Wells Fargo is building more branches that will focus on car loans and financing for auto dealers. The company hopes to build out its business without taking on bad credit risk.
In recent years, the credit card industry has remained flat while U.S. automobile financing has increased from $700 billion in the first quarter of 2010 to $1 trillion through the first half of 2015.
Wells Fargo currently operates 56 branches that are dedicated to car and dealer financing. The company calls the branches “regional business centers” and they are setup to exclusively service automobile dealerships.
The company plans to open a new office in the Southwest by the end of the year. Wells Fargo has not provided any expansion targeting at this time.
Each office includes access to credit officers who approve or deny loans. The idea is that local officers understand local buyers better and can make more informed decisions when approving or denying an automobile loan.
Wells Fargo’s Chief Executive John Shrewsberry said on the bank’s first-quarter earnings call in April that auto lending has “gotten to be a more competitive market,” and, “we’ve picked our spots, I think, a little bit more delicately.” During the company’s second-quarter call in July, he said the sector is “providing a big opportunity because so many cars are being sold.”
The Office of the Comptroller of the Currency is closely watching the automobile industry because of its rapid growth which could signal a lack of strong lending practices meant to protect consumers from defaulting on their obligations.