Allegacy Federal Credit Union
The phrase "staying the course" does not mean being inflexible at Allegacy Federal Credit Union. In fact, in the Consumer Lending area, "staying the course" stands for being diligent in monitoring the credit scoring system while continuing to improve processes and procedures.
Allegacy, based in Winston-Salem, N.C., since 1967, serves a nationwide membership. The credit union uses an industry-specific scorecard, Fast StartSM, which it has monitored regularly since 2000. "Fast Start has yielded results that are effective and efficient in our consumer loan processing in the last ten years," said Perry Crutchfield, Director of Credit Risk Management. Allegacy has diligently tracked applicant activity and loan performance and has made proactive decisions as shifts in trends were observed and management set goals and objectives.
Staying the course by means of frequent monitoring also assists the credit union in maintaining compliance with Regulation B. From an Equal Credit Opportunity Act (ECOA) perspective, Allegacy has utilized management decision reports to measure how consistently lending staff make credit decisions. These reports can be used to provide guidance, if necessary, to lenders in a timely manner and as supporting documentation during fair-lending exams.
Allegacy’s review of system overrides is used to provide feedback to staff and enhance processes and procedures when trends are observed. Over the years, management has researched high-side and low-side override reasons to determine if the decisions were appropriate according to management’s objectives. The credit union has proactively tracked loans that were approved as a result of a low-side override decision in order to manage the increased risk associated with these loans. This procedure is crucial to managing credit risk, particularly in a down economy.
Performance monitoring of booked loans also is a priority at Allegacy. Management can determine if a cutoff score adjustment is appropriate or if lending strategies are effective by reviewing these types of reports. In 2009, the credit union underwent a monitoring system conversion that enhanced its capabilities to review short-term delinquency reports for accounts booked within the last six months and performance reports on an ongoing basis.
The credit union has continuously monitored the stability of its applicant population to detect shifts in score distributions. Allegacy also can determine which characteristic of the scoring model affected change in the score distribution. In the past, management has effectively used results in the characteristic distribution report to train staff on the importance of inputting all applicant information into the data-entry system.
"Monitoring Experian’s Fast Start model has enabled Allegacy to confirm base performance, identify shifting trends, and assist in modifying lending procedures and policies," said Crutchfield. Scorecard monitoring is a mainstay in the Consumer Lending area at Allegacy, and it is not taken lightly. Monitoring reports are not only produced each month; they also are used to make improvements, and they serve as vital documentation during audits. That is why staying the course remains important at Allegacy and allows the credit union to maintain flexibility in these changing times.