Open Lending Corporation (Open Lending) is a provider of lending enablement and risk analytics to credit unions, regional banks, finance companies and the captive finance companies of automakers. Open Lending, LLC and Lenders Protection, LLC are wholly owned subsidiaries of Open Lending.
The company's customers, collectively referred to herein as automotive lenders, make automotive consumer loans to underserved near-prime and non-prime borrowers by harnessing the company's risk-based interest r...
Open Lending Corporation (Open Lending) is a provider of lending enablement and risk analytics to credit unions, regional banks, finance companies and the captive finance companies of automakers. Open Lending, LLC and Lenders Protection, LLC are wholly owned subsidiaries of Open Lending.
The company's customers, collectively referred to herein as automotive lenders, make automotive consumer loans to underserved near-prime and non-prime borrowers by harnessing the company's risk-based interest rate pricing models, powered by the company's proprietary data and real-time underwriting of automotive loan default insurance coverage from insurers. The company serves 454 active lenders.
Lenders Protection Platform
The company's flagship product, the Lenders Protection platform ('LPP'), is a cloud-based automotive lending platform. LPP supports loans made to near-prime and non-prime borrowers and is designed to underwrite default insurance by linking automotive lenders to insurance companies. The platform uses risk-based pricing models which enable automotive lenders to assess the credit risk of a potential borrower using data driven analysis. The company's proprietary risk models project loan performance, including expected losses and prepayments, in arriving at the optimal rate. With five-second decisioning, LPP recommends a risk-based, all-inclusive interest rate for a loan that is customized to each automotive lender, reflecting cost of capital, loan servicing and acquisition costs, expected recovery rates and target return on assets. LPP risk models use a proprietary score in assessing and pricing risk on automotive loan applications. This score combines credit bureau data and Fair Credit Reporting Act ('FCRA')-compliant alternative consumer data to more effectively assess risk and determine the appropriate insurance premium for any given loan application.
LPP is powered by technology that delivers speed and scalability in providing interest rate decisioning to automotive lenders. It supports the full transaction lifecycle, including credit application, underwriting, real-time insurance approval, settlement, servicing, invoicing of insurance premiums and fees and advanced data analytics of the automotive lender's portfolio under the program. Through electronic system integration, the company's software technology connects the company to parties in its ecosystem.
A key element of LPP is the unique database that drives risk decisioning using data accumulated for more than 20 years. When a loan is insured at origination, all attributes of the transaction are stored in the company's database. Through the claims management process, the company ultimately obtains loan life performance data on each insured loan. Having granular origination and performance data allows the company's data scientists and actuaries to evolve and refine risk models, based on actual experience and third-party information sources.
Business Model
The company targets the financing needs of near-prime and non-prime borrowers, or borrowers with a credit bureau score generally between 560 and 699, who are underserved in the automotive finance industry. Traditional lenders focus on prime borrowers, where an efficient market has developed with interest rate competition that benefits borrowers. Independent finance companies focus on sub-prime borrowers. Borrowers who must utilize the near-prime and non-prime automotive lending market have fewer lenders focused on loans with longer terms or higher interest rates. As a result, many near-prime and non-prime borrowers turn to sub-prime lenders, resulting in higher interest rate loan offerings than such borrower's credit profile often merits or warrants.
The company operates a business-to-business model. The company's customers are automotive lenders. LPP enables automotive lenders to expand their lending guidelines to offer loans to borrowers with lower credit scores, potentially leading to increased loan originations and higher loan advance rates. LPP integrates directly with automotive lenders' existing loan origination systems, facilitating electronic delivery of all-inclusive loan rates in real-time to automotive lenders. LPP is designed to provide a real-time experience for automotive lenders that is intuitive and easy to use.
The company has exclusivity agreements with insurance carriers who provide default insurance to automotive lenders on individual automotive loans processed through LPP, which underwrites the risk on each loan application. The insurance carriers issue default insurance to the company's customers, thereby creating a direct contractual relationship between the insurer and the lender. The company allocates loan applications to insurance carriers based on pre-determined percentages, which are embedded within LPP.
The insurance carriers contract with the company's wholly owned subsidiary, Insurance Administrative Services, LLC ('IAS'), to perform claims administration and in turn pay the company administrative fees representing a portion of the insurance premiums paid by the automotive lenders. IAS provides continuity of customer service and allows for a seamless experience between LPP, insurance carriers and automotive lenders.
The company refers to loans facilitated through LPP as certified loans based on the date the loan is awarded to the consumer. The company generates revenue of approximately 4% of the balance on each certified loan. Revenue is consisted of program fees paid by automotive lenders for the use of LPP to underwrite loans; fees paid by insurers for claims administration services; and profit-sharing with insurers that provide default insurance to automotive lenders. Approximately 80% of the expected revenue is collected in the first 12 months after loan origination, with the balance consisted of administration fees and underwriting profit share that are realized over the remaining life of the loan.
Ecosystem
LPP enables the parties in the company's robust ecosystem to benefit from the ability to integrate with one another through the company's platform, which improves the volume and quality of lending options made available to both lenders and borrowers in the automotive market.
Automotive Lenders
The company's customers are credit unions, regional banks, finance companies and the captive finance companies of automakers that use LPP. The company's customers rely on the company to assist in insuring against loan defaults by pairing them with highly rated insurance companies that mitigate the added risk associated with lending to near-prime and non-prime borrowers.
The company supports new and used automotive loans originated through a number of channels, including direct loans where the customer interfaces directly with the lender, indirect loans through networks of auto dealers who work with the company's lenders, and in targeted refinance programs implemented by the company's lenders.
Insurance Carriers
As of December 31, 2023, the company partnered with three insurance carriers to provide auto loan default insurance policies for LPP certified loans. The company's carrier partners are required to maintain not less than 'A-' Financial Strength Rating by A.M. Best insurance rating company.
On December 31, 2023, the company's producer and claims service agreement with Continental Casualty Company ('CNA') expired. CNA will no longer provide auto loan default insurance policies for LPP certified loans. However, CNA will continue to service and provide claim funding for any of its existing default insurance policies for the remaining life of the loans associated with such policies. In 2023, the company transitioned its customers who previously used CNA to the company's other insurance carriers.
On February 15, 2024, the company entered into a program management agreement with Starstone Specialty Insurance Company, an affiliate of Core Specialty Insurance Holdings, Inc. ('Core Specialty'), to provide auto loan default insurance policies for LPP certified loans, from which the company expects to earn profit share revenue and claims administration fees.
Borrowers
The company addresses the financing needs of borrowers with a credit score generally between 560 and 699, also referred to as consumers. The company seeks to meet their specific needs by supporting lending opportunities through the use of LPP.
Government Regulation
State attorneys general, state licensing regulators, and state and local consumer protection offices as well as federal agencies (e.g., the Consumer Financial Protection Bureau) have authority to investigate consumer complaints and to commence investigations and other formal and informal proceedings regarding the company's operations and activities.
History
Open Lending Corporation was founded in 2000.
