Santander Consumer USA Holdings Inc. and its subsidiaries operate as a specialized consumer finance company that focuses on vehicle finance and third-party servicing and delivering service to dealers and customers across the full credit spectrum.
The company’s primary business is the indirect origination and servicing of retail installment contracts and leases, principally through manufacturer-franchised dealers in connection with their sale of new and used vehicles to retail consumers. Santand...
Santander Consumer USA Holdings Inc. and its subsidiaries operate as a specialized consumer finance company that focuses on vehicle finance and third-party servicing and delivering service to dealers and customers across the full credit spectrum.
The company’s primary business is the indirect origination and servicing of retail installment contracts and leases, principally through manufacturer-franchised dealers in connection with their sale of new and used vehicles to retail consumers. Santander Auto Finance is the company’s primary vehicle brand and is available as a finance option for automotive dealers across the United States.
Since 2013, under the ten-year master private-label financing agreement with FCA US LLC (FCA), the company has operated as FCA’s preferred provider for consumer loans, leases and dealer loans, and provides services to FCA customers and dealers under the Chrysler Capital (CCAP) brand. These products and services include consumer retail installment contracts and leases, as well as dealer loans for inventory, construction, real estate, working capital and revolving lines of credit.
The company also originates vehicle loans through a web-based direct lending program, purchases vehicle retail installment contracts from other lenders, and services automobile and recreational and marine vehicle portfolios for other lenders. Additionally, the company has other relationships through which it provides other consumer finance products. All of the company's personal lending assets are classified as held for sale as of December 31, 2020.
As of February 22, 2021, the company was owned approximately 80.2% by Santander Holdings USA, Inc. (SHUSA), a wholly-owned subsidiary of Banco Santander, S.A. (Santander), and approximately 19.8% by other shareholders.
Products and Services
The company offers vehicle-related financing products, primarily consisting of consumer loans and leases, and servicing of those assets.
Consumer Vehicle Loans
The company’s primary business is to indirectly originate vehicle loans through automotive dealerships throughout the United States. It has a substantial dealer network, most of which consists of manufacturer-affiliated or large and reputable independent dealers. The company’s agreements with dealers place a limit on the amount of the finance charges they are entitled to retain. Although the company does not own the vehicles it finances through loans, it holds a perfected security interest in those vehicles.
The company also originates loans through its branded online RoadLoans.com platform. Additionally, the company acquires loans in bulk from third parties. The loans acquired in bulk acquisitions have primarily been collateralized by automobiles. The company generates revenue on these loans through finance charges.
Vehicle Leases
The company acquires leases primarily from FCA-affiliated automotive dealers and becomes titleholder for leased vehicles through a titling trust. The acquisition cost for these leases is based on the underlying value of the vehicle, the contractual lease payments and the residual value, which is the expected future value of the vehicle at the time of the lease termination. It uses projected residual values that are estimated by third parties, such as automotive lease guide and internal forecasts based on current market conditions, and other relevant data points. The company is a preferred provider of subvented leases through CCAP. Substantially all of these leases are to prime consumers. The company’s leases are primarily closed-ended, meaning the consumer does not bear the residual risk. It generates revenue on leases through monthly lease payments and fees.
Servicing for Others
The company services a portfolio of vehicle loans originated or otherwise independently acquired by SBNA and loans sold by the company to Santander or other financial institutions. The company also services loans sold through flow agreements, through CCAP off-balance sheet securitizations and from other loan portfolios for various third-party institutions. It generates revenue on these assets through servicing and other fees collected from the institutional owners and the borrowers, and may also generate a gain or loss on the sale of assets.
Origination and Servicing
Vehicle Finance
The company’s origination platform delivers automated 24/7 underwriting decision-making through a proprietary credit-scoring system designed to provide consistency and efficiency. Every loan application received is processed by the company’s credit scoring system. The company’s credit- scoring system is supported by an extensive market database that includes multiple years of historical data on the loans that it has acquired, as well as extensive consumer finance third-party data.
