Bank of America Ends $345M Third-Party Origination Contract, Prioritizes Brand Loyalty | Auto Finance News

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Bank of America is anticipating a “moderation” in its auto loan growth due to the termination of an agreement to purchase up to $345 million from an undisclosed auto loan originator in 2018, Chief Financial Officer Paul Donofrio said during the second quarter earnings call last week.

The move is part of the bank’s efforts to work more closely with consumers through its in-house digital channels and build brand loyalty. “[Let’s say consumers] got an auto loan with Bank of America and if they were impressed with the service they may get a credit card with us, they may get a checking account with us, they may get a mortgage with us,” a spokesman told Auto Finance News. “There are a lot of opportunities there, whereas if you’re working with a third party and you’re providing financing for that third party, the customer’s relationship with Bank of America doesn’t come out directly.”

In the first quarter, Bank of America terminated the signed December 2017 agreement, but the bank hasn’t disclosed the identity of the lender, according to the bank’s latest 10-Q filing. The agreement started in late 2016 with a commitment to purchase up to $475 million worth of loans originated by the lender last year. Bank of America extended the agreement for a lesser amount in 2018 but in the first quarter exercised its right to terminate the contract.

“The recent moderation in the consumer growth rate is driven mostly by auto loans given our decision to focus on organic growth,” Donofrio said during the earnings call. “We expect auto growth to be flat to down as we focus on organic growth and rely less on third-party [flows].”

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Source : AutoFinanceNews