Tag Archives: Risk Management

Risk & Compliance FCA’s New Rules for UK Credit Line Increases

FCA logo
Jun192017

My last two posts in this update on UK cards discussed the growth in unused credit and the rising delinquencies in New cards. Both of these posts discussed credit line increases, but there’s one more factor that could weigh heavily on issuers’ plans. The FCA is preparing to introduce new guidelines for credit cards that will impact line increases. It is anticipated that all new accounts will have to opt in for any offered increases, and this is expected to reduce the number of increases that take place. The approach for existing customers should remain as per today, where customers have to reject the offer. However, customers who display a sustained propensity to pay the minimum payment (on non-promotional balances) will either have to opt in or be excluded from increases. Customers showing signs of persistent debt (based on how much they have paid in fees and interest versus reducing their balance)... [Read More]

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Risk & Compliance 5 Questions Risk Managers Need to Ask About PSD2

PSD2 with question mark
Jun122017

The Second Payments Services Directive or PSD2 will bring tremendous changes to the payments world in the coming months. But what does it mean for risk managers? That’s one issue we grappled with at FICO’s recent EMEA Risk Leadership Forum. Today I believe we have more questions than answers. Bear in mind that the goal of PSD2 is to enable customer migration and incent market competition. It’s the finance equivalent of being able to keep your phone number when you switch providers. That’s fantastic if you’re a new entrant, not so fantastic if you’re a bank being forced to share your accounts’ details with new competitors. But PSD2 is more than just open banking. It creates two new players – the Payment Initiation Services Provider (PISP) and the Account Information Services Provider (ASIP). While most banks will be one or both of these, so will many other market participants, such... [Read More]

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Collections & Recovery Collectors — Get Ready for the IFRS 9 Bucket Challenge

Ice bucket challenge photo
Jun012017

Remember the ice bucket challenge craze? Get ready for the IFRS 9 bucket challenge — it’s even more startling, and nobody’s standing by to give you a warm towel. Like GDPR, IFRS 9 poses major challenges for collectors, just as it does for accountants, IT, risk managers and anyone else in the credit business. So now let’s talk about what you can do. Note: While I’m just talking about IFRS 9 here, you do have to approach it and GDPR in concert, because in some areas they seem to be in conflict. You don’t want to gear up for IFRS 9 and then realize you have to undo some of your strategies or processes to avoid GDPR fines. Build your 30-day plan IFRS 9 says if a customer’s risk deteriorates — including becoming 31 days overdue — they go into Stage 2, and you have to start holding lifetime impairment.... [Read More]

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Risk & Compliance Don’t Let “Averages” Mess Up Your IFRS 9 Impact Forecasts

IFRS 9 as digital clock display
May292017

The clock is ticking on IFRS 9 compliance. Preparing for Day 1 IFRS 9 impacts before models are fully built, tested and validated is a bit like preparing for a scheduled car crash: You know the event is going to happen and you know it will be expensive and painful, but you don’t yet know the exact amount of damage. It is tempting to seek comfort in averages from industry benchmarks or surveys. But just as you would never apply the brakes of your car during heavy rain based on the average stopping distance of an average car in average weather conditions, neither should you plan for your business’s IFRS 9 impacts based on average industry impacts alone. Don’t Go by Published Numbers A few widely published, well-intended surveys have attempted to prepare affected organisations for this event by providing estimated ranges and averages in respect of key impact measures.... [Read More]

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Risk & Compliance NCAP Public Record Removals Have Little Impact to FICO Scores

May172017

The National Consumer Assistance Plan (NCAP) is a comprehensive series of initiatives intended to evaluate the accuracy of credit reports, the process of dealing with credit information, and consumer transparency. As a result of NCAP, in July 2017, the three credit reporting agencies (CRAs) are scheduled to make required changes to the criteria used to accept the reporting of a tax lien and/or civil judgment. It is anticipated that civil judgments and some tax liens will be removed from consumer reporting agency (CRA) data when this goes into effect, including previously reported tax liens and/or civil judgments that do not meet the new NCAP-related reporting requirements.  All credit scores that utilize CRA data will be impacted, including but not limited to FICO® Scores. FICO recently conducted research on the most widely used FICO® Score versions at all three CRAs to assess the impact of the NCAP-driven removal of public records... [Read More]

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Risk & Compliance Video: Scotiabank Cencosud Cuts Model Development Times by +50%

