Well, here we are about two weeks from the Federal Trade Commission’s June 1, 2010 Red Flags Rule enforcement date.  While this date has been a bit of a moving target for the past year or so, I believe this one will stick.  It appears that the new reality is one in which individual trade associations and advocacy groups will, one by one, seek relief from enforcement and related penalties post-June 1.  Here’s why I say that: The American Bar Association has already file suit against the FTC, and in October, 2009, The U.S. District Court for the District of Columbia ruled that the Red Flags Rule is not applicable to attorneys engaged in the practice of law.  While an appeal of this case is still pending, in mid-March, the U.S. District Court for the District of Columbia issued another order declaring that the FTC should postpone enforcement of the Red Flags Rule “with respect to members of the American Institute of Certified Public Accountants” engaged in practice for 90 days after the U.S. Court of Appeals for the District of Columbia renders an opinion in the American Bar Association’s case against the FTC.” Slippery slope here.  Is this what we can expect for the foreseeable future? A rather ambiguous guideline that leaves openings for specific categories of “covered entities” to seek exemption?  The seemingly innocuous element to the definition of “creditor” that includes “businesses or organizations that regularly defer payment for goods or services or provide goods or services and bill customers later” is causing havoc among peripheral industries like healthcare and other professional services. Those of you in banking are locked in for sure, but it ought to be an interesting year as the outliers fight to make sense of it all while they figure out what their identity theft prevention programs should or shouldn’t be.  

By: Kari Michel Credit quality deteriorated across the credit spectrum during the recession that began in December, 2007. As the recession winds down, lenders must start strategically assessing credit risk and target creditworthy consumer segments for lending opportunities, while avoiding those segments where consumer credit quality could continue to slip. Studies and analyses by VantageScore® Solutions, LLC demonstrate that there are more than 60 million creditworthy borrowers in the United States – 7 million of whom cannot be identified using standard scoring models. Leveraging methods using the VantageScore® credit score in conjunction with consumer credit behaviors can effectively identify profitable opportunities and segments that require increased risk mitigation thus optimizing decisions. VantageScore Solutions examined how consumers credit scores changed over a 12 month period.  The study focused on three areas of consumer behavior: Stable:  consumers that stay within the same credit tier for one year Improving:  consumers that move to a higher credit tier in any quarter and remain at a high credit tier for the remainder of the timeframe Deteriorating: consumers that move to a lower credit tier in any quarter and remain at a lower credit tier for the remainder of the timeframe Through a segmentation approach, using the three credit behaviors above and credit quality tiers, emerges a clearer picture into profitable segments for acquisitions and existing account management strategies. Download the white paper, “Finding creditworthy consumers in a changing economic climate”, for more information on finding creditworthy consumers from VantageScore Solutions. Lenders can use a similar segmentation analysis on their own population to identify pockets of opportunity to move beyond recession-based management strategies and intelligently re-enter into the world of originations and maximize portfolio profitability.

By: Wendy Greenawalt The auto industry has been hit hard by this Great Recession. Recently, some good news has emerged from the captive lenders, and the industry is beginning to rebound from the business challenges they have faced in the last few years.  As such, many lenders are looking for ways to improve risk management and strategically grow their portfolio as the US economy begins to recover. Due to the economic decline, the pool of qualified consumers has shrunk, and competition for the best consumers has significantly increased. As a result, approval terms at the consumer level need to be more robust to increase loan origination and booking rates of new consumers. Leveraging optimized decisions is a way lenders can address regional pricing pressure to improve conversion rates within specific geographies. Specifically, lenders can perform a deep analysis of specific competitors such as captives, credit unions and banks to determine if approved loans are being lost to specific competitor segments. Once the analysis is complete, auto lenders can leverage optimization software to create robust pricing, loan amount and term account strategies to effectively compete within specific geographic regions and grow profitable portfolio segments. Optimization software utilizes a mathematical decisioning approach to identify the ideal consumer level decision to maximize organizational goals while considering defined constraints. The consumer level decisions can then be converted into a decision tree that can be deployed into current decisioning strategies to improve profitability and meet key business objectives over time.