Note: Descriptions are shown in the official language in which they were submitted.
CA 02955335 2017-01-16
Application number / Numero de demande : (9 cis sS
5.
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Unscannable items received with this application
(Request original documents in File Prep. Section on the 10th floor)
Documents recu avec cette demande ne pouvant etre balayes
(Commander les documents originaux dans la section de la preparation des
dossiers au 10' Rage)
CA 02955335 2017-01-16
1
ABSTRACT
A method and process of Automated Loan Underwriting to provide Guaranteed Loan
Approvals with specific dollar values and no requirement for any consumer
personal information, while simultaneously significantly mitigating risk for
the
lender beyond normal industry standards. The method and process will also
include
complete loan profiles with interactive loan variables.
Field of Invention
The method and processes are related to financial services whereby financing
is
provided to consumers who would not normally be able to obtain financing for
repairing
or improving the condition or value of their owned passenger vehicles.
What is claimed is:
The method and process will provide consumers and vendors key information for
the
decision making process of obtaining required Guaranteed Loan Approvals, with
Maximum Loan Amounts stipulated, to proceed with decision making regarding
financing for Passenger Vehicle mechanical repair, or improvement. Consumers
will not
have to present themselves, or any personal information, to a vendor or lender
to obtain
a Guaranteed Loan Approval with Loan Maximum Amounts. This is a complete
departure from all normal credit issuing methods and processes. The consumer
remains
completely anonymous as they acquire the Guaranteed Loan Approval with a
Maximum
Loan Amount stipulated. The Guaranteed Loan Approval with Maximum Loan Amount
is
valid for use by the lawfully registered owner of the vehicle
BACKGROUND OF THE INVENTION
NORMAL CREDIT UNDERWRITING AND LOAN APPROVAL PROCESSES:
Onerous Application Process ¨ Lenders to consumers with good credit histories
are
able to easily make lending decisions based primarily on an applicant's credit
score.
However, even then, lenders do require substantial personal information as
well.
The credit-challenged demographic in Canada is represented by the following
statistics:
(a) 56% of consumers have poor or no credit.
(b) 64% of consumers do not have $1,000 in savings.
http://www.forbes.com/sites/maqqiemcgrath/2016/01/06/63-of-americans-dont-have-
enough-savings-to-cover-a-500-emerqencv/#2715e4857a0b16466d896dde
(c) 76% of consumers are living paycheck-to-paycheck.
(d) 46% of consumers could not cover an emergency expense of $400 without
selling something or borrowing money.
(e) 16% or 3.5 million sub- prime consumers in Canada statistics. DealerTrack
reported that annually 600,000 non-prime consumers apply for an automotive
related loan annually, but 88% are declined.
CA 02955335 2017-01-16
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56% of Canadians are within $200 per Month of Not Being Able to Pay Their
Bills",
Februaty 15, 2016 Financial Post See article --
http://business.financialpost.com/news/economy/nearly-half-canadians-within-
200-a-
month-of-being-unable-to-pay-bills-poll-finds
(f) 40% of consumers do not have credit cards
Most credit-challenged consumers have poor credit scores, therefore lenders
require a
significantly larger amount of personal information and paperwork -- i.e.,
income
verification (pay stubs), tax returns, social security numbers, employment
confirmations,
residence confirmations, personal references, lease agreements, utility bills,
down
payments, co-signers, etc. -- to make a lending decision.
The application and approval process can take hours or even days for both the
borrower and lender. For the lender the process to issue a loan approval is
subjective
and labor-intensive. For the credit-challenged-consumer, the application
process is
usually onerous, invasive and stressful. A high percentage of applications
from credit-
challenged consumers will not qualify for financing because they expect to be
declined
and do not want to go through a rigorous application only to be embarrassed.
CONVENTIONAL LOAN APPROVALS ARE BASED ON
CONVENTIONAL UNDERWRITING
Loan underwriting is the process a lender uses to determine if the risk of
offering
a loan to a particular borrower under certain parameters is acceptable:
Conventional Underwriting is the process that is undertaken to analyze all of
the
information provided by each loan applicant and their credit file to assess
whether or not
that applicant meets minimum loan approval criteria.
As part of that process all data is verified, analyzed and summarized to paint
a picture
of each applicant.
An underwriting review of each case is done to assess the likelihood of
borrowers
making their required payments based on both the current affordability of the
loan and
their financial past. This means that they only approve loan applications
where it is
clear loan repayments are affordable, based on the applicant's income and
outgoings,
for the term of the loan, and that the applicant has a strong record of
managing credit
in the past.