Cencosud video interview image
Apr192017

Ever wonder how one of Chile’s largest retailers retains over 3 million customers? We asked Scotiabank Cencosud’s Claudia Guerrero, Model Development Manager of Risk Management in its Retail Finance division. In this Cencosud video, Claudia discusses how the retailer relies on a comprehensive, integrated credit portfolio management solution developed by FICO. This enables it to make better customer decisions, from originations through customer management. In particular, FICO® TRIAD® Customer Manager successfully manages risk-based strategies for credit line increases and cross-selling, and FICO® Model Builder has helped Scotiabank Cencosud cut model development times in half, while still retaining predictive strength — which the company sees as a tremendous competitive advantage. For more information, read the Cencosud case study or visit the FICO Model Management and Compliance solution page.

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Risk & Compliance Examining the Credit Cycle: Is This as Good as it Gets?

Credit-Cycle-Abstract-Featured-Image
Apr132017

More than 70 straight months of US job growth, the official unemployment rate down below 5%, and average hourly earnings growing at a seven-year high of 2.9%. Signs of approaching full employment finally allowed the Fed to see enough stability to inch up rates without being seemingly blown off course by events elsewhere. There will be more rate hikes to come if the economy stays on this course, and in the event the deficits grow, it will pretty much guarantee what we already expect on the interest rate front. With all this in mind, it’s a good time to ask: Has the US credit cycle reached the top? Is it as good as it gets? Of course, we never know that for sure. This is all opinion (some would say speculation), especially on the economic policy front. But you have to feel that if it isn’t the top we are... [Read More]

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Collections & Recovery Three Top Regulatory Themes Emerge from Debt Collection Panel

Three Regulatory Themes
Apr102017

I recently moderated a regulatory panel discussion before a group of nearly 100 collections and recovery (C&R) professionals at the FICO® Debt Manager™ User Group Forum. The esteemed panel consisted of a mix of veteran policy and business leaders, including: Maria Wolvin, Vice President and Senior Counsel of Regulatory Affairs at ACA International; Terry Collins, Collections and Recovery Manager at Trustmark National Bank; and Lucia Lebens, Vice President of Government Relations and Public Policy at Navient. Much of the discussion focused on what C&R professionals can expect in the new US regulatory environment that has emerged in the wake of the November elections. While our experts spoke on a number of hot-button topics, three main themes emerged. CFPB Debt Collection Rulemaking Will Likely Move Forward The panel discussed the CFPB’s continued focus on developing new debt collection regulations. The CFPB has indicated that its next pre-rule action will be the... [Read More]

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Risk & Compliance Afraid of Small Business Lending? Mid-Market Lenders Shouldn’t Be

Small Business Lending for Mid-Market
Apr052017

Some 500,000 – 600,000 new small businesses emerge each year, according to recent U.S. Census Bureau data, and they supply over 60% of jobs. While we’ve expected that number to grow and fuel the economy, it is starting to decrease according to recent reports by TIME and CNN Money. Is small business growth slowing due to lack of innovation and initiative? That seems unlikely. According to a survey done by Insureon, 82% of small businesses expect to grow in 2017. Whether buying new equipment or furniture, hiring, moving, or adding products/services, businesses are planning to expand. So what’s really standing in the way? FICO’s mid-market bank and credit union clients tell us that it remains difficult for entrepreneurs and small business owners to acquire the credit they need to fuel their growth plans. The reasons for this are two-fold. First, there is often little traditional commercial credit history available on... [Read More]

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Collections & Recovery IFRS 9 and Collections – The 31-Day Time Bomb

IFRS 9 as digital clock display
Apr052017

IFRS 9 may just be a new accounting standard, but accountants aren’t the only people scrambling to meet the January 2018 deadline. If you’re involved with consumer debt in any way, this regulation is going to change your world. (Unless, of course, you’re in the US – the name of the game for you will be CECL.) I recently presented a webinar on how IFRS 9 will impact collections, and in this post I’ll share two changes that will have a massive impact on everyone in debt collection, from in-house collectors to DCAs to debt purchasers. At 31 Days, Everything Changes When accounts roll from Stage 1 (low risk) to Stage 2 (impaired risk), it’s a big deal. 31 days is a hard trigger that sends an account from Stage 1 to Stage 2. Impairment for Stage 1 accounts is 12-month expected credit losses. Impairment for Stage 2 and 3 accounts... [Read More]

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