Industries

In order to compete for consumers and to enable lender growth, creating operational efficiencies such as automated decisioning is a must. Unfortunately, somewhere along the way, automated decisioning unfairly earned a reputation for being difficult to implement, expensive and time consuming. But don’t let that discourage you from experiencing its benefits. Let’s take a look at the most popular myths about auto decisioning. Myth #1: Our system isn’t coded. If your system is already calling out for Experian credit reporting data, a very simple change in the inquiry logic will allow your system to access Decisioning as a ServiceSM. Myth #2: We don’t have enough IT resources. Decisioning is typically hosted and embedded within an existing software that most credit unions currently use – thus eliminating or minimizing the need for IT.  A good system will allow configuration changes at any time by a business administrator and should not require assistance from a host of IT staff, so the demand on IT resources should decrease.  Decisioning as a Service solutions are designed to be user friendly to shorten the learning curve and implementation time. Myth #3: It’s too expensive. Sure, there are highly customized products out there that come with hefty price tags, but there are also automated solutions available that suit your budget. Configuring a product to meet your needs and leaving off any extra bells and whistles that aren’t useful to your organization will help you stick to your allotted budget. Myth #4: Low ROI. Oh contraire…Clients can realize significant return-on-investment with automated decisioning by booking more accounts … 10 percent increase or more in booked accounts is typical. Even more, clients typically realize a 10 percent reduction in bad debt and manual review costs, respectively. Simply estimating the value of each of these things can help populate an ROI for the solution. Myth #5: The timeline to implement is too long. It’s true, automation can involve a lot of functions and tasks – especially if you take it on yourself. By calling out to a hosted environment, Experian’s Decisioning as a Service can take as few as six weeks to implement since it simply augments a current system and does not replace a large piece of software.  Myth #6: Manual decisions give a better member experience. Actually, manual decisions are made by people with their own points of view, who have good days and bad days and let recent experiences affect new decisions. Automated decisioning returns a consistent response, every time. Regulators love this! Myth #7:  We don’t use Experian data. Experian’s Decisioning as a Service is data agnostic and has the ability to call out to many third-party data sources and configure them to be used in decisioning. --- These myth busters make a great case for implementing automated decisioning in your loan origination system instead of a reason to avoid it. Learn more about Decisioning as a Service and how it can be leveraged to either augment or overhaul your current decisioning platforms.  

For members of the U.S. military, relocating often, returning home following a lengthy deployment and living with uncertainty isn’t easy. It can take an emotional and financial toll, and many are unprepared for their economic reality after they separate from the military. As we honor those who have served our country this Veterans Day, we are highlighting some of the special financial benefits and safeguards available to help veterans. Housing Help One of the best benefits offered to service members is the Veteran’s Administration (VA) home-loan program. Loan rates are competitive, and the VA guarantees up to 25 percent of the payment on the loan, making it one of the only ways available to buy a home with no down payment and no private mortgage insurance. Debt Relief Having a VA loan qualifies military members for a Military Debt Consolidation Loan (MDCL) that can help with overcoming financial difficulties. The MDCL is similar to a debt consolidation loan: take out one loan to pay off all unsecured debts, such as credit cards, medical bills and payday loans, and make a single payment to one lender. The advantage of a MDCL? Paying a lower interest rate and closing costs than civilians and far less interest than paying the same bills with credit cards. These refinancing loans can be spread out over 10, 15 and sometimes 30 years. Education Benefits The GI Bill is arguably the best benefit for veterans and members of the armed forces. It helps service members pay for higher education for themselves and their dependents, and is one of the top reasons people enlist. Eligible service members receive up to 36 months of education benefits, based on the type of training, length of service, college fund availability and whether he or she contributed to a buy-up program while on active duty. Benefits last up to 10 years, but the time limit may be extended. Saving & Investing Money According to the Department of Defense’s annual Demographics Report, 87 percent of military families contribute to a retirement account. Service members who participated in the Thrift Savings Plan, however, are often unaware of their options after they separate from service, and many don’t realize the advantages of rolling their plans into an IRA or retirement plan of a new employer. Safeguarding Identity Everyone is a potential identity theft target, but military personnel and veterans are particularly vulnerable. Routinely reviewing a credit report is one way to detect a breach. The Attorney General's Office provides general information about what steps to take to recover from identify theft or fraud. Today is a great time to consider ways to support your veteran and active military consumers. They are deserving of our support and recognition not just today but continuously. Learn more about services for veterans and active military to understand the varying protections, and how financial institutions can best support military credit consumers and their families.

