Margin test

Who doesn’t like low monthly payments? Unless you are lucky enough to buy a car outright, most consumers would agree that when making any large purchase, one of the goals is to keep the monthly payments as low and affordable as possible. Whether it is providing a large down payment, extending loan terms or securing the lowest interest rates, keeping costs down is a number one priority (at least in my household). As it turns out, Experian Automotive’s recently released State of Automotive Finance report showed that very thing. The report found that the average loan terms for a new vehicle jumped to an all-time high of 65 months, the average interest rate for new and used vehicle loans dropped and the average monthly payments dropped versus the same time period in Q4 2011. The report also showed that the average loan amount for a new vehicle was $26,691 in Q4 2012, up $272 from Q4 2011, while the average used vehicle loan was $17,629 in Q4 2012, up $239 from Q4 2011. However, while consumers are taking out larger loans, lower interest rates and longer loan terms for new vehicles helped bring down the average monthly payments. For example, the average interest rate for a new vehicle loan in Q4 2012 dropped to 4.36 percent, from 4.52 percent in Q4 2011, while the average interest rate for a used vehicle loan dropped to 8.48 percent, from 8.67 percent in Q4 2011. Additionally, the average monthly payment for a new vehicle dropped from $468 in Q4 2011 to $460 in Q4 2012. More consumers also were able to obtain financing in Q4, as average credit scores for both new and used vehicles dropped. For new vehicle loans, the average consumer credit score was 755 in Q4 2012, down six points from Q4 2011. For used vehicle loans, the average consumer credit score dropped to 665 in Q4 2012, down five points from Q4 2011 For more information on this report and other automotive-related insights, please visit ExperianAutomotive.com. Photo: Shutterstock

There’s a lot of commentary in the press today as a result of a report the Federal Trade Commission issued this morning about the accuracy of credit reports. This gives me the opportunity to share some insight into Experian’s business and how we actively manage the integrity of our data. After thoroughly reviewing the FTC report issued today, we believe it confirms that consumer credit reports are predominately accurate and serving lenders and consumers well. The report shows that the vast majority of errors on credit reports have no bearing on credit scores, for example outdated information on a consumer’s phone number or address. About 2.2% of reports contained an identified error that shifted consumers to a more favorable lending tier when the data furnisher corrected the inaccuracy. That said, Experian is not satisfied with this result and we continue to work toward ensuring credit reports are 100% accurate.  We take all errors seriously, and invest millions of dollars every year in ways to maintain the integrity of our data by updating our systems to keep data as fresh and accurate as possible. Experian manages information on 220 million consumers and 25 million businesses here in the U.S. There’s no question that’s a challenging job, but one that’s the cornerstone of what we do and therefore critically important. Given the immense significance of credit data in the lending process, we constantly invest the time and resources to improve the integrity of our data, keeping it as fresh and accurate as possible. Credit data powers lending, commerce and our economy, and enables consumers to have access to reasonably priced credit to get the things they need to live a productive life. Lenders need accurate data so they can make objective lending decisions, and consumers should reasonably expect that the information reported about them is an accurate description of how they have handled their credit obligations. All participants in the credit and lending process, including Experian, bear a responsibility to ensuring credit reports are accurate to help keep this process balanced, harmonious and thriving for everyone. Other research on credit report accuracy has also been conducted and published. The Policy and Economic Research Council (PERC) issued the results of its study in May 2011 (PDF); after extensive scientific research, it found that consumers were negatively affected less than one percent of the time by an error in their credit report. Further, the Consumer Financial Protection Bureau (CFPB) issued a report (PDF) that analyzed credit scoring models and found that between 1.3 percent and 3.9 percent of all consumers disputed information on their credit report. Experian’s comments on that report are here. Maintaining Integrity of Our Data The illustration below provides some context on the size of our credit databases. Our goal is to maintain the massive amounts of data flowing through the credit reporting system and ensure credit reports are 100% accurate. Admittedly, this goal has not yet been achieved. We still have work to do, and we invest millions of dollars every year in ways to maintain the integrity of that data by updating our systems to keep it as fresh and accurate as possible. Experian maintains an inventory of more than 400 data quality rules that are customized to the unique needs of clients. Each data furnisher’s submission is checked by these rules to make sure the data is historically consistent and logical before it is loaded to our database. For example, a data furnisher in the auto industry should not be reporting a mortgage account. Our system would catch this, and it would be flagged for one of our data management specialists to investigate. Again, we still have work to do. But we remain vigilant and committed to making improvements. How to Dispute an Error We understand how stressful it can be to find incorrect information on your credit report, especially if the incorrect information is found while applying for credit. Our consumer assistance agents make it a priority to have disputes resolved as quickly and as easily as possible. In fact, to better serve consumers and make sure they have the opportunity to ask questions to understand how inaccuracies occur and how the resolution process works, our consumer assistance center established our “Stop the Clock” program. Instead of measuring the success of our customer service by the number of calls answered or the speed which those calls are handled, our agents are empowered to provide excellent customer service and spend time with each consumer to make sure their questions are answered and they understand any next steps if needed. To accommodate consumer preferences, we provide options on how consumers can initiate a dispute — either online, by telephone or by mail. Most consumers choose to utilize the online dispute system since it simplifies the process by providing choices for the most common dispute reasons and provides a way to check the status of the dispute during the process. In 1996, the credit reporting industry implemented an online dispute resolution system to drive greater accuracy and efficiency into the dispute resolution process. As a result, consumer disputes are sent to data furnishers online daily rather than relying on written documents sent by mail. Our online dispute resolution systems have been enhanced by numerous technology improvements, such as Live Chat assistance for online consumers which have led to faster dispute resolution times – now averaging 14 days. This is less than half the time allowed by federal law. Consumers should be satisfied that we have an effective dispute resolution process that allows them to correct errors through multiple channels. In fact, the PERC study noted above found that 95% of consumers who went through a dispute process were satisfied with the outcome. Experian also invests in consumer education and financial literacy. We want consumers to fully understand the fundamental credit concepts so they can engage effectively in the credit reporting process and play an active role in ensuring information is accurate and complete. The “Live Credit Smart” website is just one example of Experian’s consumer education outreach. Experian’s Commitment We live in a world with balanced interests, and believe consumers, credit grantors and the credit reporting industry all benefit from playing an active role in the credit system. Without this system in place, credit grantors would not be able to assess risk, credit would be harder to get and more costly, lending would slow and as a result, the economy could stall. We know all consumers rely on the ability to lock into a new mortgage rate, get a retail store card to afford that key purchase, or leave the auto dealer with a new car for your family. We take our role in this process seriously, and as a company, we continually challenge ourselves to exceed the highest standards in the industry, both in managing the integrity of our data and helping consumers understand and manage their credit. The success of our business depends on it. Photo: Shutterstock