An underwriter will review everything. This begins with the declarations on
the
application form. The key characteristics considered are age, employment
status,
income, how long in current property, residential status, loan amount, loan
purpose
and how many earners there are in household.
CA 02955335 2017-01-16
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Underwriters use electronic identification procedures by connecting directly
with
Equifax, or other credit reporting agencies, to verify identity and payment
history
performance.
They compare key credit data such as mortgages, loans, credit cards and bank
overdraft records against those disclosed by you in the application. They also
review
how many other financial services companies have searched the customer and
look at
the customer's financial associations (other people that you share a financial
relationship them).
The credit search shows payment history as reported by other lenders and
validates
whether they have had any adverse credit in the past. Even late payments are
reported on a credit search and can adversely affect your application.
They often ask for copies of recent bank statements or down payments during
the
underwriting process. Doing this helps them to understand how well the
customer
manages their money. Bank statements also allow confirmation of the following
information:
= Full name and address
= Salary and whether they are on a regular basis and are a regular amount
= General transactional history and whether regular payments are made to
credit
agreements
= Any recent unpaid or reversed transactions
= Credit payments not disclosed on your application form
= Evidence of short-term high-cost credit usage (for example payday
lending) or
excessive online gambling
= Outgoing day-to-day costs, spending habits and ongoing obligations
= Use of authorized credit limits
Once they have verified income, outgoings and credit history, they use an
objective
mathematical formula to calculate the affordability score and creditworthiness
score.
The results of these calculations allow the assessment of the following:
= What is the value of total debt outstanding? Is this sustainable and
reasonable in
comparison to annual net income?
= Is the loan affordable based on compulsory financial obligations,
including the loan
applied for when compared against income?
= Is there sufficient disposable income after all commitments and living
expenses are
taken into account?
CA 02955335 2017-01-16
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On occasion the underwriter will ask for further information, for example pay
slips if net
income is or cannot otherwise be verified. Underwriters may also ask for
clarification
of detail from the applicant's documents or disclosures.
Lenders use a risk model to determine the price of a loan for each individual
applicant.
They consider all of the data and information described above to assess how
likely it is
that the customer will meet all of the loan repayments. To do this they also
look at
various key characteristics ¨ for example if they own their own home since
experience
shows that the risk of default is lower, and therefore the APR (Annual
Percentage
Rate) offered will likely be lower.
At the other end of the scale, applicants who display signs of a transient
nature, for
example renting at a number of different addresses over the past few years,
are
inherently riskier and therefore the cost of their loan will be higher or
declined.
Each loan application is meticulously underwritten by underwriting
professionals. If
they cannot establish creditworthiness or that the loan is affordable then
they will be
unable to accept the loan application. Ultimately the approval of a loan
becomes a
subjective decision to a significant degree, requiring extensive personnel
experience
and specific application review.
A conventional Loan Application is a labor intensive and time consuming
process for
the lender and an onerous and anxiety filled task for a loan applicant.
"Asset-based Underwriting" Process for Subprime Consumers Needing Financing
For Auto Repair or Improvements
Consumer Credit:
Finance companies make lending or underwriting decisions to consumers based on
a
consumer's credit profile or score.
There are several credit scoring software companies that track consumer's
payment
history, debt load etc. to determine a consumers credit score.
The leading credit scoring company is "FICO" founded in 1956 by software
engineers
Bill Fair and Earl Isaac (Fair Isaac Company of FICO). FICO is a NYSE company,
has
100's of patents and pending patents protecting their proprietary software and
generate
almost a billion dollar annually selling credit score data to lenders who make
trillions of
loans based on FICO credit scores
CA 02955335 2017-01-16
Based on their credit score consumers generally have two types of credit
profiles 1)
prime credit and 2) subprime credit
Prime credit consumers can access traditional financing from banks, credit
card
companies, car manufacturers, etc.
Subprime Credit Consumers:
Subprime Credit Consumers (or Credit-challenged consumers) cannot access
traditional financing and must rely on alternative financing companies, many
of which
are predatory lenders (payday loans, title loan companies, etc.) charging
interest rates
ranging from 60% to 750%.
