary underwriting with an embedded insurance wrapper. “This insurance aids financial institutions in mitigating risk while offering attractive rates,” according to Collins. The innovative solution allows banks and credit unions to model their specific overhead and funding costs and set a target return on assets for their insured portfolio, leading to a profitable auto loan portfolio with carefully managed pricing and risk characteristics.
Open Lending’s Lenders Protection is the only solution in the US that backs its proprietary underwriting with an embedded insurance wrapper
The highly professional team at Open Lending easily integrates the Lenders Protection solution with clients’ existing loan-decisioning systems for simplistic workflows that generate approvals within five seconds. That means banks and credit unions can be more consistent in their lending guidelines and generate business throughout the year, on- or off-season. Accordingly, dealers will send more prime business to our client lenders who offer a broader spectrum of loans compared to others.
“One of our differentiators is the valuable and unique dataset, ranging from 2003 to current, including the 2008-09 recession,” adds Collins. During the recession, numerous firms stopped lending or tightened up their underwriting guidelines. “We have captured all that data, including how the consumers’ responded during those arduous times,” he adds. During the recession, Open Lending’s customers still hit their expected ROA targets unlike others in the market. In 2010, following the Great Recession, Open Lending revamped its solution with an even more resilient underwriting model and priced it appropriately to handle any future recessions efficiently and effectively.
A case in point, a Texas-based bank approached Open Lending to overcome hurdles they were facing in terms of credit rating agency (CRA) credit requirements. The bank was not lending any money and was charging fees to nonprime consumers because of these CRA issues. “We are helping them through the CRA issue, and now, they are initiating a thousand transactions every month,” says Collins.
Moving forward, Open Lending strives to be at the forefront of innovation in the auto lending arena. “We were using a FICO-based model until last year. Now, we have brought in new and alternative data sources, such as looking at the borrower’s bank account to check that they have paid their bills. We take the FICO credit score and alternative data sources to derive our proprietary score, which we believe will be the successor to the auto-enhanced FICO score for auto lending,” Collins concludes.
AUSTIN, Texas, --Open Lending Corporation (NASDAQ: LPRO) ("Open Lending" or "the Company"), an industry trailblazer in automotive lending enablement and risk analytics solutions for financial institutions, today announced its nomination as a finalist for the 2023 Credit Union Times LUMINARIES awards in the Product Innovation category.
"We are proud of the dedicated partnerships we’ve developed with credit unions throughout the country to enhance vehicle accessibility, particularly among deserving, yet often overlooked, near- and non-prime consumers," said Keith Jezek, Chief Executive Officer, at Open Lending.
"Open Lending has written and insured over $20.2 billion in auto loans since our founding and we are nearing the certification of insurance on our one millionth auto loan in the coming year," added Kevin Filan, Senior Vice President of Marketing at Open Lending. "As we approach this milestone, we are mindful of the nearly one million stories that each of these auto loans and car ownership represents. The fulfillment of the dream of owning a car, the ability to take a better job, the improved quality of life that comes with personal mobility - all made possible with the hundreds of committed credit union partnerships Open Lending has cultivated. Our Lenders Protection™ product has made it possible for credit unions to automate the decisioning process to include scoring, structuring and pricing auto loans coupled with default insurance. The near- or non-prime applicant of today often represents the prime member of tomorrow when we can work together to ensure that that member has a loan he or she can afford, and the credit union has a solution that works for its institution."
The LUMINARIES program highlights individuals and organizations in the credit union industry who are achieving meaningful change by improving the lives of members, and the Product Innovation category acknowledges service and technology organizations of all sizes around the United States.
The winners will be announced at a ceremony on November 9, 2023, in Orlando, Florida, after the finalists have been reviewed by a diverse panel of judges across the credit union industry.