The mortgage meltdown and Great Recession have translated into big shifts as it relates to financial services regulations. What's to come with a new administration coming soon?

$1.3 trillion. 41.1 million Americans. $31,590. These are the growing numbers associated with student loan debt in the United States: $1.3 trillion in outstanding student loans, spread across 41.1 million people, who are leaving college with an average balance of $31,590. The numbers are staggering, and for the first time student loan debt is playing a prominent role in a presidential election. For all of their differences, presidential nominees Hillary Clinton and Donald Trump seem to agree on one thing: student loan debt is a crushing burden. Both candidates have proposed solutions for student lending. Clinton’s “New College Compact” would allow borrowers to refinance their student loans at current rates available to students taking out new loans. She also wants to reduce interest rates on new student loans, and make it easier for borrowers to enroll in income-driven repayment programs that would cap monthly payments at 10 percent of discretionary income. Trump proposes giving more oversight to colleges to decide whether to grant loans to students based on their prospective major. The plan would also give private banks oversight over government-backed student loans—reversing a 2010 decision under President Obama to make the federal government the lender. Neither candidate, however, has outlined a solution for taming growing tuition costs. Tuition expenses are up 1,225 percent over the past 36 years, outpacing medical costs (634 percent rise) and the consumer price index (279 percent) over the same period, according to the Bureau of Labor Statistics. So it’s not surprising an Experian study shows the student loan rate has grown five percent in the past three years. What is surprising is the number of people and the average age of those people holding student loans. Experian found: 20 percent of people with a credit file hold a student loan that is being repaid or deferred. The average age of a consumer with a student loan is 37, with an average income of $47,200 compared to 53.8 and an average income is $44,500 for consumers without a student loan. The average age of a consumer with at least one deferred student loan is 32.7 with an average income of $32,900 compared to 38.7 and an average income of $53,200 for consumers with at least one non-deferred student loan. Candidate proposals aside, one thing is certain: student loan debt has a very real impact on the daily lives of people, many of whom have delayed buying homes, starting families, and saving for retirement. Until policymakers find a way to address bloated tuitions and student debt, it will take many longer to realize their dreams.

Since 1948, International Credit Union Day – a time to recognize the credit union movement – has been celebrated the third Thursday of October. The day is the perfect time to remind your members and consumers about all of the services and benefits your credit union offers. This year’s theme, “The Authentic Difference,” celebrates what makes credit unions stand out. Here are 10 reasons CUs deserve a spotlight: Credit unions are non-profit cooperatives, owned and operated by its members. That means they emphasize consumer value to more than 217 million members worldwide. Profits go back to members in the form of reduced fees, higher savings rates and lower loan rates. Personal relationships are key. Credit unions pride themselves on developing relationships with their members, and CUs are typically staffed by friendly reps who know customers by name. Checking accounts are free. Roughly 80 percent of credit unions offer free checking accounts, compared to less than 50 percent of banks, according to economic research firm Moebs Services. Few ATM fees. Many credit union customers are able to avoid ATM fees because CUs typically give them access to a large network of ATMs by sharing branches and other resources. Savings rates are above average. Because credit unions don't have to pay dividends to shareholders and are exempt from federal taxes they can offer high rates on saving accounts. The average credit union offers CD, money market, and savings rates well above the national banking rates average. Lower interest rates. Credit unions offer lower interest rates on some loans. The difference between banks and credit unions was greatest in car-loan interest rates, according to a September report by SNL Financial. The average 36-month used-car loan interest rate offered by CUs was 2.67 percent compared to 4.45 percent for banks. For new-car loans, CUs offered an average interest rate for 48 months of 2.60 percent compared to 3.94 percent for banks. Invested in the community. A credit union’s core values are focused on its members and the communities where they live and work. Many provide financial education and outreach to consumers. It’s easier to get credit. CUs don’t have to abide by loan restrictions and qualifications mandated by a corporate office, so they have more flexibility to make loans when possible. Small-business support: CUs may know borrowers and are able to take into account intangibles like community reputation and accountability. Also, they understand the value to the community of a small business, its market and credit needs. Joining is easy. Many credit unions base eligibility simply on where you live, instead of restricting membership to a particular employer. Since expanding eligibility, credit union membership has grown by about two percent a year for the past decade.