Credit-challenged consumers are a large demographic representing 56% of all
consumers. 88% of credit applications from sub-prime credit consumers are
declined
Subprime Credit Car Purchase Lending -- Car loans to subprime consumers is a
large business. Approximately 35% of all used cars sold are to subprime credit
consumers who need financing.
Problems for Subprime Consumers and Vehicle Repair Service Centers:
A major trend in recent years in the auto repair industry is as cars have
become more
technology advanced car vehicle repairs have become more expensive with a
major
repair costing in the $2,000 to $4,000 range
Subprime consumers own the majority of older cars, with most out of warranty.
A
serious problem for these consumers is a major car repair. Most times it is
unexpected
and can cost $1,000's of dollars. A recent survey showed that over 60% of
consumers
have less than $1,000 in the bank.
Subprime consumers not being able to afford a major vehicle repair is also a
large
problem for auto repair service centers. Approximately 33% of quotes written
are not
acted on because the consumer cannot afford the repair and does not have
access to
financing. Unacted upon repair quotes cost the auto repair industry billions
of dollars
annually in Canada alone.
Automotive Repair Service Centers in Canada operate at 55% of capacity. 50% of
required work not being done is due to consumers being unable to afford the
cost and
inability to finance the required work.
Unlike the automobile sales industry, where all vendors of automobile have an
in-
CA 02955335 2017-01-16
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house financing provision via 3rd party lenders, the auto repair industry has
no such
provision. The repair industry is not as mature or sophisticated, therefore
are unable to
manage consumer financing at point of sale as the auto sale industry does. To
incorporate point of sale financing to the auto repair industry it is
necessary to
automate the entire process as much as possible, and in such a manner as
results and
processes are completed with minimal work required by the service center. The
most
time consuming process obtaining financing is the application and approval
process.
Whereas financing and purchasing of an automobile is usually a decision and
action of
choice, the repair of an expensive auto repair is usually unexpected and
requires
immediate decision making and action. An automated underwriting method and
process is crucial to expediting the required decisions and actions under the
duress
resulting from lack of time and money.
Additionally is important to note the dollar volume of financing provided in
the used
auto sales industry makes the employment of full time finance managers a
viable
option. Where the auto dealer may originate $20,000.00 to over $100,000.00 a
day in
3rd party loans, a very large and successful repair service center may only
average
$500.00 to $1500.00 a day in loan originations. It is therefore crucial to
provide fast
efficient automated systems and methods to minimize administration costs
normally
associated with having an in-house finance manager.
PRIOR ART:
There are over 49,000 financial services providers in Canada and a
proportional number
in the United States. None of them will provide a written Guaranteed Loan
Approval,
including a Maximum Loan Amount without various and sometimes significant
amounts
of personal information on the prospective borrower.
It is common to see signing and advertising claiming such things as "No Credit
Checks",
"Guaranteed Approvals", "Everyone Approved", etc. However, in all cases these
offerings
are subject to extensive consumer information from which the lender will base
numerous
subsequent stipulations for the loan to actually be approved. Many of the
stipulations are
onerous and punitive the consumer simply cannot comply in order to actually
obtain the
approval.
The applicant has found Prior Art that is similar in that some Loan
Underwriting methods are
automated; however, all do require various amounts pf personal information on
the potential
borrower prior to issuing loan approval.
See below:
CA 02955335 2017-01-16
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Loan underwriting system and method
US 7212995 B2-
Automates the loan making decision upon receipt of borrower information
Mortgage loan system and method
US 20070067234 Al
Requires borrower's personal information
Method and system for loan organization and underwriting
US 20080103963 Al
Requires borrower's personal information / loan application
SYSTEM AND METHOD FOR ONLINE EVALUATION AND UNDERWRITING OF
LOAN PRODUCTS
IPC8 Class: AGO6Q4002F1
Requires borrower's personal information / loan application
Systems and methods for underwriting loans
WO 2012006192 A3
Requires borrower's personal information / loan application
Automated loan approval system
US 7742980 B1
Requires borrower's personal information / loan application
Network based loan approval and document origination system
US 20010032178 Al
Requires borrower's personal information / loan application
System and method for real time loan approval
US 5870721 A
Requires borrower's personal information / loan application
System and method for online evaluation and underwriting of loan products
US 20160042451 Al
Requires borrower's personal information / loan application
A search of the Canadian Intellectual Property office's Patent Data Base of
automated loan
underwriting system, automated loan approvals, loan approval underwriting,
loan underwriting
indicate no patents were found matching the query
Results of Search in US Patents Text Collection db for:
"automated loan underwriting" AND "automated loan approvals": 0 patents.
