On a typical day Westlake finances 750 cars. It currently has 336,000 outstanding loans, each originating from one of the 23,000 dealerships it works with (everyone from CarMax to small mom-and-pop used car lots). ... most of Hankey’s borrowers aren’t average–they are financial underachievers with credit scores below 600. Many have bankruptcies, past repossessions or limited credit histories–things that make them unattractive to traditional lenders. That’s where Hankey steps in. While Westlake offers loans as low as 1.65%, it specializes in financing credit-challenged car buyers–at an eye-popping rate of 19%, more than double the average for used car loans. ... They typically shell out $344 per month over 49 months, or $16,860 on a $12,000 loan. That translates to an extra $3,920 in interest over the life of the loan when compared to the 3.67% rate a borrower with good credit gets when buying a new car, according to Experian. Sure, each month the company has to write off about $17 million in unpaid loans, but it still banks a profit of around $20 million. In 2014 Westlake netted $230 million on $600 million in revenues. ... He joined forces with the ride-share leviathan in September 2014 as its only outside financing partner. Spanish bank Santander had been working with Uber, offering a lease-to-own program, but that relationship ended earlier this year. Would-be Uber drivers who are looking to purchase a car can get pre-qualified online in a matter of minutes. ... so far a greater portion of its Uber drivers are behind on their payments compared to its typical subprime borrowers, apparently not earning enough to cover the costs.
In 2013, at age 30, he set out to build a better, more equitable way to assign credit scores to millennials who, in the wake of the recent financial crisis, had never taken out a loan before. All Sims needed to get started was a trove of data from a financial institution. ... When Lending Club went public in late 2014, Sims scraped together about $1,000 to buy stock. “It sounds dumb now,” he said, “but it felt like a chance to participate in history.” He was so taken by Lending Club that he began listening to the company’s earnings calls. “Like a weirdo,” he said. It was on one of these calls, in 2015, that he heard Chief Executive Officer Renaud Laplanche say that 14 percent of Lending Club’s borrowers, or more than 100,000 people, “returned for a second loan.” That struck Sims as curious. He knew that for all the information the company made public about its borrowers—incomes, employment histories, their reasons for borrowing—one thing it didn’t list was repeat customers. ... Sims saw a business opportunity: a research service that would independently rate Lending Club loans the way Morningstar rates mutual funds. Sims asked a data scientist, Allen Grimm, to help design an algorithm to identify loans that seemed to have been taken out by the same person and yet were assigned different rates. They called it the Financial Genome Project. ... Lending Club and its backers don’t deny the self-dealing but say it’s a nonstory. ... Sims has discovered dozens of other loans he suspects were made to company insiders, as well as lending practices that seem to have been designed to push growth above all else.