Did you know that identities can shift (for better or worse) in just 30 days? To succeed in today’s multichannel, mobile environment, businesses must have a broader, more dynamic identity management strategy that includes: Identity proofing: Point-in-time verification (e.g., account opening) Authentication: Ongoing verification (e.g., account login) Identity management: Continual monitoring throughout the Customer Life Cycle Minimize your identity fraud risk, increase customer engagement and provide a satisfying customer experience by shifting to a strategy focused on identity relationship management. >>The three pillars of identity relationship management  

At the end of July, the Consumer Financial Protection Bureau (CFPB) took a significant step toward reforming the regulatory framework for the debt collection and debt buying industry by announcing an outline of proposals under consideration.  The proposals will now be considered by a small business review panel before the CFPB announces a proposed rule for wider industry comment. The CFPB said its proposals will affect only third-party debt collectors pursuant to the Fair Debt Collection Practices Act (FDCPA).  However, the CFPB signaled it may consider a separate set of proposals for first-party collectors. The collections industry has long been a focus of the CFPB.  In 2012, the bureau designated larger market participants in the debt collections marketplace and placed some of these entities under supervision. In 2013, the CFPB released an Advanced Notice of Proposed Rulemaking covering collections. The focus on debt collection is fueled in part by the large number of consumer complaints it receives about the debt collection market (roughly 35% of total complaints).  Moreover, the CFPB’s proposals build upon some of the regulatory and enforcement priorities that the CFPB and Federal Trade Commission have pursued for several years around data quality, consumer communication and disclosures. Here are some of the key takeaways for third party debt collectors from the CFPB’s proposals: Address data quality: Collectors would be required to substantiate claims that a consumer owes a debt in order to begin a collection. Collectors would also be required to pass on information provided by consumers in the course of collections activity. New Validation Notice and Statement of Rights: The CFPB’s draft outline would update the information provided to consumers through the FDCPA validation notice, as well as require disclosure of a consumer statement of rights. Changes to frequency of communications:  Debt collectors would be limited to six emails, phone calls or mailings per week, including unanswered calls and voicemails. After reaching the consumer, the debt collector would be allowed either one contact or three attempted contacts per week. There would also be a waiting period of 30 days before contacting the family of a debtor who has died. New disclosures on “out of statute” debt and litigation: In the outline, CFPB proposes having debt collectors provide new disclosures to consumers regarding the possibility of litigation and whether the debt is beyond the statute of limitations. Waiting period before sending collection accounts to  a consumer reporting agency: Reporting a person’s debt would be prohibited under the draft outline unless the collector has first communicated directly with the consumer about the debt. The CFPB will next hear comments from a panel of small businesses in the industry, complete an analysis of how its proposals would impact small businesses, and take written comments from the public. Following those steps, the agency will issue a proposed rule for comment.  

Consumer card balance transfer activity is estimated to be $35 billion to $40 billion a year. How do lenders identify these consumers before they make transfers? By using trended data.  While extremely valuable, trended data is very complex and difficult to work with. For example, with 24 months of history on five fields, a single account includes 120 data points. That’s 720 data points for a consumer with six accounts on file and 72 million for a file with 100,000 consumers — not to mention the other data fields in the file. Trended data allows lenders to effectively predict where a consumer is going based on where they’ve been. And that can make all the difference when it comes to smart lending decisions. >>What is trended data?

Experian has been selected as one of the leading players in the fraud detection and prevention space in Juniper Research’s Online Payment Fraud strategies report.

