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Case Study: Custom Small Business Behavior Scores

The economic recession has caused substantial increases in delinquent accounts for many small business lenders.  Controlling dollars at risk before the account becomes delinquent is a common initiative. Many lenders use scoring technology to prioritize collection activities on delinquent customers to gain efficiencies in the allocation of scarce resources and collection actions.

Some small business lenders rely on generic scorecards which were built for other credit products because their credit losses were fairly limited until 2008. This can be a costly decision given the size of the dollars, the difference in products and the staggering increase in losses.

 
A recent Scoring Solutions™ client experienced a rise in delinquencies and losses in their small business portfolio. The lender needed to identify high risk accounts before they utilized the remainder of their line. Potential liabilities from inactive accounts were a concern. More accounts were in collections than ever before and it was difficult to predict the volume of accounts that would enter collections in the next month. Improved prioritization of collection resources and actions was needed.
 

A custom model was developed to be a leading indicator for pre-collection activities. Today, current and inactive accounts are managed using custom score-based decision strategies before they become delinquent. The credit line of the high risk accounts can be reduced before they become past due.

 

Delinquent accounts are scored using custom collection models tailored to the portfolio. Strategies are designed using dollars at risk to efficiently and successfully handle the volume of accounts. In addition to risk-based collection strategies, the custom scores are able to forecast collection account volumes for the following month.

 

To learn about the results of this case study, contact Scoring Solutions™.

 
Winning Strategies to Successfully Navigate 2010

The credit markets in 2009 were in turmoil.  During this challenging period, Scoring Solutions™ developed a number of new scoring systems for clients.  Many of these clients asked the same questions - “where do we go with our credit policies now that we have these new scoring systems with better rank-ordering capabilities?”  “Should we continue to keep our scoring and credit policies ratcheted down or should we begin to loosen up in anticipation of a better 2010?”  Scoring Solutions™ interviewed a number of clients to gain insight into the strategic directions that lenders will be taking as they move forward in 2010. 

 

Contact Scoring Solutions™ for the entire article which provides a summary of client feedback along with Scoring Solutions™' perspective on market trends.

 
Overdrafts That Pay Off

The Federal Reserve announced that new rules governing the application of overdraft fees linked to debit card use will be initiated July 1st, 2010. The new rules prohibit financial institutions from charging consumers fees for paying on automated teller machine (ATM) and one-time debit card transaction overdrafts, unless a consumer consents, or opts in, to the overdraft service for those types of transactions. 

 

Before opting in, the consumer must be provided a notice that explains the financial institution’s overdraft services, including the fees associated with the service, and the consumer’s choices. The final rules, along with a model opt-in notice, are issued under Regulation E, which implements the Electronic Fund Transfer Act.

 

Specialized behavior scores can be developed to identify customers that are likely to pay the overdraft within a short period of time via their next deposit of funds.  This targeted selection, while mitigating risk, would enable institutions to reward and retain good customers that they might otherwise lose to competitors.  Contact Scoring Solutions™ for more information regarding these specialized account management scores.

 
Scoring SolutionsTM' Clients Select Score360

Several Scoring Solutions™ clients have selected Score360™, a state-of-the-art attribute interface which includes 1,000 comprehensive and robust tri-bureau attributes to quickly launch their new custom scorecards.  This interface facilitates rapid implementation of the attributes, with low system integration costs. The attributes are used for the implementation of scoring models, as well as credit policy and decision rules for various aspects of the credit life cycle including targeting, acquisition, customer management, collections and recovery.  Scoring Solutions™ has created highly predictive attributes from unsummarized credit bureau data that you can use to develop your own strategic scores and decisioning solutions. The attributes include bureau interpretation from Equifax, Experian and TransUnion.  GDS Link, LLC developed the web services software product and Scoring Solutions™ configured it for scorecard implementation.

 

Join Scoring SolutionsTM at These Upcoming Events

Scoring Solutions™ will be attending the following events:

 

CFSA (Community Financial Services Association of America) Conference

March 3-6 in La Quinta, California
 

Auto Finance Risk Summit

May 11-12 in Dallas, Texas
 

Elina Rodriguez, a Principal of Scoring Solutions™, is a faculty member at upcoming international and US bankcard management schools (March 22-26 and July 12-16) and will be participating as an industry expert when presenting and advising on credit risk management for new and existing accounts.

 
 

Visit www.scoringsolutions.com for white papers published
by Scoring Solutions™
.

 

 
   
To learn more about how we can bring value to your organization, call us at 678-672-5450, ext. 362 or e-mail us at score.info@scoringsolutions.com.