Will they still aspire to achieve the “American Dream” of education, homeownership and raising a family? Are Millennials ready for a mortgage?

Lenders are just weeks away from the required compliance date for changes made to the Military Lending Act (MLA), but confusion persists. Here are some insights to the top questions being posed.

At the end of July, the Consumer Financial Protection Bureau (CFPB) took a significant step toward reforming the regulatory framework for the debt collection and debt buying industry by announcing an outline of proposals under consideration.  The proposals will now be considered by a small business review panel before the CFPB announces a proposed rule for wider industry comment. The CFPB said its proposals will affect only third-party debt collectors pursuant to the Fair Debt Collection Practices Act (FDCPA).  However, the CFPB signaled it may consider a separate set of proposals for first-party collectors. The collections industry has long been a focus of the CFPB.  In 2012, the bureau designated larger market participants in the debt collections marketplace and placed some of these entities under supervision. In 2013, the CFPB released an Advanced Notice of Proposed Rulemaking covering collections. The focus on debt collection is fueled in part by the large number of consumer complaints it receives about the debt collection market (roughly 35% of total complaints).  Moreover, the CFPB’s proposals build upon some of the regulatory and enforcement priorities that the CFPB and Federal Trade Commission have pursued for several years around data quality, consumer communication and disclosures. Here are some of the key takeaways for third party debt collectors from the CFPB’s proposals: Address data quality: Collectors would be required to substantiate claims that a consumer owes a debt in order to begin a collection. Collectors would also be required to pass on information provided by consumers in the course of collections activity. New Validation Notice and Statement of Rights: The CFPB’s draft outline would update the information provided to consumers through the FDCPA validation notice, as well as require disclosure of a consumer statement of rights. Changes to frequency of communications:  Debt collectors would be limited to six emails, phone calls or mailings per week, including unanswered calls and voicemails. After reaching the consumer, the debt collector would be allowed either one contact or three attempted contacts per week. There would also be a waiting period of 30 days before contacting the family of a debtor who has died. New disclosures on “out of statute” debt and litigation: In the outline, CFPB proposes having debt collectors provide new disclosures to consumers regarding the possibility of litigation and whether the debt is beyond the statute of limitations. Waiting period before sending collection accounts to  a consumer reporting agency: Reporting a person’s debt would be prohibited under the draft outline unless the collector has first communicated directly with the consumer about the debt. The CFPB will next hear comments from a panel of small businesses in the industry, complete an analysis of how its proposals would impact small businesses, and take written comments from the public. Following those steps, the agency will issue a proposed rule for comment.  

With HELOC end of draw peaking, lenders must consider best practices and actions to take to manage and optimize their portfolios.

