Ally Financial's new Charlotte-based CEO says that while the Detroit auto lender is considering making more loans to people with nonprime credit ratings, he's not interested in ramping up lending to the riskiest of borrowers – those in the so-called "deep subprime" category.
"I want to be very clear: I have no strong appetite to go into deep subprime," Jeffrey Brown told me in an interview last week.
Since Ally named Brown its new CEO earlier this month, he has publicly discussed his interest in possibly boosting lending to nonprime borrowers. Brown says Ally has "underachieved" in the nonprime space and could have been "more aggressive" with that type of lending.
Those comments come at a time when Brown is seeking to boost profitability at Ally, which went public last year. His comments also come after Ally recently lost an exclusive lease agreement with General Motors, whose financing arm is replacing Ally as the exclusive lessor for Buick, Cadillac and GMC vehicles.
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Brown said he might deploy the capital freed up by GM's pullback into nonprime lending.
Ally, which uses the deposits from its online-only bank to fund auto loans, has already come under scrutiny by federal authorities over subprime lending.
Last year, the company disclosed that it had received a Department of Justice subpoena as part of an investigation “related to subprime automotive finance and related securitization activities.”
Ally is among other lenders who received subpoenas from the Justice Department last year over subprime lending practices.
"All consumers need access to credit," Brown told me. "I think we (Ally) can do nonprime lending in a responsible manner and a responsible fashion that regulators would actually support."
"Deep subprime," by the way, describes a borrower with a credit score of less than 550, according to credit-reporting firm Equifax. A nonprime borrower has a credit score of 640 or less, while a subprime borrower has a score of 620 or less, according to Equifax.
Ally employs roughly 800 people in the Charlotte metro area, mostly at its South Church Street tower. Charlotte is one of a handful of U.S. hubs the company maintains.