As regulators continue to warn financial institutions of the looming risk posed by HELOCs reaching end of draw, many bankers are asking: Why should I be concerned? What are some proactive steps I can take now to reduce my risk? This blog addresses these questions and provides clear strategies that will keep your bank on track. Why should I be concerned?  Just a quick refresher: HELOCs provide borrowers with access to untapped equity in their residences. The home is taken as collateral and these loans typically have a draw period from five to 10 years. At the end of the draw period, the loan becomes amortized and monthly payments could increase by hundreds of dollars. This payment increase could be debilitating for borrowers already facing financial hardships. The cascading affect on consumer liquidity could also impact both credit card and car loan portfolios as borrowers begin choosing what debt they will pay first. The breadth of the HELOC risk is outlined in an excerpt from a recent Experian white paper. The chart below illustrates the large volume of outstanding loans that were originated from 2005 to 2008. The majority of the loans that originated prior to 2005 are in the repayment phase (as can be seen with the lower amount of dollars outstanding). HELOCs that originated from 2005 to 2008 constitute $236 billion outstanding. This group of loans is nearing the repayment phase, and this analysis examines what will happen to these loans as they enter repayment, and what will happen to consumers’ other loans. What can you do now?  The first step is to perform a portfolio review to assess the extent of your exposure. This process is a triage of sorts that will allow you to first address borrowers with higher risk profiles. This process is outlined below in this excerpt from Experian’s HELOC white paper. By segmenting the population, lenders can also identify consumers who may no longer be credit qualified. In turn, they can work to mitigate payment shock and identify opportunities to retain those with the best credit quality. For consumers with good credit but insufficient equity (blue box), lenders can work with the borrowers to extend the terms or provide payment flexibility. For consumers with good credit but sufficient equity (purple box), lenders can work with the borrowers to refinance into a new loan, providing more competitive pricing and a higher level of customer service. For consumers with good credit but insufficient equity (teal box), a loan modification and credit education program might help these borrowers realize any upcoming payment shock while minimizing credit losses. The next step is to determine how you move forward with different customers segments. Here are a couple of options: Loan Modification: This can help borrowers potentially reduce their monthly payments. Workouts and modification arrangements should be consistent with the nature of the borrower’s specific hardship and have sustainable payment requirements. Credit Education: Consumers who can improve their credit profiles have more options for refinancing and general loan approval. This equates to a win-win for both the borrower and lender. HELOCs do not have to pose a significant risk to financial institutions. By being proactive, understanding your portfolio exposure and helping borrowers adjust to payment changes, banks can continue to improve the health of their loan portfolios. Ancin Cooley is principal with Synergy Bank Consulting, a national credit risk management and strategic planning firm. Synergy provides a rangeof risk management services to financial institutions, which include loan reviews, IT audits, internal audits, and regulatory compliance reviews. As principal, Ancin manages a growing portfolio of clients throughout the United States.

Experian defines how businesses should approach Identity Relationship Management for identity and devices to enable better fraud protection through our latest perspective paper, The 3 Pillars of Identity Relationship Management: How organizations can reduce risk and increase engagement.

Ten years after homeowners took advantage of a thriving real-estate market to borrow against their homes, many are falling behind on payments, potentially leaving banks with millions of dollars in losses tied to housing. Most banks likely have homeowners with home-equity lines of credit (HELOCs) nearing end-of-draw within their portfolio, as more than $236 billion remain outstanding on loans originated between 2004 and 2007. The reality is many consumers are unprepared to repay their HELOCs. In 2014, borrowers who signed up for HELOCs in 2004 were 30 or more days late on $1.8 billion worth of outstanding balances just four months after principal payments began, reported RealtyTrac. That accounts for 4.3 percent of the balance on outstanding 2004 HELOCs. In practice, this is what an average consumer faces at end-of-draw: A borrower has $100,000 in HELOC debt. During the draw period, he makes just interest-only payments. If the interest rate is 6 percent, then the monthly payment is $500. Fast forward 10 years to the pay-down period. The borrower still has the $100,000 debt and five years to repay the loan. If the interest rate is 6 percent, then the monthly payment for principal and interest is $1,933 – nearly four times the draw payment. For many borrowers, such a massive additional monthly payment is unmanageable, leaving many with the belief that they are unable to repay the loan. The Experian study also revealed consumer behaviors in the HELOC end-of-draw universe: People delinquent on their HELOC are also more likely to be delinquent on other types of debt. If consumers are 90 days past due on their HELOC at end of draw, there is a 112 percent, 48.5 percent and 24 percent increase in delinquency on their mortgage, auto loan and credit cards, respectively People with HELOCs at end-of-draw are more likely to both close and open other HELOCs in the next 12 months That same group is also more likely to open or close a mortgage in the next 12 months. Now is the time to assess borrowers’ ability to repay their HELOC, and to give them solutions for repayment to minimize their payment stress. Identify borrowers with HELOCs nearing end of term and the loan terms to determine their potential payment stress Find opportunities to keep borrowers with the best credit quality. This could mean working with borrowers to extend the loan terms or providing payment flexibility Consider the opportunities. Consumers who have the ability to pay may also seek another HELOC as their loan comes to an end or they may shop for other credit products, such as a personal loan.

