White River Capital, the corporate parent of a large subprime automobile finance company, has announced that it will be acquired by California private equity firm Parthenon Capital Partners.
White River Capital owns Coastal Credit. Based in Norfolk, Coastal focuses on making car loans to car dealerships. In turn, dealers use those dollars as a means for offering in-store financing. RVR than assumes the receivables going forward.
In 2011, sixty percent of loans held by Coastal Credit were made to service members. Coastal has relied upon the allotment system as a means to lower their default rates:
Coastal Credit believes that having in its portfolio a significant percentage of contracts for which the borrowers are United States military personnel contributes to lower payment delinquency and higher collection personnel efficiencies. Coastal Credit requests all borrowers who are in the military to use the military allotment system to make payments on their contracts. Under this allotment system, the borrower authorizes the military to make a payroll deduction for the amount of the borrower’s monthly contract payment and to direct this deduction payment to Coastal Credit on behalf of the borrower. Delinquency of payments on contracts paid by allotment historically has been less than delinquency of payments on contracts not paid by allotment.
Provided that the customer consents, allotment is a viable and legal means of taking payments.
Service members have additional consumer protections under the Servicemen’s Civil Relief Act.For a company like Coastal, where such a large portion of overall revenues are derived from contracts with members of the military, compliance with lending laws becomes a chief requirement to maintain as an ongoing enterprise.