The company’s servicing activities consist of processing customer payments, responding to customer inquiries (such as requests for payoff quotes or complaints), processing customer requests for account revisions (such as payment deferrals), seeking to maintain a perfected security interest in the financed vehicle, monitoring vehicle insurance coverage, pursuing collection of delinquent accounts, and remarketing repossessed or off-lease vehicles. The company has made significant investments in staffing and servicing systems technology intended to make servicing activities compliant with federal and local consumer lending rules in all jurisdictions in which it operates.
The company, through its servicing platform, seeks to maximize collections while providing outstanding customer service. The company’s servicing practices are integrated with the originations platform, resulting in an efficient exchange of customer related data, market information and understanding of the latest trends in consumer behavior. The company validates its models with data back-testing and can update the models to reflect new information received throughout the company, such as new vehicle loan and lease applications, refreshed consumer credit data, and consumer behavior observed through servicing operations.
The company provides multiple convenient customer communication methods aiming to meet customers at their communication channel of choice, and has implemented strategies to monitor and improve the customer experience. In addition to live agent assistance, the company’s customers are offered a range of self-service options via an interactive voice response system and through its customer website, which are continually reviewed to improve the user's experience. Self-service options include demographic management (such as updating a customer’s address, phone number, and other identifying information), payment and payoff capability, and payment history reporting, as well as online chat and communication requests. The company also has self-service functionality that can be activated on the website during natural disasters to help process requests for customer assistance, such as payment deferrals.
The company’s analytics software converts speech from every call into text so that each conversation with a customer can be analyzed and subsequently data-mined. This is used to search for specific words or phrases to identify if the appropriate actions were taken, as well as to identify opportunities for process enhancements.
Strategy
The key elements of the company’s strategy are to organic growth in indirect auto finance; and continue to expand fee-based income opportunities through its relationship with Santander and Santander Bank, N.A. (SBNA) and other consumer financial institutions.
Seasonality
The company’s origination volume is generally highest in March and April each year (year ended December 31, 2020) due to consumers receiving tax refunds, which provides additional discretionary income. The company’s delinquencies are generally highest in the period from November through January due to consumers’ holiday spending, which reduces income available for car payments.
Intellectual Property
The company has the right to use the Santander name on the basis of a non-exclusive, royalty-free, and non-transferable license from Santander, which only extends to uses in connection with the company’s current and future operations within the United States.
In connection with the company’s agreement with FCA, the company has been granted a limited, non-exclusive, non-transferable, royalty-free license to use certain FCA trademarks, including the term ‘Chrysler Capital’.
In connection with the 2008 acquisition of Roadloans.com, a direct-to-consumer online platform, the company purchased the ‘Roadloans.com’ trade name, which constitutes an intellectual property right.
Supervision and Regulation
The company is subject to inspections, examinations, supervision, and regulation by the U.S. Securities and Exchange Commission (SEC), the Consumer Financial Protection Bureau (CFPB), the Federal Trade Commission, and the U.S. Department of Justice and by regulatory agencies in each state in which the company is licensed.
In addition, the company is directly and indirectly, through its relationship with SHUSA, subject to certain banking and financial services regulations, including oversight by the Office of the Comptroller of the Currency, the European Central Bank, and the Federal Reserve Bank of Boston.
The Dodd-Frank Act (Comprehensive financial regulatory reform legislation enacted by the U.S. Congress on July 21, 2010) established the CFPB, which has regulatory, supervisory, and enforcement powers over providers of consumer financial products and services, including the company, and explicit supervisory authority to examine and require registration of non-depository lenders and promulgate rules that can affect the practices and activities of lenders.
The company is also subject to risk retention rules promulgated under the Dodd-Frank Act, which generally require sponsors of asset-backed securities (ABS) to retain at least 5% of the credit risk of the assets collateralizing the ABS issuance.
The company is subject to final rules adopted by SEC known as ‘Regulation AB II’.
History
Santander Consumer USA Holdings Inc. was founded in 1995. The company was incorporated in the state of Delaware in 2013.
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