Tag Archives: Risk Management

Risk & Compliance Auto Loan Credit Quality: Hazardous Road Conditions Ahead? Part 2

Auto Lending Credit Trends #2
Feb282017

In my last blog post, I shared a new FICO research study on credit trends in auto lending. One key finding highlighted that the size of auto loans has been increasing faster than inflation since the recession. So how are consumers affording these larger loans? It’s simple: consumers are ending up with longer terms for their car loans: While five-year loans were the most popular length of terms in 2009, there has been a swing towards opening six-year loans since then. Seven-year loan terms—while still rare at ~5% of all new loans—seem to be increasing in popularity as well. This trend towards more six-year loans occurred across all FICO® Scores. This shift may signal an increase in credit risk for the industry because six-year loans have historically had higher delinquency rates. However, confirming this requires some care in our analysis. The lingering effects of the recession, average age of the... [Read More]

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Risk & Compliance Auto Loan Credit Quality: Hazardous Road Conditions Ahead?

Auto Lending Credit Trends
Feb222017

The gist of recent media coverage on the state of US auto lending can be summarized by the title of a recent New York Times article: As Auto Lending Rises, So Do Delinquencies. With this concern in mind, FICO recently conducted a research study to examine the credit quality of US consumers with auto loans, as well as other significant credit trends in auto lending. Our findings tell an interesting tale: Banks have been mildly decreasing their car loan underwriting standards. Overall indebtedness for many consumers has been declining since the Great Recession. The size of car loans has been increasing faster than inflation since the recession. More consumers now have six-year auto loans instead of five-year loans, which were the previous standard. These six-year loans have higher delinquency rates, thus this shift to longer-term loans is likely to result in higher losses for US auto loans over the next... [Read More]

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Fraud & Security Report from RSA: Bangers, Mash, Security and OpportUNITY

Feb162017

The RSA Conference has descended upon San Francisco’s Moscone Center, bigger and more energizing than ever. With security an agenda-topping concern of many CIOs in 2017, the fervor to fight cybercrime is at an all-time high. While there was a wide range of top-of-mind topics being discussed, two topics in particular continued to show growing interest – artificial intelligence and cyber insurance. More on that in a minute. The theme of this year’s RSA Conference was “The power of opportUNITY,” and we had plenty of opportunities in San Francisco to showcase FICO’s unity with security professionals and industry influencers on similar missions. Two of these events took place in informal settings designed to encourage networking and dialogue: The Cyber+IoT Bangers and Mash Roundtable Breakfast, held on Tuesday morning in conjunction with the San Diego industry organization CyberTECH. This panel session focused on “Securing the Smart City” and featured guests such... [Read More]

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Fraud & Security Stamping Out Financial Crime in Kathmandu

Feb132017

It’s not often that we enter a greenfield market that is just on the cusp of significant growth, but earlier this month FICO announced its entry in the Nepalese financial market. Nepal is looking to grow its economy and the government recently called for enhanced risk management compliance capabilities to help combat cases of financial crime in the country. “There is clear evidence that economic and financial crimes are some of the fastest growing offences globally,” said Dr. Chiranjivi Nepal, governor, Nepal Rastra Bank. “In Nepal, we can ill afford for these activities to drain our economy or to destroy business and banking confidence. It is therefore imperative that we match the technologies of sophisticated organized criminal groups, with advanced analytics to help banks closely monitor the vast volume of financial transactions they handle on a day-to-day basis.” With the perspective of regulatory compliance turning increasingly global, the Nepalese banks... [Read More]

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Risk & Compliance For Consumers Seeking Credit Scores, VantageScores Are No Substitute for FICO® Scores

Consumers + credit scores
Feb132017

Consumers today are being bombarded by offers to get their “credit scores” for free.  These lead generation websites don’t provide the FICO® Scores used by nearly all lenders – but some “experts” say that doesn’t matter.  In fact, some people claim that the VantageScores distributed to consumers through these websites are perfectly good approximations of the FICO® Scores used by lenders. The argument goes something like this: because multiple versions of the FICO® Score exist and are used by thousands of lenders, no single FICO® Score represents a consumer’s “credit score”.  It doesn’t matter whether a consumer receives a FICO® Score or VantageScore because they all work similarly: if you rank high on one score, you’ll rank high on another score, and all these scores move up and down together. This is simply not true, and new research confirms it. FICO has nine widely used versions of the FICO® Score... [Read More]