CA 02955335 2017-01-16
8
Results of Search in US Patents Text Collection db for:
ABSTr guaranteed loan approvals": 0 patents.
No patents have matched your query
Description of Asset-Based Underwriting Process and Method for Subprime Credit
Consumers Applicable to Auto Repair and Improvements Financing.
Enables the consumer, or vendor, to obtain the Guaranteed Approved Loan and
Maximum Amount independent of the lender's active involvement.
Underwriting method and processes will not require a 'Loan Application', will
not issue a
subsequent 'Approval', will not do a 'Credit Check', will not require an
'Income
Verification', will not require 'Employment Verification', will not require a
'Residence
Verification' or any other conventional stipulation to issue a Guaranteed Loan
Approval
and Maximum Loan Amount.
Normally this seems quite counter-intuitive and even reckless lending. It is
counter-
intuitive, but it is not risky. The method and process creates a responsible
loan approval
model which by-passes all of the conventional underwriting and lending
practices.
How is this accomplished?
Establishment of relationships with the automotive wholesale sales industry
across the
nation. Data is accessed nation-wide on a base 24/7/365 basis and updated
daily.
Utilizing proprietary software created results in providing a method for
consumers and
vendors to confirm a Guaranteed Approved Loan and Amount available on any
given
passenger vehicle on any given day. It is a simple 20 second process done on
line via
the lender's website.
How a Guaranteed Loan Approval and Maximum Loan Amount is Created
On the Lender's web portal the user enters the following information only:
YEAR... ... limited to 13 model years or newer
MAKE
MODEL
STYLE ....options are automatically presented for consumer choice
TRIM ....... options are automatically presented for consumer choice
KILOMETERS... .limited to 250.000 kilometers or less
OPTIONS.. ..options are automatically presented for consumer choice
OWNERSHIP... .confirmation of lawfully owned and lawfully registered ownership
HISTORY ......... confirmation the owned vehicle is not an accident write off
or
branded as a write-off re-build.
The user clicks on "Submit" and is instantly presented with a written
guarantee of
his/her Guaranteed Loan Approval and maximum amount.
Note* No personal information is required.
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The 'Maximum Guaranteed Loan Approval and Maximum Amount' is automatically
calculated as being a pre- determined percentage of the very lowest current
wholesale
pricing on the very day the information is inputted, 24/7/365
Reviewing the industry valuations grid there are four (4) potential categories
for values:
Extra-Clean Clean Average Rough
New YEAR MAKE MODEL TRIM
STYLE __________
Used' 2010 2d1 Cadillac _III Escalade 2:11 ESV
Select
Retail
Add/Deducts
Residuals
Industry
Extra
Clean Clean Average Rough
Base
0 0 23350
Wholesale
Add/Deduct(+/-
0 0 0
KM Adjust(-) 0 0
Total
0 0 23350
Wholesale
Ontario
Region I Kilometres I 13500( Term I Annual
Kilometres I Ca Lutate
Guaranteed Loan Approval and Maximum Loan Amount valuation is always based on
'Rough Book' ( the lowest pricing), and additionally, always based on the
market area
with the lowest prevailing market prices, which in Canada, is Ontario.
With 'Guaranteed Loan Approval and Maximum Loan Amount' information in hand
the
consumer can go to any Auto Service Center of their choice and arrange to have
the
work done and financed by the lender.
CA 02955335 2017-01-16
A Service Center may also initiate the 'Guaranteed Loan Approval and Maximum
Amount' confirmation at point of sale with a "walk-in" customer.
In addition to providing a Guaranteed Loan Approval and Maximum Loan Amount
the
method and process also enables the borrower to vary specifics within a loan
they wish
to initiate.
For a consumer and the Service Center the lending process is exponentially
more
efficient and less cumbersome than the standard onerous process of applying
for a loan
with traditional underwriting.
GUARANTEED LOAN APPROVAL VARIABLES
Notwithstanding the provision of a Guaranteed Loan Approval with Maximum
amount
the consumer, or vendor, may not require the Approved Loan Maximum Amount. The
consumer or vendor may adjust the variables within the Guaranteed Approval.
The
variables include the actual loan amount required (versus what has been
approved as
maximum), the interest rate (the interest rate will vary dependent on the
consumer's
self-declared and subsequently verified credit score/rating), the down-
payment, the term
(number of months), the sales tax, loan administration fees and total cost of
financing.
