The Consumer Financial Protection Bureau (CFPB) is a new regulatory agency that is still evolving. But even now it’s clear that it will have unprecedented powers with a broad reach across industries – including communications. Although there are questions about how the CFPB will operate, there are still steps you can take to prepare. To help you get ready, let’s review a few of the areas you should expect CFPB to affect your business, followed by three questions you can help your customers answer. 3 Ways the CFPB Will Impact Business: Consumer disclosures must be clear and easy to read. The goal is to ensure that financial terms and conditions of services (especially for credit cards and mortgages) are disclosed in clear, easy-to-understand terms that allow consumers to compare offers. Consumer products to be examined rather than industries – Regulatory agencies are typically structured around the kinds of businesses they supervise. With the CFPB, we’ll see a regulator with a perspective more focused on consumer financial products and services. Transparency on how credit scores affect terms & conditions – Greater transparency about credit scores and how they are used to determine loan rates will also be a priority. Lenders are required to disclose a score they used in all risk-based pricing notices and adverse action notices beginning July 21, 2011.   CFPB Takes Authority on July 21 The CFPB receives full regulatory and enforcement authority on July 21, so it’s important for covered entities to continue complying with current law and striving to follow industry best practices. Companies need to demonstrate that they have taken steps to increase consumer credit education and transparency of credit scores, as these items top the CFPB agenda. Experian Consumer Education Resources Experian is addressing the growing need for consumer education by offering Experian Credit EducatorSM, a credit education service in which consumers engage in a one-on-one credit education session with an Experian credit professional agent,  together reviewing  a copy of their credit report and VantageScore® credit score. Answers to 3 Consumer Questions: As part of Experian Credit Educator, consumers learn the answers to three main questions: What’s in a credit report? What is a score, and what types of information can increase or decrease a score? How does credit affect my financial situation?     Experian Credit Educator allows lenders to provide customers a personalized education service, thereby advancing customer engagement while improving customer satisfaction, loyalty, portfolio quality, and cross-sell opportunities. Do you have questions about the CFPB’s role? Leave a comment or contact your Experian representative if you need assistance in complying with new regulatory requirements.

It’s that time of year again – when people all over the U.S. take time away from life’s daily chores and embark upon that much-needed refresh: vacation! But just as fraud activity spikes during the holidays, there are also fraud trends suggesting spikes in fraudster activity during the summer. With consumers on vacation, identity theft becomes easier. Consumers are most likely to break their normal spending trends and break patterns established by fraud analytics; and consumers are less likely to be as attentive to elements that can help minimize fraud while out of town. There has been plenty of research to demonstrate that fraudsters perpetrate account takeover by changing the pin, address, or email address of an account. Now, fraudsters are more likely to add themselves as an authorized user to the account, which may not be considered a high-risk flag in transactional decisioning strategies. By identifying risky behaviors or patterns outside of a consumer’s normal behavior and an engaging in a knowledge based authentication session with the consumer, it is possible to help minimize the risk of fraud. Knowledge based authentication provides strong authentication and can be part of a risk-based approach to on-going account management, protecting both businesses and consumers from being burned, at least by fraudsters, while on vacation.

By: Kari Michel On March 18th 2011 the Federal Reserve Board approved a rule amending Regulation Z (Truth in Lending) to clarify portions of the final rules implementing the Credit CARD Act of 2009. Specific to ability to pay requirements, the new rule states that credit card applications generally cannot request a consumer's "household income" because that term is too vague to allow issuers to properly evaluate the consumer's ability to pay. Instead, issuers must consider the consumer's individual income or salary. The new ruling will be effective October 2011. Given the new direction outlined in the latest rules, we've been hard at work on developing 2 income models to support these regulatory obligations and enhance the underwriting and risk assessment process - Income InsightSM and Income Insight W2SM.  Both income models estimate an individual’s income based on an individual credit report and can be used in acquisition strategies, account management review and collection processes.  Why two models? Income InsightSM estimates the consumer’s total income, including wages, investments, rentals and other income. Income Insight W2SM estimates wages only.  Check them out - and let us know what you think! We want to hear from you.

