The static pre-determined collateral ratios certainly are vulnerable in even moderately volatile periods.
And I tend to agree, many borrowers are looking to take out more than they put in to the credit system. Borrowing and backing loans with LP tokens - that are continuously growing - might help tilt the calculus in favor of repayment.
Good call on the auto-repay function. Seems prudent to enable automatic payment right before expiration so borrower gets the maximum value for the credit fee.