For years, organizations have used data to improve operational efficiencies and cost savings. Now they are beginning to use data to optimize or improve nearly every aspect of their organization. When justifying the return on investment for managing data quality, consider these findings from a recent Experian Data Quality survey of U.S. organizations: 23% of customer data is believed to be inaccurate 75% think inaccurate data is undermining their ability to provide an excellent customer experience 79% say it is difficult to predict when and where the next data challenge will arise 77% believe data management is driven by multiple stakeholders in their organization rather than by a single data specialist >>Download: The 2016 global data management benchmark report

Fraudsters invited into bank branches The days of sending an invitation in the mail have for the most part gone by the wayside. Aside from special invitations for weddings and milestone anniversaries, electronic and email invitations have become the norm. However, one major party planner has refused to change practices — banks inviting fraudsters into their banking centers. As a fraud consultant I have the privilege of meeting many banking professionals, and I hear the same issues and struggles over and over again. It’s clear that the rapid increase of fraudulent account-opening applications are top of mind to many. What the executives making policy don’t realize is they’re facing fraud because they’re literally inviting the fraudsters into their branches. Think I’m exaggerating? Let me explain. I often encounter bank policymakers who explain their practice of directing a suspicious person into a banking center. Yes, many banks still direct applicants who cannot be properly verified over the phone or online into their banking center to show proof of identity. Directing or inviting criminals into your bank instead of trying to keep them out is an outdated, high-risk practice — what good can possibly come of it? The argument I typically hear from non-fraud banking professionals: “The bad guys know that if they come into the bank we will have them on film.” Other arguments include that the bad guys are not typically bold enough to actually come into the banking center or that their physical security guards monitor high-traffic banking centers. But often that is where bank policies and employee training ends. Based on my years of experience dealing with banks of all sizes, from the top three global card issuers to small regional banks, let me poke a few holes in the theory that it is a good deterrent to invite perpetrators into your banking center. Let’s role-play how my conversation goes: Me: “When an underwriter with limited fraud training making the decision to direct a suspicious applicant into a banking center, what is the policy criteria to do so?” Bank policymaker: (typical response) “What do you mean?” Me: “What high-risk authentication was used by the underwriter to make the decision to extend an invitation to a high-risk applicant to come into the banking center? If the applicant failed your high-risk authentication questions and you were not able to properly identify them, what authentication tools do the branch managers have that the underwriters do not?” Bank: “Nothing, but they can usually tell when someone is nervous or seems suspicious.” Me: “Then what training do they receive to identify suspicious behaviors?” (You guessed it …) Bank: “None.” (I then switch to the importance of customer experience.) Me: “How do you notify the banking center in advance that the suspicious applicant was invited to come in to provide additional verification?” Bank: “We do not have a policy to notify the banking center in advance.” Me: “What is considered acceptable documentation? And are banking center employees trained on how to review utility statements, state ID cards, drivers’ licenses or other accepted media?“ Bank: “We do not have a list of acceptable documentation that can be used for verification; it is up to the discretion of the banking center representative.” Me: “How do you ensure the physical safety of your employees and customers when you knowingly invite fraudsters and criminals into your banking center? How do you turn down or ask the suspicious person to leave because they do not have sufficient documentation to move forward with the original application for credit? If a suspicious person provides your employee with a possible stolen identification card, is that employee expected to keep it and notify police or return it to the applicant? Are employees expected to make a photocopy of the documentation provided?” The response that I usually receive is, “I am not really sure.” I hope by now you are seeing the risk of these types of outdated practices on suspicious credit applications. The fact is that technology has allowed criminals to make fairly convincing identification at a very low cost. If employees in banking centers are not equipped, properly trained, and well-documented procedures do not exist in your fraud program — perhaps it’s time to reconsider the practice or seek the advice of industry experts. I have spent two decades trying to keep bad guys out of banks, but I can’t help but wonder — why do some still send open invitations to criminals to come visit their bank? If you are not yet ready to stop this type of bad behavior, at the very least you must develop comprehensive end-to-end policies to properly handle such events. This fraud prevention tactic to invite perpetrators into banks was adopted long before the age of real-time decisions, robust fraud scores, big data, decision analytics, knowledge-based authentication, one-time passcodes, mobile banking and biometrics. The world we bank in has changed dramatically in the past five years; customers expect more and tolerate less. If a seamless customer experience and reducing account-opening and first-party fraud are part of your strategic plan, then it is time to consider Experian fraud solutions and consulting.

