As the industry braces for an economic slowdown next year, the financial health of dealerships, fraud and data security are hot issues for auto lenders.
The following topics were among those discussed at an annual conference of leaders of associations such as the National Automobile Dealers Association and the American Financial Services Association.
Dealerships' financial health: Chuck Jones, AFSA's vehicle finance division chairman, said major auto lenders must maintain communication with their dealer partners to ensure the retailers are planning ahead for a sales slowdown.
"You want to support them in good times and bad, and that's regular communication. It's not someone who just rushes in when they see a downturn," said Jones, head of national indirect lending at SunTrust. "If you have to go out when something's already happened, you're already too late. You haven't served the customer or the dealer."
In addition to meeting regularly with dealers, lenders should thoroughly scan the deals submitted to the bank to monitor changes in behavior, Jones said. For example, if a dealership starts submitting deals that differ from its initial strategy, lenders should ask why.
Fraud: Auto lending fraud will be a consistent issue in the industry, Jones said. Old-school fraud schemes, such as credit washing, a type of fraud in which customers falsely report identity theft to remove legitimate trade lines from their credit report, will remain prevalent, Jones said. And synthetic identity fraud will also climb during an economic downturn, he added. Synthetic identity fraud occurs when criminals cobble together real and fake personal information to make fraudulent auto purchases.
"As you start to see an economic slowdown, people are going to be desperate and do desperate things," Jones said.
Privacy and data protection: Safeguarding customers' personal data will also be top of mind for auto lenders, particularly with the adoption of laws such as the California Consumer Privacy Act. Jones said policymakers should solicit feedback from leadership across the industry to ensure consumer data is protected wherever lenders and dealers operate.
"Hopefully as an industry, we can come together with some common and definite regulations that cross countries and states, and protect consumers effectively and efficiently," Jones said.
F&I product compliance: Ensuring consumers understand that F&I products are optional is another long-standing focus for NADA and AFSA that Jones said the industry must continue. Jones said SunTrust in particular shares data with regulators on how guaranteed asset protection has benefited customers.
Tariff concerns: Tariff concerns will likely continue further into 2019, Jones said. Tariffs on import vehicles and parts add costs that many segments of the auto industry will be forced to absorb. "It really impacts us," Jones said. "Anytime there are tariffs or a trade dispute, it doesn't impact just the dealership." It also affects dealerships' and lenders' common customer base, he said.