As you may have seen, 60 Minutes ran a story on the credit reporting industry tonight, and unfortunately, much of the story was inaccurate and misleading. The focus of the segment was on data accuracy and the results of the yet-to-be released FTC accuracy study. Many parts of the story did not accurately reflect the facts that have been validated by independent third party studies, the industry’s position or Experian’s position. As such, we would like to clarify our industry position and specific allegations about Experian’s practices. The Business of Credit Reporting The core business of credit reporting agencies is ensuring the accuracy of consumer credit files. This helps lenders rapidly and accurately assess the credit risk of individual consumers and assures consumers that credit reports are an accurate reflection of their credit and repayment history. The more accurate our data, the more accurate assessment the lenders can make of consumer risk. Data Accuracy – What You Didn’t See 60 Minutes showed FTC Commissioner Leibowitz saying that one out of 10 consumers might have an error that would lower their score. To clarify, the focus of the study was on "material" errors and according to the FTC’s own study, which the Consumer Data Industry Association (CDIA) commented on, “98% of credit reports are materially accurate.” CDIA also shared with 60 Minutes that repeated studies have shown that despite the fact that billions of individual pieces of data are received and processed each year, the credit reports assembled provide highly accurate assessments of consumer credit history that both businesses and consumers can use to make informed financial decisions. They pointed to the work done by the Consumer Financial Protection Bureau who looked at the issue of credit accuracy last December. Their analysis found that only between 1.3% and 3.9% of consumers disputed information in their credit report that they believed was in error. Even that number may overstate the number of actual inaccuracies, since the study did not indicate how many of the disputes were the result of an actual error, instead of mere requests to update information or the result of dispute requests from fraudulent credit repair companies who attempt to scam consumers into disputing accurate data. They also highlighted a recent study concluded by the Policy and Economic Research Council that found only one-half of one percent found an error that would cause the consumer to pay a higher price. These studies also showed 60 Minutes that consumers who use the dispute process are generally satisfied with the results and that credit bureaus are handling disputes in a timely manner. In fact, the Policy and Economic Research Council study found that 95% of consumers were satisfied with the outcome of their disputes. Experian’s Management of Dispute Resolution 60 Minutes interviewed three former Experian employees on how they allegedly handled dispute resolutions. As we informed 60 Minutes, these are the details about the important process we employ to manage disputes: “We cannot speak to the motivation of the statements attributed to former Experian employees, particularly as the comments are out of context and simply not reflective of the way Experian runs its business. We can say without question that Experian is focused on providing the highest quality services to consumers. That commitment is reflected in consumer surveys in which 95% of consumers are satisfied with the results of their dispute requests. In addition, Experian does have procedures where its agents can and do question dispute responses directly with data furnishers. Our agents are trained to be proactive when considering information submitted by consumers; they do in fact have the ability to include supporting information provided by the consumer with each dispute. Experian does drive for efficiency in its processes in full support of consumers' needs for speed in resolving their issues. Importantly, however, our agents are empowered to resolve consumer disputes incorporating the highest quality and customer service without time parameters. Regarding the former employee’s comment that “he could not question or investigate a furnisher’s response,” that is simply not true. We utilize a specialized platform, created by our industry and mandated by federal law, for our agents to effectively communicate with data furnishers when processing disputes. The document that the agent reviews includes both the consumer’s dispute as well as the data furnisher’s response. If the agent feels that the response is unclear, they are empowered to phone verify the response. This has been our agents’ process for many years. Consumers need speed in resolving their disputes, and we direct our efforts toward that goal. We complete dispute processing in 14 days on average, well below the required 30 day turnaround required under federal law.” Accusations of Breaking the Law Among the glaring errors, Ohio Attorney General Michael DeWine stated that companies in the industry are in violation of the Fair Credit Reporting Act. This statement demonstrates both a misunderstanding of the law and the efficacy of our dispute systems. Experian is in full compliance with all relevant laws and regulations. And, from an industry perspective, Federal courts have found no violations on multiple occasions. Further, Congress directed the Federal Trade Commission to conduct a year-long review of the dispute process and they did not find any violations of law. This industry is under continuous scrutiny, but we at Experian do not let that deter us from our commitments. We know there is always more work to do to make the system better, and rest assured, this is core to our commitment. We have a long history of doing what’s right for the consumer. I would invite you to visit “Our Commitment” to learn about how we approach data accuracy, customer service and consumer education.