Inventors Underwriting Comparison versus Conventional Underwriting
Asset-based lending is any kind of lending secured by an asset. This means, if
the loan is not repaid, the asset is taken. In this sense, a vehicle repair
loan is an
example of an asset-based loan. Asset-based lending is usually done when the
normal
options of borrowing money is not possible. This is often because the consumer
has
exhausted other borrowing options or needs more immediate financing for
immediate
needs. Asset based loans (sub-prime loans) are also accompanied by higher
interest
rates, due to the inherent risks in the event of default.
In the event of a default the lender can recoup their funds by seizing and
liquidating the
assets tied to the loan.
Asset-based lending, once considered a last-resort finance option, has become
a
popular choice for companies and individuals that don't have the credit
ratings, track
record or patience to pursue more traditional financing sources.
CA 02955335 2017-01-16
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Sub-Prime Automotive Finance Industry relies heavily on what is referred to as
'Asset Based Lending'. However, they only achieve partial 'Asset Based
Lending'. As a
result they are exposed to significant risk and suffer the inherent losses of
potential
revenues.
The method on the other hand, targets and achieves a real 100% plus, asset
based
lending model.
The following is an example and explanation of a typical sub-prime loan
offered to
consumers on the purchase of a vehicle:
All vehicles are categorized in one of 3 or 4 categories, Extra Clean, Clean,
Average
and Rough. The categories are defined by mileage and current or historical
condition.
The category in which a vehicle is designated is the single point of reference
used by
sub-prime lenders to determine how much they are to finance on any given
vehicle. The
finance amount can be equal to the full retail value, or in many cases a lower
amount if
and when down payments are a stipulation of the loan approval.
Generally speaking sub-prime lenders like to see some customer equity in the
vehicle.
"Retail Values" are determined by industry standards (market place pressure)
and are
generally 145% to 150% percent of "Wholesale Value".
This means if a wholesale value of a vehicle is determined to be $7000.00 the
normal
retail selling price allowed for a sub-prime consumer would be $7000.00 X 150%
=
$10.500.00. To this amount sub-prime lenders allow the dealer to add other
"unsecured
costs" such as 'Documentation Fees' to be retained by the dealer, ranging from
$400.00
to as much as $1000.00. In addition most sub-prime auto lenders require and
aftermarket power train warrantee in order to approve the loan. This
invariably adds
another $1200.00 to $1800.00 dollars to the total deal. Finally, the sales
taxes are
inputted into the transaction.
The loan structure is as follows:
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Selling Price ....... $10.500.00
Documentation Fee ... $400.00
Extended Warrantee .. $1200.00
Sub Total ............ $12.100.00
Sales Tax (5%) (or more). $605.00
Total Due ........... $12.700.00
Down Payment (10%) .. $1050.00 (Industry standards are 10% of vehicle selling
price as Down payment)
Balance to Finance .. $11.650.00 ___________________________________________
Here is where typical sub-prime lending strays from true asset base lending.
They
disregard a $7000.00 asset value to provide an $11.650.00 finance amount.
They have gone beyond "Asset-based loans that are 100% collateralized based on
liquidation values" in the amount of $4650.00. It is the difference between
asset value
and finance amount.
"Over the six months through Jan 1 and September, 2015 more than $110 billion
of auto
loans have been originated to borrowers with credit scores below 660, the
bottom cutoff
for having a credit score generally considered "good," according to a report
from the
Federal Reserve Bank of New York. Of that sum, about $70 billion went to
borrowers
with credit scores below 620, scores that are considered "bad."
LOSS STATISTICS 2014-2015
(Statistics supplied by Subprime Analytics
Average Gross Dollar Loss (Before Recoveries)
Average Net Dollar Loss (After Recoveries) .......... $8381.00
Average Default Rate (% of Loans Written Off) ........ $5410.00
Average Gross Dollar Loss Rate (% of Principal) ......... 31.41%
Average Net Dollar Loss Rate (% of Principal) ........ 35.75%
Average Recovery (% of Principal Charged Off) ........... 24.37%
It is important to note the "Principle" amount of the loan refers to the total
amount due
on the contract or the total amount the borrowers agreed to pay.
This means the real collection rate of typical automotive sub-prime lenders is
the area of
75%.
