Vendor's Single Interest Plus (VSI Plus)
Under VSI (blanket) coverage, a damaged vehicle must be repossessed before the lender can submit a claim for repairs. As a result, only troubled loans are truly covered and no protection can be extended to a borrower in good standing. For example, if such a borrower is unwittingly without coverage from his or her carrier, or has insurance but is denied coverage in a specific instance, he or she may be forced into a “voluntary repo.”
This means losing good credit as well as the use of the vehicle, which may have been the borrower’s only source of transportation. At the same time the lender has a damaged vehicle that must be repaired or disposed of to discharge as much of the unpaid balance as possible. This leads to mounting deficiency balances that, generally, wind up being charged off.
VSI-Plus solves this problem by issuing the borrower an individual certificate of insurance under the dual-interest master policy, when appropriate. This approach enables repair of the vehicle, allows the borrower to keep both vehicle and credit and reduces the lender’s repossession headaches.
A reciprocal problem develops when a loan “goes sour” and collection managers must seriously consider repossessing the collateral. Adding an insurance premium to an already delinquent loan balance only compounds collection problems. The blanket component of VSI-Plus permits the lender to waive duel-interest coverage and file a claim under the VSI blanket policy.