Time heals countless things, including credit scores. Many of the seven million people who saw their VantageScore® credit scores drop to sub-prime levels after suffering a foreclosure or short sale during the Great Recession have recovered and are back in the housing market. These Boomerang Buyers — people who foreclosed or short sold between 2007 and 2014 and have opened a new mortgage — will be an important segment of the real estate market in the coming years. According to Experian data, through June 2016 roughly 800,000 people had boomeranged, with Los Angeles, Phoenix, and Sacramento housing the most buyers. Some analysts believe more than three million Americans will become eligible for a home over the next three years. Are potential Boomerang Buyers a great opportunity to boost market share or a high risk for a portfolio? Early trends are positive. The majority of Boomerang Buyers who opened mortgages between 2011 and June 2016 are current on their debts. An Experian study revealed more than 29 percent of those who short sold have boomeranged, and just 1.5 percent are delinquent on their mortgage —falling below the national average of 2.8 percent. This group is also ahead of or even with the national average for delinquency on auto loans (1.2 percent vs. the national average of 2.2 percent), bankcards (3 percent vs. 4.3 percent) and retail (even at 2.7 percent). For those Boomerang Buyers who had foreclosed, the numbers are also strong. More than 12 percent have boomeranged, with just 3 percent delinquent on their mortgage. They also match or are below national average delinquency rates on auto loans (1.9 percent) and bankcards (4.1 percent), and have a slightly higher delinquency rate for retail (3.5 percent). Due to their positive credit behaviors, Boomerang Buyers also have higher VantageScore® credit scores than before. On average, the overall non-boomerang group’s credit score sunk during a foreclosure but went up 10 percent higher than before the foreclosure, and Boomerang Buyers rose by nearly 14 percent. For people who previously had a prime credit score, their number dropped by nearly 5 percent, while those who boomeranged returned to the score they had prior to the foreclosure. By comparison, the overall non-boomerang and boomerang group saw their credit score drop during a short sale and increase more than 11 percent from before the short sale. For people who previously had prime credit, they dropped 2 percent while those who boomeranged were almost flat to where they were before the short sale. Another part of the equation is the stabilized housing market and relatively low loan-to-value (LTV) limits that lenders have maintained. In the past, borrowers most often strategically defaulted on their mortgages when their LTV ratios were well over 100 percent. So as long as lenders maintain relatively low LTV limits and the housing market remains strong, strategic default is unlikely to re-emerge as a risk.

Experian estimates card-to-card consumer balance transfer activity to be between $35 and $40 billion a year, representing a sizeable opportunity for proactive lenders seeking to grow their revolving product line. This opportunity, however, is a threat for reactive lenders that only measure portfolio attrition instead of working to retain current customers. While billions of dollars are transferred every year, this activity represents only a small percentage of the total card population. And given the expense of direct marketing, lenders seeking to capitalize on and protect their portfolio from balance transfer activity must leverage data insights to make more informed decisions. Predicting a consumer’s future propensity to engage in card-to-card balance transfers starts with trended data. A credit score is a snapshot in time, but doesn’t reveal deep insights about a consumer’s past balance transfer activity. Lenders that rely only on current utilization will group large populations of balance revolvers into one bucket – and many of these individuals will have no intention of transferring to another product in the near future. Still, balance transfer activity can be identified and predicted by utilizing trended data. By analyzing the spend and payment data over time to see when one (or multiple) trade’s payment approximately matches another trade’s spend, we have the logic that suggests there has been a card-to-card transfer. What most people don’t realize is that trended data is difficult to work with. With 24 months of history on five fields, a single trade includes 120 data points. That’s 720 data points for a consumer with six trades on file and 72,000,000 for a file with 100,000 records, not to mention the other data fields in the file. It’s easy to see why even the most sophisticated organizations become paralyzed working with trended data. While teams of analysts get buried in the data, projects drag, costs swell, and eventually the world changes as rates climb and fall. By the time the analysis is complete, it must be recalibrated. But there is a solution. Experian has developed powerful predictions tools that combine past balance transfer history, historical transfer amounts, current trades carried and utilized, payments, and spend. Combined, these data fields can help identify consumers who are most likely to transfer a balance in the future. With Experian’s Balance Transfer Index the highest scoring 10 percent of consumers capture nearly 70 percent of total balance transfer dollars. Imagine the impact on ROI of reducing 90 percent of the marketing cost of your next balance transfer campaign and still reaching 70 percent of the balance transfer activity. Balance transfer activity represents a meaningful dollar opportunity for growth, but is concentrated in a small percentage of the population making predictive analytics key to success. Trended data is essential for identifying those opportunities, but financial institutions must assess their capabilities when it comes to managing the massive data attached. The good news is that regardless of financial institution size, solutions now exist to capture the analytics and provide meaningful and actionable insights to lenders of all sizes.