CA 02955335 2017-01-16
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In fact, Credit Acceptance, the largest sub-prime auto finance company in the
world has
had historical collection rates over a period of 20 plus years of about 73%.
As a
publically traded company their financials are available on line.
HOW IS THE UNDERWRITING METHOD DIFFERENT?
The most important number mentioned above is $4650.00
Why? Because it consists OF UNSECURED (NON-COLLATERALIZED) RISK
CAPITAL
In other words, it is worth nothing to a lender. It has no value and it is
that part of sub-
prime lending amounts that is NOT asset based lending.
The method and processes of creating a guaranteed loan approval with maximum
amount completely avoids the deployment t of risk capital that is not 100%
plus asset
based secured
The underwriting and Guaranteed Loan Approval and maximum amount model will,
with
no exceptions, only approve a fraction of the net fire sale real time value of
an asset.
To further mitigate lender risk the underwriting will also use the lowest
verified and
current net asset value as the only point of reference in its underwriting,
including using
the lowest geographical pricing.
Specifically that means the example shown above with a "Wholesale Value" of
$7000.00 will be valued by the system at Rough Book in the Ontario region, at
$4500.00 .. NOT $7000.00.
In other words, Rough Book being $4500.00 maximum guaranteed loan amount would
be capped at 75% of $4500.00 equaling $3375.00 on a vehicle which conventional
lenders would lend $11,650.00.
Guaranteed Loan Approvals are structured such that payments exceed
depreciation,
starting at date of origination with a 25% pre-loan real equity advantage.
According to Edmons.com cars depreciate an average of 12% per year if they are
purchased new, and if already used, the deprecation rate is slower.
Payment structure reduces amounts owing by 33% per year and payment amounts
are,
by design, affordable and in compliance with consumer protection legislations.
CA 02955335 2017-01-16
14
AUTOMATED GUARANTEED LOAN APPROVAL AND MAXIMUM AMOUNT
TECHNICAL FIELD
[0001] This relates to a system and method for issuing a written verifiable
guaranteed
confirmation of a loan approval.
BACKGROUND
[0002] Traditional loans are issued based on a consumer's credit profile.
Consumers
with a poor credit profile are sometimes referred to as subprime credit
consumers, and
often rely on alternative financing strategies, such as payday loans, title
loan companies,
etc. when they require financing. These alternative financing strategies have
a high
degree of risk, and are quite punitive to the consumer.
BRIEF DESCRIPTION OF THE DRAWINGS
[0003] These and other features will become more apparent from the
following
description in which reference is made to the appended drawings, the drawings
are for the
purpose of illustration only and are not intended to be in any way limiting,
wherein:
FIG. 1 is a schematic view of a system for implementing a method of issuing a
written verifiable confirmation of a guaranteed loan approval.
DETAILED DESCRIPTION
[0001] A method and system for providing a guaranteed loan approval and amount
available for a passenger vehicle in need of a repair service or improvement
will now be
described with reference to FIG. 1. The method provides information to
customers and
/or vendors to determine the viability of financing for repair or improvement
product and
service to be provided. The method is particularly designed to be used with
vehicles
lawfully owned and registered to a rightful owner in Canada in which a
registry of
ownership is maintained, which facilitates using the article being repaired
improved as
collateral for the loan. It will be understood that other approaches to
determining value
and establishing collateral may also be used other than those discussed below
when
the article is something other than a passenger vehicle or something that does
not have
CA 02955335 2017-01-16
the same systems for determining ownership or estimating the value. In a
preferred
implementation, the method provides a secured, conservative guaranteed loan
approval
to pay for a repair or improvement product and service that presents very
little risk to the
lender.
[0002] A customer presents a vehicle to be repaired or improved with product
and
service to a repair service provider. In the discussion below, the article
will be assumed
to be a vehicle, and the repair service provider will be an auto repair
company, and that
analogous steps may be taken if the article is something other than a vehicle,
and/or the
service provider is something other than an auto repair company.
[0003] The identifying characteristics of the vehicle are electronically
transmitted to a
third-party lender terminal. While a service provider can transmit the
identifying
characteristics to the third-party lender, the identifying characteristics may
be
transmitted by the customer by determining the viability of required financing
and prior
to presenting the article to the repair service provider, and obtain a
separate guaranteed
pre-approved loan amount, as discussed below. It will be appreciated that the
repair
service provider will need to verify the identifying characteristics of the
article prior to
proceeding with the repair service by utilizing the same method and process as
done by
the consumer.