By: Kennis Wong When we think about fraud prevention, naturally we think about mininizing fraud at application. We want to ensure that the identities used in the application truly belong to the person who applies for credit, and not identity theft. But the reality is that some fraudsters do successfully get through the defense at application. In fact, according to Javelin’s 2011 Identity Fraud Survey Report, 2.5 million accounts were opened fraudulently using stolen identities in 2010, costing lenders and consumers $17 billion. And these numbers do not even include other existing account fraud like account takeover and impersonation (limited misusing of account like credit/debit card and balance transfer, etc.). This type of existing account fraud affected 5.5 million accounts in 2010, costing another $20 billion. So although it may seem like a no brainer, it’s worth emphasizing that we need to have fraud account management system and continue to detect fraud for new and established accounts. Existing account fraud is unlikely to go away any time soon.  Lending activities have changed significantly in the last couple of years. Origination rate in 2010 is still less than half of the volume in 2008, and booked accounts become riskier. In this type of environment, when regular consumers are having hard time getting new credits, fraudsters are also having hard time getting credit. So they will switch their focus to something more profitable like account takeover. In addition to application fraud, does your organization have appropriate tools and decisioning strategy to minimize fraud loss from existing account fraud?  

While the majority of your customers may be consumers, most telecommunications companies also work with a number of business accounts. Understanding business credit scores — and what attributes have the most impact on them — can go a long way in helping you identify good customers as well as better manage risk. The following article was originally posted by Peter Bolin on the Experian Business Credit blog. There are a number of factors that impact business credit risk scores. Keep in mind that most risk models are built using multivariate statistical methods that not only look at each attribute, but also look for the interaction between the attributes. However, there are three general factors that will impact a business score. Recency: How recently has the business been delinquent? Events that have happened recently tend to be most predictive of business behavior in the near future. For example being days beyond credit terms (DBT) in the past 30, 60, and 90 days will tend to negatively impact, on average, a business’s credit score versus those that are current. Frequency: How frequently is the business delinquent or applying for credit? If a business has multiple beyond terms events then the algorithm will reflect this behavior and will tend to impact the score to the low side. In addition, if a business is frequently applying for credit (called inquires) then this will also negatively impact the score. Monetary/Usage: How large is the debt burden? Businesses that carry large balances in relation to credit limits tend to be more risky than those that carry lower balances in relation to credit limits. This is called the utilization ratio or balance-to-limit ratio. As the debt burden increases interest payments also grow placing more stress on cash flows. This tends to negatively impact a business’ risk score. Please comment on this post to let me know of specific topics you want to hear more about.

The next time a consumer asks about his or her credit score, consider it an opportunity. Recent changes to the Risk-Based Pricing (RBP) rule may provide new opportunities to strengthen relationships by educating consumers about what their credit scores mean, how they’re used, and how they can be improved. For many lenders and other businesses, this could be the first time they’ve had a chance to speak directly and openly with customers about their credit scores. The RBP rule is intended to improve financial literacy As we’ve discussed, the Risk-Based Pricing Rule was instituted in response to policymaker concerns that consumers were not being sufficiently informed of the impact that credit reports can have on their annual percentage rate (APR). Now, when a lender makes a credit decision based on a consumer credit report and does not offer the best possible rate, or denies credit, the RBP Rule requires lenders to notify the customer about the decision – through either an explanation of the rate offered or disclosing a credit score. New requirements take effect on July 21 RBP compliance is changing following recent passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Companies will now be required to provide all customers with a credit score within a Risk Based Pricing Notice, along with educational material. The new requirement is effective July 21, 2011. This is also the date when the new Bureau of Consumer Financial Protection (CFPB) is set to be fully operational. How to prepare for consumer questions about credit scores Experian offers a number of resources to help lenders answer consumer questions. Online resources, including the Ask Experian column and our extensive Credit Education section, provide fundamental information to help consumers better understand credit scores and credit reports. The Experian Credit Score Basics booklet, plus more than 20 other educational documents, are available electronically and formatted for easy printing and distribution. All documents, PowerPoint presentations, virtual seminars and education videos are available on a free mini-disk. Customized training and education is available The Experian Public Education team can also provide customized, live Internet-based training and education for our clients’ employees to help them effectively answer customer questions about credit reports and credit scores. For a free mini-disk or more information about training events, please contact Rod Griffin, Experian’s Director of Public Education, at 1 (972) 390-3528, or email clientcorner@experian.com. Take a moment to check out our Risk-Based Pricing microsite, too. Note: While Experian is happy to provide our observations related to the new Risk-Based Pricing Rule, please work with your own legal counsel to ensure that you comply with your obligations under the rule.

