Credit Risk

How BHPH Dealers can Reduce Delinquent Payments

How BHPH Dealers can Reduce Delinquent Payments

July 23, 2020 | Ashley Morris

BHPH Lenders Need Alternative View of Customers' Ability to Pay

It's paramount to keep sales moving during this time, not only for franchised dealers, but specifically for Buy Here Pay Here (BHPH) dealers. BHPH dealers are unique because many act as both dealer and lender, meaning they underwrite and fund their loans while managing their own portfolio of clients. They focus on consumers in subprime and deep subprime -- and payment frequency is key for the BHPH business model. Therefore, BHPH lenders need  a better understanding of their customers’ ability to pay.

Standard credit data doesn’t always tell the whole customer story. BHPH dealers need an alternative view of the consumer, especially when funding loans for consumers who have less than perfect credit or a thin credit file. Knowing if a consumer is financially stable could help BHPH dealers make better lending decisions and ultimately minimize payment defaults.

Consumers' Debit History Reveals Key Insights

Lenders and dealers depend on predictive data to make informed lending decisions. Specifically, they can access a consumer’s entire debit history before funding. This allows them to identify which consumers will most likely fulfill their loan obligations. ChexAdvisor from DataX FIS™ captures debit-related data, complementing the DataX Credit Report. It creates a thorough financial record of the consumer using wide-ranging historical and up-to-date debit information. 

Use Alternative Data for Portfolio Management

Dealers can manage their ongoing opportunity and risk management with existing accounts by incorporating DataX data into their portfolio review. With visibility into non-traditional data, dealers gain additional insight to help drive more confident decisions and improve overall credit portfolio performance. DataX can also be leveraged to make more informed organic re-marketing decisions.

This can be especially critical in helping BHPH dealers determine a customer’s ability to pay on time, thus minimizing delinquencies down the road. According to Agora Data as published in Auto Remarketing2, auto delinquencies and payment recency specific to the BHPH industry has grown an average of 19 days from  March from March 18, 2020 to 21 days on April 20, 2020. Recency is known as the number of days since an actual payment has been made.

Get More Effective Customer Verifications Up Front

It is important for BHPH dealers to gain access to accurate, valid banking information up front. Preserving the dealer’s bottom line depends on the ability to capture and process customer payments on time.  Leading bank account verification solutions from DataX help minimize financial losses and protect dealers against attempted fraud with respect to:  

  • Validating account status in real time before submission of payment processing, reducing losses from inaccurate data, returned items and fraudulent transactions
  • Confirming an account is active to lower reject rates
  • Reaching beyond traditional bank account verification tools that only check account status

Bank account verification further helps dealers by checking the account status and returning a broad spectrum of detailed positive and negative account information. This data not only determines whether the account is in good standing, it also describes a returned negative result.

Understanding the basis for a negative indicator is advantageous, especially when providing applicants an explanation for a decline. This gives dealers an opportunity to help consumers correct the issue(s) and resubmit their application.