[0004] The identifying characteristics are those that may be present in a
commercial
database that estimates the value of the article. The identifying
characteristics will
generally include the year, make, model, style, mileage, features, and
condition of the
vehicle. As will be understood from the discussion below, the condition of the
vehicle
may not be used, as the process calculates the value based on a "poor"
condition in
order to be conservative.
[0005] Based on the identifying characteristics, the processor in the third
party lender
terminal will electronically search a computer database for an estimated
current and
future market value of the article. In terms of a vehicle, the database may be
a
comprehensive database with estimated vehicle values, such as, for example,
the
Canadian Black Book database or other comparable database. Based on the
estimated
market value of the article, the processor calculates a maximum loan amount.
The
maximum loan amount will be calculated based on a predetermined formula, such
as a
CA 02955335 2017-01-16
16
percentage, of the estimated market value. In one example, the maximum loan
amount
may be 75% of the estimated wholesale value of the vehicle in poor condition,
regardless of the actual condition of the vehicle. While 75% is given as an
example, the
actual percentage may be decided based on the preferences of the lender and
the
specific circumstances. Furthermore the formula may be more complex and take
into
account other objecting factors, such as a sliding scale based on the overall
value of the
vehicle or certain characteristics of the vehicle that may affect the ability
to liquidate the
vehicle, for example a vehicle branded as a write off or major accident repair
As will be
understood, the risk of the lender against default is reduced by estimating
the value of
the vehicle as the lowest possible amount, and then approving a maximum loan
amount
that is less than this. As such, should the customer default on the loan, the
lender will
be in a much better position to recover the unpaid portion of the loan by
recovering and
liquidating the vehicle. Furthermore, if the replacement cost was about the
same as, or
less than, the repair costs, it is more likely that the customer would simply
choose to
replace the vehicle, rather than repair the vehicle.
[0006] Once calculated, the maximum loan amount is provided to the repair
service
provider and/or the consumer. If the identifying characteristics were
submitted by the
repair service provider, or consumer, the amount will be transmitted
electronically to the
computer terminal repair service provider or consumer. If the identifying
characteristics
were submitted by the customer, the repair service provider may be presented
with a
certificate provided to the customer that confirms the maximum guaranteed
approval of
loan amount. To secure this process, the certificate may be assigned a unique
identification number, a bar code, a QR code, stored by phone number, may be
accessible by username and password, or the like, that can be used by the
repair
service provider to access the identifying characteristics of the article and
the maximum
loan amount from the loan provider in order to confirm the certificate applies
to the
article being presented.
[0007] The maximum loan amount is then compared to the repair cost as
estimated
by the repair service provider. If the repair cost is less than the maximum
loan amount,
a loan agreement will be issued to the customer to cover the cost of the
repairs, using
the article as collateral for the loan agreement. This will generally be
secured by
CA 02955335 2017-01-16
17
registering a suitable security against the vehicle. This allows, for example,
a non-
possessory lien, allows the lien to be assigned to others, and allows the lien
to be good
for 3 years. In addition, the repair lien will have priority over all other
interested in the
vehicle. Using this registration scheme, the lien or right to register the
lien may be
assigned from the repair service provider to the lender, the passenger vehicle
may be
released to the customer after repairs have been completed, and the customer
may
have up to 3 years to repay the loan, all while allowing the loan to be
secured using the
vehicle as collateral. As the process is intended to be electronic and
automatic, the
loan agreement will be issued based exclusively on the estimated value of the
passenger vehicle and a verification step that consists of verifying that the
customer is
the registered owner of the vehicle, thus is authorized by to enter into the
loan
agreement. The process is designed such that no other steps are required. By
doing
so, if the customer is able to show that they are able to allow a security
interest to be
registered with respect to the article, they are automatically approved for
the loan, up to
the maximum value of the loan, as discussed above.
[0008] Once the agreement has been entered into, the repair service proceeds,
and
once the lender has been notified that the repair service has been completed,
and
received authorization for the lien, the repair cost can then be paid out to
the service
provider.
[0009] In some circumstances, the customer may pay a portion of the repair
cost
directly to the repair service provider. In most circumstances, this will not
affect the
calculations performed by the loan provider, unless it is desired to use this
as a factor to
be used in automatically calculating the loan amount. However, this amount may
be
used to reduce the repair or improvement finance amount prior to comparing the
amount to the maximum loan amount.
