Introduction
The world of auto finance is undergoing a profound transformation, particularly in how it manages data related to Finance and Insurance (F&I) products. In a recent AFSA Business Partner webinar, “Silos to Solutions: Building F&I Product Data Integrity in Auto Finance,” the discussion featured three industry veterans: Stephen McDaniel, CEO of F&I Sentinel; Samantha Miller, Group Manager at Toyota Financial Services and Matt Brink, Senior Vice President at Wells Fargo. The conversation illuminated the pervasive data integrity issues facing auto lenders today and outlined a path toward standardization and efficiency.
F&I Product Data is Disparate, Fragmented and Complex
When asked to describe the current state of F&I product data in a single word, the panel offered “disparate,” “fragmented,” and “complex.” These terms reflect a chaotic environment where data inconsistency is the norm.
As Stephen McDaniel explained, the core problem of disparate data lies in the context of refunds: “Dealers may call a particular F&I product company one thing, the F&I product company in a given state calls themselves something else. Yet what the lender is trying to do is an entirely different thing. This lack of standardization among these key stakeholders creates significant data challenges across the entire product lifecycle.”
The panel highlighted that the fragmentation is evident in seemingly simple details, such as the confusion between an administrator’s legal name and the trade name of a product that a consumer sees on documents. Furthermore, the consensus was that auto finance remains a “very manual” industry, leading to more operational risk and downstream data errors compared to more technologically advanced areas of consumer lending.
Siloed Systems
A core issue is the complicated ecosystem of systems, often completely siloed from each other, involved in the F&I product lifecycle. McDaniel listed several systems that touch the data, including the Contract Administrative System (CAS), the Dealer Management System (DMS), the Loan Origination System (LOS) and the servicing platform.
Crucially, originating and servicing arms often operate in siloed environments, and this internal disconnect within the lending institutions prevents a common language from being established, meaning data visibility and controls set at funding are frequently not connected to the loan servicing phase. McDaniel stated, “If the data is not standardized on F&I products throughout that entire life cycle… things get messy really, really quickly.” To see how regulatory demands are exposing these silos, read our Rocky Mountain Regulation update.
The Path Forward
Strategy Over Speed
The expert panel emphasized a strategic, collaborative approach rather than a quick fix as a solution to the problems. They noted that to prepare for technology integration, lenders must document and understand their business processes from their perspective as well as the dealer’s perspective, recognizing that the sales process is often non-linear.
Additionally, the panel agreed that true progress requires getting all stakeholders—lenders, F&I product companies and technology vendors (like RouteOne and CDK)—in the same room. McDaniel observed that once these parties understand the issues lenders face, a “light bulb turns on,” and they recognize that “this is fixable.”
Looking ahead, the panel advised lenders to develop a strategy to thoughtfully apply technology that closes data gaps and focuses on earlier integration in the sales process (often called “shifting left”) to ensure data quality from the start. And while AI holds great promise for efficiency, it should not be relied upon for compliance decision-making, ensuring a persistent need for human oversight in a complex and nuanced industry.
Taking Action
Proactivity is Key
In closing, the panel offered three actionable takeaways for auto finance leaders:
- Challenge the Status Quo: Use the current environment to enhance and refine controls, ensuring consumers are protected regardless of external regulatory pressure.
- Start Small: Begin immediately by bringing sales, originations, and servicing teams together to build a common language and understanding.
- Ensure Data Integrity at the Front Door: As Stephen McDaniel summarized, “Don’t try to solve the problem after the problem already exists.” By focusing on what is funded at the time of origination, lenders ensure they have the complete, standardized data required for easy servicing and compliant cancellations on the back end. His point is underscored in an episode of the AFSA Extra Credit Podcast, highlighting how data gaps and process breakdowns in F&I product funding lead to downstream servicing risks and refund exposure.
The information provided in this post does not, and is not intended to, constitute legal advice; instead, all information, content, and materials referenced are for general informational purposes only. Readers should contact their attorney to obtain advice with respect to any particular legal matter.