Time heals countless things, including credit scores. Many of the seven million people who saw their VantageScore® credit scores drop to sub-prime levels after suffering a foreclosure or short sale during the Great Recession have recovered and are back in the housing market. These Boomerang Buyers — people who foreclosed or short sold between 2007 and 2014 and have opened a new mortgage — will be an important segment of the real estate market in the coming years. According to Experian data, through June 2016 roughly 800,000 people had boomeranged, with Los Angeles, Phoenix, and Sacramento housing the most buyers. Some analysts believe more than three million Americans will become eligible for a home over the next three years. Are potential Boomerang Buyers a great opportunity to boost market share or a high risk for a portfolio? Early trends are positive. The majority of Boomerang Buyers who opened mortgages between 2011 and June 2016 are current on their debts. An Experian study revealed more than 29 percent of those who short sold have boomeranged, and just 1.5 percent are delinquent on their mortgage —falling below the national average of 2.8 percent. This group is also ahead of or even with the national average for delinquency on auto loans (1.2 percent vs. the national average of 2.2 percent), bankcards (3 percent vs. 4.3 percent) and retail (even at 2.7 percent). For those Boomerang Buyers who had foreclosed, the numbers are also strong. More than 12 percent have boomeranged, with just 3 percent delinquent on their mortgage. They also match or are below national average delinquency rates on auto loans (1.9 percent) and bankcards (4.1 percent), and have a slightly higher delinquency rate for retail (3.5 percent). Due to their positive credit behaviors, Boomerang Buyers also have higher VantageScore® credit scores than before. On average, the overall non-boomerang group’s credit score sunk during a foreclosure but went up 10 percent higher than before the foreclosure, and Boomerang Buyers rose by nearly 14 percent. For people who previously had a prime credit score, their number dropped by nearly 5 percent, while those who boomeranged returned to the score they had prior to the foreclosure. By comparison, the overall non-boomerang and boomerang group saw their credit score drop during a short sale and increase more than 11 percent from before the short sale. For people who previously had prime credit, they dropped 2 percent while those who boomeranged were almost flat to where they were before the short sale. Another part of the equation is the stabilized housing market and relatively low loan-to-value (LTV) limits that lenders have maintained. In the past, borrowers most often strategically defaulted on their mortgages when their LTV ratios were well over 100 percent. So as long as lenders maintain relatively low LTV limits and the housing market remains strong, strategic default is unlikely to re-emerge as a risk.