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Risk & Compliance Medical Collections Rates Highest for Consumers Aged 24-46

Medical-Collections-by-Age
Jan112017

Since medical costs often increase as we age, one might expect that the rate at which medical bills are unpaid and then sent to collections companies would also increase with age – at least until age 65 when US citizens qualify for Medicare. New FICO research shows that not this not the case. Looking at credit bureau data as of July 2016, medical collections reporting – both paid and unpaid collections greater than $99 – breaks down by age as follows: While the peak of this curve occurs at age 27, the rate of consumers with medical collections is uniformly high for ages 24 to 46. Over a quarter of consumers in that age range have at least one such collection showing on their bureau report. After age 46, we see the rate slowly drop, and as expected, it drops substantially after age 65. Part of the issue stems from... [Read More]

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Risk & Compliance 2017 Banking Regulatory Predictions—Brace for a Sea Change

2017-Banking-Regulatory-Predictions
Jan092017

Last fall, I suspect that most regulatory compliance professionals in the U.S. consumer lending market anticipated 2017 would be more of the same. This meant a continued focus on implementation of recently adopted rules, while bracing for a wave of new regulations from the federal banking agencies. Everything changed on November 8. The unexpected election of Donald Trump resulted, in many cases, in a 180-degree course correction. The Trump administration, bolstered by the reelection of a Republican majority in both houses of Congress, has fostered a new environment that is expected to promote de-regulation. While I won’t ever be mistaken for Nostradamus, amidst this regulatory sea change, I feel (relatively) confident in sharing with you my top regulatory compliance predictions for 2017. A little-known law will have big impact on regulation. Haven’t heard of the Congressional Review Act (CRA)? You are not alone. This obscure statutory provision was adopted in... [Read More]

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Risk & Compliance Improving Small Business Lending: Q&A with Ascentium

Jan052017

Ascentium Capital, an innovative commercial lender, wanted to expand its growing small business portfolio while keeping risk in check. I recently had the chance to speak with Chris Miller, VP of Decision Analytics at Ascentium, on how the company makes quick lending decisions for its small business customers. Please tell me a bit more about Ascentium Capital and what makes you unique? Chris: Ascentium is a commercial lender with a focus on equipment and technology leasing. We’ve grown in five years to have over $1.2 billion in assets and to be the third-largest private-independent finance company. We see ourselves as a small business lender working on making life easier for small business owners. We do that by making access to capital easier using our proprietary finance platform combined with exceptional service. Our basic premise is we can make an application decision in two hours, though it only takes about an... [Read More]

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Analytics & Optimization Top 10 of 2016: Our Blog Posts You Liked Best

Jan032017

With 2016 recently coming to a close, we took a look back to uncover which topics you – our blog readers – gravitated toward last year. Chief among your interests were analytic innovation, credit risk, regulatory compliance, customer experience and mobile payments. Here’s a recap of our top 10 most popular posts published in 2016: US Credit Quality Rising … The Beat Goes On – Ethan Dornhelm shares FICO research showing how US consumer credit quality continues to climb. Why Is Customer Experience So Hard to Explain? – For an organization to improve customer experience, here’s why everyone needs to start on the same page. 4 Analytic Predictions for 2017 – From Killer Devices to AI Hype – FICO Chief Analytics Officer Scott Zoldi shares his predictions for analytics trends and burning issues in 2017. Your Customer Experience Management Is SO Immature! – Roughly 80% of companies are customer experience... [Read More]

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Risk & Compliance 2017 Predictions: 4 Trends that Will Shake Up Banking Next Year

Dec202016

If you follow the financial press, blogs and newsletters, you may have noticed a sea change in the topics du jour over the last 12 months. As we close out 2016, receding into the background are the never-ending stories of Big Data technology, as well as the hype of how P2P lending is taking over. Instead, the focus is on blockchain, open banking, AI, fintech beyond P2P lenders, cybersecurity, digitisation and customer experience. This shift is exciting because, as these topics all collide, it will shake up the very face of banking as we know it … although probably not quite as quickly as the technology talking heads would have us believe. I have one more to add to that list: financial inclusion must be central to the story of 2017 because it will be the beneficiary of many mainstream industry innovations. Here are some thoughts on just four of... [Read More]

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