[0010] In some circumstances, the cost of the repair or improvement service
may
change as the service is performed. In this case, the loan repair cost
discussed above
may include an estimated repair cost and an actual repair cost. In this
situation, the
estimated repair cost will be compared to the maximum loan amount prior to the
service, and, depending on the terms of the agreement with the customer, the
actual
repair cost may be paid out to the service provider after the repair service
is completed.
CA 02955335 2017-01-16
18
However, the amount paid to the service provider by the lender will not be
more than
the guaranteed loan approval maximum loan amount.
[0011] An example of a system used for providing a guaranteed financing
approval
with a maximum loan amount stipulated repair or product improvement services
is
shown in FIG. 1 and includes a computer network 10, such as the internet,
which
connects a service provider terminal 12 and a loan provider terminal 14. Loan
provider
terminal 14 has a processor 16 and has access to a database 18, shown as a
third
party commercial database that has estimated values of articles based on
identifying
characteristics. The third party commercial data base aggregator is connected
to
numerous industry data bases 24. It will be understood that the database of
values may
also be maintained by the loan provider's terminal, although in most
circumstances it
will be more efficient to use a commercially available database. Furthermore,
while loan
provider terminal 14 is shown as being connected to database via the internet
[0012] In another example, the computer network may also connect a customer
terminal 22 to the loan provider terminal, which allows a customer to obtain a
guaranteed approved loan amount separately from the repair service provider.
In this
case, the processor on the loan provider terminal would cause the approved
loan
amount to be saved using a unique identifier that can then be accessed by the
service
provider terminal to finalize the loan.
[0013] Each terminal discussed above may be a general purpose computer, or a
purpose built computer processing device, with the appropriate input and
output
connections, including user interfaces, network connections, etc.
Each terminal
generally has a processor and a suitable type and amount of memory for
performing its
defined function. Each terminal Preferably, the computer network is the
internet, but
may also involve direct computer connections
[0014] Loan provider terminal 14 is programmed to perform the necessary steps
described above, such as to use a predetermined loan calculation formula to
calculate
an approved loan amount that is less than the estimated value of the article;
to
transmitting authorization to issue a loan agreement to the customer for an
amount that
is less than or equal to the guaranteed approved maximum loan amount and that
uses
the article as collateral.
CA 02955335 2017-01-16
19
[0015] Loan provider terminal 14 is limited in the aspects that are reviewed
in issuing
the guaranteed loan approval and maximum amount, just as the service provider
is
limited in the aspects or characteristics of the customer that are reviewed
prior to
authorizing and entering into a loan agreement, respectively. In particular,
the loan
provider and the service provider look exclusively at the right of the
customer to enter
into a loan agreement that uses the article as collateral, and the identifying
characteristics of the article being repaired.
[0016] The loan provider terminal 14 will also enable the consumer and/or
repair
service center to vary specifics within the loan itself, such as interest
rates, term, down
payment, amount to be borrowed, thereby enabling the consumer and or/ service
center
to structure the terms of the loan to meet the determined requirements of the
consumer
and /or the service center.
[0017] As can be seen, the method and system described above provides an
automated system for issuing a guaranteed loan approval and maximum loan
amount in
a fast, efficient, and predictable manner. Of note, while the loan agreement
may ask for
identification information, such as proof of ownership of the vehicle, and
contact
information for the loan agreement, the system does not ask for any details
that relate to
the credit-worthiness of the customer. To obtain a guaranteed loan approval
the
consumer is not required to provide any personal information. As such, there
is no need
for any intervention, discretion, or review by an individual, or any
benchmarks or criteria
that must be satisfied prior to issuing the loan.
[0018] The loan that has been entered into as discussed above is registered in
accordance with a law that allows security interests to be entered that are
transferrable
to third parties; that do not require possession; that take priority over
other security
interests; and that allow for an extended period of time to repay the repair
loan. The
features described herein may be combined together in any reasonable
combination as
will be recognized by those skilled in the art.
[0019]
In this patent document, the word "comprising" is used in its non-limiting
sense to mean that items following the word are included, but items not
specifically
mentioned are not excluded. A reference to an element by the indefinite
article "a" does
not exclude the possibility that more than one of the elements is present,
unless the
CA 02955335 2017-01-16
context clearly requires that there be one and only one of the elements.
The scope of the following claims should not be limited by the preferred
embodiments
set forth in the examples above and in the drawings, but should be given the
broadest
interpretation consistent with the description