Experian’s annual global fraud report reveals trends that can help organizations mitigate fraud and improve the customer experience: Apply the right-sized fraud solutions to reduce unnecessary customer disruption Ensure you have a universal consumer view Select fraud solutions that are future-proof As fraudsters evolve, losses are climbing and the status quo is no longer effective. Organizations should be as forward-looking in fighting fraud as they are in business operations and marketing. >> Global Business Trends: Protecting Growth Ambitions Against Rising Fraud Threats

Experian estimates card-to-card consumer balance transfer activity to be between $35 and $40 billion a year, representing a sizeable opportunity for proactive lenders seeking to grow their revolving product line. This opportunity, however, is a threat for reactive lenders that only measure portfolio attrition instead of working to retain current customers. While billions of dollars are transferred every year, this activity represents only a small percentage of the total card population. And given the expense of direct marketing, lenders seeking to capitalize on and protect their portfolio from balance transfer activity must leverage data insights to make more informed decisions. Predicting a consumer’s future propensity to engage in card-to-card balance transfers starts with trended data. A credit score is a snapshot in time, but doesn’t reveal deep insights about a consumer’s past balance transfer activity. Lenders that rely only on current utilization will group large populations of balance revolvers into one bucket – and many of these individuals will have no intention of transferring to another product in the near future. Still, balance transfer activity can be identified and predicted by utilizing trended data. By analyzing the spend and payment data over time to see when one (or multiple) trade’s payment approximately matches another trade’s spend, we have the logic that suggests there has been a card-to-card transfer. What most people don’t realize is that trended data is difficult to work with. With 24 months of history on five fields, a single trade includes 120 data points. That’s 720 data points for a consumer with six trades on file and 72,000,000 for a file with 100,000 records, not to mention the other data fields in the file. It’s easy to see why even the most sophisticated organizations become paralyzed working with trended data. While teams of analysts get buried in the data, projects drag, costs swell, and eventually the world changes as rates climb and fall. By the time the analysis is complete, it must be recalibrated. But there is a solution. Experian has developed powerful predictions tools that combine past balance transfer history, historical transfer amounts, current trades carried and utilized, payments, and spend. Combined, these data fields can help identify consumers who are most likely to transfer a balance in the future. With Experian’s Balance Transfer Index the highest scoring 10 percent of consumers capture nearly 70 percent of total balance transfer dollars. Imagine the impact on ROI of reducing 90 percent of the marketing cost of your next balance transfer campaign and still reaching 70 percent of the balance transfer activity. Balance transfer activity represents a meaningful dollar opportunity for growth, but is concentrated in a small percentage of the population making predictive analytics key to success. Trended data is essential for identifying those opportunities, but financial institutions must assess their capabilities when it comes to managing the massive data attached. The good news is that regardless of financial institution size, solutions now exist to capture the analytics and provide meaningful and actionable insights to lenders of all sizes.

In an attempt to stay ahead of fraud, systems have become more complex, more expensive and even more difficult to manage, leading to more friction for customers. How extensive is this impact? 30% of online customers are interrupted to catch one fraudulent attempt One in 10 new applicants may be an imposter using breached data $40 billion of legitimate customer sales are declined annually Businesses must continue their efforts to protect all parties’ interests if they are to thrive in this new world of rapid technological growth. >> Infographic: Global fraud trends