By: Kristan Frend Small business owners appear to be lucrative targets for identity fraud perpetrators, alarming banking institutions, payment processors, and B2B service providers. According to Javelin’s 2011 Small Business Owners (SMBO) Identity Fraud report, the cost of fraud and identity theft “hit SMBO constituents particularly hard. Javelin research uncovered what was previously an undocumented cost to the industry of $5 billion as a direct result of this fraud. In addition, financial institutions (FIs) lost over $590 million in clients and revenue opportunities over a five‐year period.” Additionally, the report indicated that small business owners mean fraud amount is about 5% higher than that for all consumers ($4,851 vs. $4,607). Even more alarming was the fact that the SMBO’s mean victim cost is 150% higher than consumer costs ($1,574 vs. $631). So what does all of this mean? If you’re a small business lender or service provider, having a robust multi-layered SMBO fraud prevention program in place is essential for client retention and avoiding reputational risk.   You can take control of the situation with more proactive fraud prevention strategies which will improve your relationships with SMBO customers and save them (and you) money in the long run.

Managing commercial credit in today’s economy can be a real challenge. For telecommunications companies, pulling a report can be helpful in deciding whether or not to offer service to a consumer. But pulling credit reports alone is simply not effective to perform true, proactive portfolio management. The following article was originally posted by Minnie Blanco on the Experian Business Credit blog. If you make decisions just by pulling credit reports, you may want to think about how you can manage your accounts proactively. Pulling a report is helpful in deciding whether you should offer credit to a business. But, consider these basic steps when looking for any negative trends: Develop a policy for how you’d handle accounts that are current, delinquent, bankrupt, etc. Segment your portfolio by those accounts who pay within a particular range of time or who fall within a particular category, i.e. Current 1-30 days, 31-60, 61-90, 91 plus or filed bankruptcy. Review your accounts and apply your company policy to that particular segment.     By applying steps 1 -3, you’ll be able to proactively identify good candidates for increased credit limits, as well as those you’ll need to pay closer attention to because they may be headed for delinquency or collections. BusinessIQ allows you to easily pull reports, segment accounts and submit them for account review. It’s easy-to-use…plus, the Portfolio Module is free! Here’s a demo on the application. Look for future blog posts from me where I’ll write more about managing your portfolio. And, feel free to comment and let me know if there are specific topics you want to hear about.

Scoring is one of the fundamental ways to improve customer management and acquisitions in any business. Companies use scoring to predict what kind of risk they will be working with before granting credit. When those predictions turn out to be wrong and the accounts move into collections, scoring is crucial in determining which actions result in repayment. Many companies handle each past due account in the same manner. They make sure they have updated phone numbers and addresses; then send letters and make phone calls--all of which are important steps. However, treating each account the same is neither an effective nor efficient use of resources. When dealing with a large number of collection accounts and a staff that needs to do more with less, you need a segmentation strategy to determine which accounts are most collectible, and focus your efforts on those accounts. Scoring has been used in collection efforts for many years; however the economy has changed dramatically since recovery scores were developed so it’s time to start considering new recovery scoring technologies. The use of blended data, which combines account-level transactional data and credit data, and advanced analytics, are vital to producing the most predictive recovery results. Leveraging geographic-based summarized data provides another level of segmentation allowing decisions to be made based on such things as local jobless rates or localized wealth pockets where income is higher in certain areas. Today’s most profitable collections operations utilize segmentation strategies that consider the customer’s capacity to pay and probability of recovery. Corresponding treatment strategies are then aligned so that more money is spent on those customers that are more likely and willing to pay, while spending less money on those that are not likely and less willing to pay. Regardless of your company size, the interest in minimizing costs within collections operations and maximizing dollars recovered should be your goal.  Innovations in recovery modeling will undoubtedly help you reach that goal. For additional information on recovery modeling, click here.

By: Staci Baker It seems like every time I turn on the TV there is another natural disaster. Tsunami in Japan, tornadoes and flooding in the Mid-West United States, earthquakes and forest fires – everywhere; and these disasters are happening worldwide. They are not confined to one location. If a disaster were to happen near any of your offices, would you be prepared? Living in Southern California, this is something I think of often. Especially, since we are supposed to have had “the big one” for the past several years now. When developing a preparedness plan for a company, there are several things to take into consideration. Some are obvious, such as how to keep employees safe, developing steps for IT  to take to ensure data is protected , including an identity theft prevention program, and establishing contingency business plans in case a disaster directly hits your business and doors need to remain closed for several days, weeks, or …. But, what about the non-obvious items that should be included in a disaster preparedness plan? When a natural disaster hits, there is an increase in fraud. So much so, that after Hurricane Katrina battered the Gulf, the Hurricane Katrina Fraud Task Force, now known as the National Center for Disaster Fraud, was created. In addition to the items listed above, I recommend including the following. Create a plan that will put fraud alerts in place to minimize fraud.  Fraud alerts are not just to notify your clients when there is fraudulent activity on their accounts. Alerts should also be put in place to let you know when there is fraudulent activity within your own business as well. Depending on the type of disaster, delinquency rates may increase, since borrower funds may be diverted to other needs. Implement a disaster collections strategy, which may include modifying credit terms, managing credit risk, and loan loss provisioning. Although these are only a few things to be considered when developing a disaster preparedness plan, I hope it gets you thinking about what your company needs to do to be prepared. What are some things you have already done, or that are on your to do list to prepare your company for the next big event that may affect you?

