Loan Zone: Auto loan compliance

For financial institutions, avoiding risk completely is impossible. However, managing risk surrounding auto loans is definitely achievable with a well-developed collateral protection program. An effective program enables a financial institution to monitor and mitigate risk associated with procedures, processes, compliance and consumer-friendly services. The following overview of best practices and metrics should be considered when initiating and sustaining a collateral protection program.

1.    Implement fair premium rates. 
Noticing a premium added to a loan balance for lacking auto insurance can be stressful for consumers—especially when they are actually maintaining adequate insurance. Your program can prevent this type of stress by determining which consumers are truly insured. Adding a fair premium to consumers’ loan balances when they lack adequate insurance is necessary; the challenge is maintaining as low a rate as possible to be fair to the borrower while providing the financial institution with adequate coverage should something happen to the vehicle.

 

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