As weakness in the auto sector has become evident, regulators have begun to sound alarm bells.
In a speech in October, U.S. Comptroller of the Currency Thomas Curry warned of risks from subprime auto loans, as well as loans that mature in six years or more, which tend to be issued to customers who can't afford monthly payments on loans with shorter durations. In November, the Federal Reserve Bank of New York issued a report on auto lending that showed a growing portion of loans being issued to consumers with poor credit.
Focused on prime
Bank of America says it is focused strictly on prime and "superprime" customers. The "majority by far" of its auto borrowers have credit scores higher than 700, Vernon said. Borrowers with credit scores above 660 are generally considered to have good credit.
Still, a decline in used car values would lower recoveries on loans that go bad, and the longer the life of the loan the greater the exposure to such a risk. Bank of America will lend up to 75 months slightly longer than the six years Comptroller Curry cited as a concern though Vernon said the average maturity is far lower.
The bank does not release granular data on its auto loan book, so it is hard to know how its borrowers' credit quality has held up over time. In data provided to Reuters, Bank of America said it made $23.7 billion in auto and recreational vehicle loans in 2015, up 41 percent from 2014.
Most of that growth came through auto dealers, the area Vernon oversees, and much of it happened in the fourth quarter after he hired seven "relationship managers" whose job is to drum up business with dealerships around the country. Vernon is targeting 5-10 percent growth for his operation in 2016.
Schleck, who oversees the business that works directly with retail customers, has also been staffing up nearly doubling the number of loan officers to 110 from 60 since last May. Although Schleck said he is unlikely to continue growing staff at that pace, he may hire more this year if demand warrants. Likewise, if demand cools, Schleck said he is prepared to reduce staff.
"I needed to get to a certain level to be able to provide a certain level of service and I needed to get there very quicklyand did," he said. "Prior to May there was probably a lot of lost opportunity, whereas after May, I'm capturing what maybe we could have captured earlier."
Boland, their boss, said it's true that Bank of America was "in a different place in 2012," but disputed the idea that the bank is too late to build up its auto loans business.