It seems as though every day the news headlines trumpet another high-profile data breach.  The most recent marquee breach is courtesy of a Sony PlayStation Network hacker, whose attack on the Sony and Qriocity servers between April 17th and 19th have compromised the personal data and, possibly, stored credit card information of 77 million players.  (Yes, you read that right; 77 million.)  Combine that with other recent cyber-heists affecting millions of unsuspecting consumers or residents, and many organizations have been forced to send out a dizzying array of email notifications to their customer base, many – if not all – of whom are now vulnerable to spear-phishing attacks. With numerous different breaches affecting so many people as of late, millions of consumers are receiving emails from trusted brands noting that customer emails (and perhaps other information) have been compromised, so consumers should be wary of future emails that may appear to be sent from them…like the one they’re reading now. Got that? This begs the question of whether customers are starting to tune out to the onslaught of breach alerts flooding their email in-boxes. Some security gurus believe that notifications aren’t effective and customers become numb to these alerts.  Others are convinced that breach information overload is a good thing, educating people to the dangers lurking in the cybershadows and their vulnerability to identity thieves.  After all, how do you know to watch out for email “bait” if you’re not aware there’s a phishing hook with your name on it? Furthermore, the flip side of over-notification is under-notification.  This is something that Sony is now being accused of in a lawsuit that claims the company waited too long to notify its PlayStation customers of the recent breach, which only exacerbated customer vulnerability to credit card fraud. The irony is that while the dramatic breaches of late have been stealing headlines (as well as data), a 2011 Data Breaches Investigations Report by Verizon indicates that total thefts from data breaches have in fact declined significantly over the past few years.  The total number of records actually compromised from these breaches was a “mere” 4 million in 2010, quite a drop from the 144 million records compromised in 2009, and the 361 million compromised records in 2008.  The bad news?  If you look at actual data breaches versus compromised records, the numbers this year are up; 760 breaches last year, an increase from 141 in 2009. The bottom line: while fraudsters haven’t been able to recently score as much cyber-loot as in times past, this is no time to relax. Just be aware that with the steep increase in breaches comes an equally steep increase in breach notifications, and the associated risk that breach notification fatigue will put your customers to sleep. Learn more about our Data Breach solutions

Unless you’ve been hiding under a rock, you are undoubtedly aware that the 4G ship has sailed into port. The 4G network is a completely different technology as compared to 3G, the network it is replacing. 3G was fast, but 4G will set the world on fire. It’s kind of like the difference between a farm tractor and a Lamborghini. Rather than just being able to check email and (slowly) surf the net (as with 3G), 4G users will be able to watch live television and rip through online content like nobody’s business. So what does this mean for communications companies? Change device, change carrier? The big question for wireless providers is whether or not customers will change carriers as they upgrade to new, 4G-supported devices. The simple answer is, it depends. Customers who are currently under contract will not likely jump ship for the simple fact that it will cost too much. For example, let’s say I want to upgrade five devices. I can probably buy these less expensively by changing carriers (due to attractive introductory offers). However, if I have to cancel three contracts prior to term end to do it, it may cost me upwards of $1,000—probably more than I can save by changing carriers. For customers who are at the end of a contract term, upgrading to 4G presents a golden opportunity to change providers, if that’s something they’ve been considering. Wireless providers will obviously need to contact these customers well before their contracts are up and make them an offer they simply can’t refuse. Other concerns for wireless providers Obviously, key players in the market have invested a significant amount of money to develop the 4G infrastructure, and sooner or later they’re going to want to recoup those costs. Introductory offers will motivate many to upgrade to 4G, but will all these new/upgrade customers be able to pay the higher monthly bills that will likely come with their new 4G devices? While locking in all these new contracts will positively affect sales quotas, it will be more important than ever to assess these customers’ cash flow situations and credit-worthiness, so they don’t end up negatively affecting the bottom line. Concerns for other telecommunications companies One other interesting aspect to consider is this: With a 4G device, consumers can effectively create their own “hot spot.” So the question is, just as many people are dropping their landlines in favor of wireless, will 4G device users decide to drop their Internet providers? How about their cable television service? I intend to revisit this topic in 3-6 months to see whether early 4G adopters are in fact jumping to different carriers and/or dropping other services. What do you think might happen as 4G becomes the new normal? Leave a comment and share your thoughts.