As the global leader in the credit business, it’s our responsibility to assist lenders in managing consumer credit risk, and importantly, to empower consumers to understand and responsibly use credit in their financial lives. These responsibilities require a commitment – a commitment from us to play a leading role in helping consumers understand the fundamentals of credit management and how they can benefit from this growing marketplace reliant upon credit. To do this, we continually invest in processes and products that help consumers throughout their credit journey. Experian has created a long-standing culture of commitment to evolve with the changing marketplace and demands of consumers (and the credit industry). We have a proven track record of continual improvements to our systems over the years, including: We’ve invested millions of dollars annually upgrading our systems and processes in pursuit of “error-free” data; We were the first credit reporting agency (CRA) to add rental payment history to credit reports; We empowered our call center operators to stay on the phone with consumers as long as it takes to answer their questions; and, We were the first CRA in the U.S. to launch a nationwide financial education campaign. These are just a few examples – and while we are proud of them, we are not sitting idle and resting on these efforts alone. We are constantly striving to make our data as accurate, complete and current as possible to service the needs of consumers and lenders. We know there is always more work to do to make this system better, and rest assured, this is core to our commitment. The world of consumer credit is evolving, and it’s up to Experian (and the industry) to continue looking at ways to make it better. This is a business – but we realize that consumers are at the core of why we are in business in the first place. We are dedicated to helping consumers throughout their journey in this fast-changing world of consumer lending. This is our culture. This is our commitment. I invite you to hear directly from our employees and our partners about our culture and our commitment at www.experian.com/ourcommitment. Photo: Shutterstock

As of 2011, the Hispanic population comprised 16.7% of the United States population, the largest minority group following African-Americans. In addition, 20.3% of U.S. households speak a language other than English. Recognizing the need for expanded financial resources to the Hispanic community, Experian provided a generous grant to translate the NFCC’s MyMoneyCheckUpTM tool into Spanish. The resource provides consumers with a means of evaluating four key areas of personal finance: budgeting and credit management, saving and investing, planning for retirement and home equity. The tool is now available in Spanish at MiAyudaFinanciera.org and Debtadvice.org. “Experian is pleased to work with the NFCC Member Agencies in helping families improve their financial capability and in making this valuable tool available to a wider audience,” said Maxine Sweet, Experian vice president of public education. “We have a shared goal of helping everyone learn to live credit smart. That starts with a clear understanding of your financial position and having readily accessible tools to help guide your future.” Experian has supported the NFCC’s outreach from its earliest days, with representatives previously serving on its Board of Directors, Advisory Council, Education committee and the boards of member agencies across the nation. We recognize the valuable role of the NFCC and its member agencies in helping consumers recover from debt and that they share our passion for educating consumers to live credit smart. To learn more about Experian’s financial education resources, please visit LiveCreditSmart.com. Photo: Shutterstock