Financial health open doors for people, creating opportunities for credit, cars, homes and stability. So how can you get "healthy?"

While organizations increasingly rely on data to make decisions, when it comes to data accuracy, too many wait to correct errors rather than implement proactive solutions.

As net interest margins tighten and commercial real estate concentrations begin to slowly creep back to 2008 levels, financial institutions should consider looking to their branch networks to drive earnings. Why wouldn’t you, right? The good news is branch networks can embrace that challenge by simply using some of the tools they already have access to – most notably the credit report. Credit reports are generally seen as a tool to assist financial institutions in assessing credit risk. However, if used properly, credit reports can provide a wealth of insight on selling opportunities as well. Typically when a customer’s credit report is pulled, the personal banker or customer service representative is primarily focused on whether or not a loan application is approved based on the institution’s approval parameters. Instead, what if a lender elected to view this customer interaction as an opportunity to deepen the relationship? So, here are three ways to utilize credit reports to generate earnings through retail loan growth: 1. Opportunities to Consolidate Debt  Looking for debt consolidation opportunities is probably the simplest way to mine for opportunities. For example: Personal Banker: “It looks like you also have a card credit with XYZ and ABC Bank. Based on your application, we can consolidate both of those balances into one and give you a lower interest rate.” Be specific. Tell the customer exactly how much money per month they would be able to save and the benefits of consolidation. Not to mention, debt consolidation often reduces a lender’s credit risk and enhances customer loyalty, so this is a win for the institution as well. 2. Opportunities to Provide Additional Credit  Another method would be to “soft pull” a segment of your portfolio to identify customers who qualify for larger credit card balances or refinance opportunities. This strategy is best executed at the portfolio management level, as insight is needed on the bank risk appetite and concentration levels. Layering on a basic prescreen helps qualify and segment your prospect list according to your unique credit criteria. You can also expand the universe with an Experian extract list, identifying new consumers who might be open to new offers. 3. Find Hidden Opportunities Credit scoring models are not perfect. There are times when a person’s credit score does not reflect an applicant’s true risk profile. For example, a person who was temporarily out of work may have missed two to three payments during that period. A deeper scan of the credit report during underwriting may reveal an opportunity to lend to a person rebounding from financial difficulties not yet reflected by their credit score. For example, this individual may have missed two credit card payments but hasn’t missed a mortgage or car payment in 20 years. A score is just one dimension to the story, but trended insights can shine a light on who best to lend to in the future. Conclusion: With the proper tools and training, your retail team can get more out of the basic credit report and find additional opportunities to deepen customer relationships while maintaining your desired risk profile. The credit report can be a workhorse for your team, so why not leverage it for more business. Note: The information above outlines several uses for a credit report.  Separate credit reports are required for each use with the intended permissible purpose. Ancin Cooley is principal with Synergy Bank Consulting, a national credit risk management and strategic planning firm. Synergy provides a rangeof risk management services to financial institutions, which include loan reviews, IT audits, internal audits, and regulatory compliance reviews. As principal, Ancin manages a growing portfolio of clients throughout the United States.

As temperatures climb, so do automotive sales, which often reach annual highs during the warmest months of the year.