With cell phones overtaking landlines as the new “home phone” for many consumers, things could get tricky for credit card holders and other debtors as well as the creditors who need to reach them. The Federal Communications Commission wants to limit the ability of collectors to use autodialers to call cell phones. But the unintended consequences could make credit more costly as well as harder to get for younger customers. The FCC’s proposed revision At issue is a proposed FCC action to revise the Telephone Consumer Protection Act (TCPA) of 1991 in an effort to align its regulations with Federal Trade Commission rules. The do-not-call rules already restrict telemarketers from calling cell phones. But the new FCC revisions would cover any call to a cell phone, including legitimate calls to collect a debt, notify a customer of a payment due, or request additional information to complete an application. Confusion about consent Businesses are puzzled at how compliance might work under the new rule. If approved, the proposed rule would no longer permit creditors to call a customer’s cell phone when the cell number was filled in on an application. The proposed rule changes the definition of what constitutes prior consent. Just having a phone number on an application wouldn’t be sufficient. Companies would be required to have written permission, such as “I consent to calling my cell phone when there’s a problem…” When a cell phone is the only phone This raises new issues. For instance, if a consumer needs to be contacted, but the company doesn’t know the cell phone is the only line, the company could still be liable for calling it. What now? The good news is that this issue hasn’t moved anywhere over the last year. The rule was proposed in March of 2010 and comments were accepted up to last May, but nothing has happened since. From a regulatory perspective, the level of industry concern over the FCC’s proposed rule warrants some caution. While some form of revision could still go forward, the modification may not be in line with FTC rules. Are you concerned about the FCC’s proposed cell phone rule? Let us know if you’ve developed contingencies in case it’s approved. We’ll be sure to keep you up to date on any new developments, so watch this space for updates. For further reading on this issue: FCC Cell Phone Rule Would Raise Risk Debt Collectors Seek Right to 'Robocall' Cell Phones

Time certainly does fly — I can’t believe it’s been more than a month since TRMA’s Spring Conference in Las Vegas! Those of us who participated from Experian Decision Analytics had a great time interacting with all the telecommunications risk management professionals who attended, and the feedback we received on our presentations was overwhelmingly positive. Sharing our thoughts We had the occasion to get together recently to compare notes about the conference, and wanted to share a few observations with you: Attendees who participated in Jim Nowell’s SimTel business game were EXTREMELY engaged. (Click here to see photos!) A number of participants told Jim they’d like to have him run the game for their entire team back at the office. Greg Carmean reported that there was a lot of interest focused on credit consortiums, especially concerning who is participating in them within the telecommunications space. Linda Haran noted that attendees were curious about where jobs would be created (largely in the private sector) and where foreclosure activity would be the strongest (CA, AZ, NV and MI as expected, but increases have been observed in TX, WA, IL, GA and CO). Jeff Bernstein found that unemployment remains a concern, though increasing consumer confidence and spending seem to be moving us toward a slow but steady recovery. Collectability scores were also a big topic of interest. Attendees wanted to better understand whether these scores represent a consumer’s ability to pay or their propensity to pay. Finally, regulatory requirements continue to be an area of concern, especially surrounding the Fair Credit Reporting Act (FCRA).   Share your thoughts! If you attended TRMA’s Spring Conference, we’d love to hear from you. Please share your thoughts and impressions from the conference by commenting on this blog post. All of us at Experian look forward to seeing you at TRMA’s Summer Conference in San Francisco June 28 - 29, 2011.

DISH Network’s Team Summit scheduled for May 4-6 Team Summit is an annual event hosted by DISH Network for over 3,000 retailers in the digital satellite broadcast industry who are serious about growing their businesses and doing what it takes to succeed. This year’s Team Summit is scheduled for May 4-6 at the Colorado Convention Center in Denver, Colorado. In addition to training, networking, meals, entertainment and more, Team Summit features a trade show that includes over a hundred companies showcasing the latest in technology, services and tools. At Experian, we’re committed to investing in new technologies in order to offer our customers the most effective ways to target, acquire and manage customers. Being a part of Team Summit helps us better understand how we can more effectively respond to the needs of one of the key industries we serve. It also allows us to share what we see as up-and-coming trends and new developments in all areas of customer lifecycle management. Learn more about Team Summit Click here for more details on DISH Network’s Team Summit and be sure to stop by our booth. We look forward to seeing you there, but if you can’t attend (or even if you can), be sure to follow us on Twitter for live summit updates, and check back here for post-summit blog posts.