We are excited to announce that Experian Fraud and Identity Solutions is presenting at FinovateFall 2016!  Finovate conferences showcase cutting-edge banking and financial technology in a unique demo-only format. Held twice a year, the conferences bring together the leaders from top financial institutions, fintech companies, investors from around the globe, and fintech media to share and promote the most innovative financial technology solutions. "Experian’s Fraud and Identity Solutions is a leader in customer-centric identity and fraud solutions, providing fraud management solutions to some of the world’s largest brands in financial services, insurance, and retail," said Adam Fingersh, general manager and senior vice president of Fraud and Identity Solutions in North America. "We will introduce our Fraud and Identity Solutions and promote our newly released CrossCore platform. CrossCore puts more control in the hands of fraud teams to adapt and deploy strategies that keep up with the pace of fraud while reducing burdens on IT and data science teams." Fingersh and John Sarreal, senior director of Fraud and Identity product management at Experian, are presenting the 7-minute demo focusing on the key CrossCore capabilities, and how CrossCore manages fraud and identity services through its flexible API; open, plug-and-play platform; and powerful workflow and strategy design capabilities. In Forrester’s 2016 “Vendor Landscape: Mobile Fraud Management”, Experian Fraud and Identity Solutions was cited as having the most capabilities and one of the highest estimated revenues in total fraud management in the market, between $200 million and $250 million. Join us for the event on September 8-9 in New York. Experian also has an exclusive 20% off discount code (Experian20FF16) to get even more savings! For more information on the event or to view videos of previous demos, please visit finovate.com.

The pendulum has swung again. The great recession brought a glacial freeze to access to capital. The thaw brought rapid, frictionless underwriting with an almost obsessive focus on growth and customer experience. Enter Marketplace Lenders and their more “flexible” approach to credit risk assessment. While much good has come from this evolution in financing, new challenges have surfaced – especially as it pertains to fraud prevention and credit risk management. Stacking has emerged as a particularly knotty problem in the small business lending space. Applicants have the opportunity to apply for and be approved for multiple loans in a matter of days or even hours.   Technology allows for underwriting that is at least somewhat automated and depositing often occurs within hours of approval. The speed of fulfillment is a boon for small businesses. However, it also makes it possible to be approved and draw down funds on multiple loans in quick succession. Core underwriting metrics, such as debt-to-income ratios and cashflow, are unreliable in the face of ratcheting debt from concurrent online business loans. This situation occurs because the window between the approval of the loan and delivery of the funds is much shorter than the timeframe to report the loan to credit reporting agencies and other third-party data suppliers. Not all lenders report small business loans, further compounding the problem.  Lenders’ risk and pricing strategies are hamstrung in the face of stacking, whether intentional on the part of the small business or not. If a struggling small business applies for credit and receives multiple loan offers, should we rely on their ability to resist the temptation to accept them all and use the funds wisely? No. The burden rests squarely on the credit provider to proactively address the problem. Technology-enabled frictionless underwriting underpins the online consumer loan space and facilitates a similar, yet subtly different stacking problem.  There are a large number of loan providers, with a spectrum of risk appetites and pricing strategies. This all but ensures that a consumer has access to additional loans at an ever-increasing interest rate. The underlying assumption, among the more mainstream, lower-rate providers, is that the consumer is disclosing all of their obligations – including any recent loans.  Although reporting in the consumer space is more robust and timely, it is still possible for an applicant to quickly access and draw funds on several loans within a very short timeframe, making it difficult for loan providers to get a full and complete picture of their capacity to repay the loan. The situation is further complicated by lenders at the higher risk, higher rate end of the market whose business models are structured to allow for, and perhaps even encourage, stacking by the consumer. Fortunately, there are a number of steps lenders can take to improve the situation: Contribute credit data to the credit reporting agencies. Know your customer, their industry, their market and underwrite appropriately. Develop a tailored underwriting approach that achieves a balance between frictionless customer experience and prudent credit and risk assessment. All applicants are not equal, and some require additional scrutiny and more time to underwrite. Understand the drivers and indicators of stacking. The latter point is worth emphasizing. The time to address stacking is prior to funding. This requires the lender to anticipate, identify and pre-empt stackers. There is no 100 percent foolproof remedy.  However, lenders can stack (pun-intended) the odds in their favor. For example, if an existing loan has a high balance and is delinquent, might that be an indicator of a propensity to stack? What if the business owner has applied for multiple loans, resulting in multiple inquiries, over a 45-day period? A proactive, data-driven anti-stacking strategy can yield positive results, reducing delinquency and losses. In combination with consistent comprehensive reporting to the bureaus, it can go a long way toward reducing the risk posed by this largely invisible threat.