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Best practices and innovative strategies for banking to millennials Before we begin, a disclaimer: Banking to millennials is a long-term strategy. Many marketing campaigns will not drive immediate returns on investment, but they lay the groundwork for a lifelong, mutually beneficial relationship. Now, some good news. Millennials are just beginning their financial journey — getting ready to embark on a life that includes homes, cars, families and small businesses. Connecting with this generation today can bode well for a financial institution’s success tomorrow. With a strong relationship in place, millennials will turn to that organization when they are ready to fund their life events. Below are some key strategies that will help financial institutions build and continue banking to millennials. Keeping up with technological expectations Millennials were raised in the digital age, and therefore mobile devices are the hubs of their digital lives. They expect real-time access to their accounts for peer-to-peer payments, deposits, paying bills and customer service. Not meeting their digital expectations could drive them to seek another — more technology-oriented — financial institution that embraces CNP, mobile apps and social media. Authentic and targeted marketing messaging Millennials expect targeted messaging. Generic, catchall offers of the past fall flat for them. They want banks to figure out who they are, what they need and how they can access it with the tap of a finger. Additionally, messages to millennials should have a genuine voice that advises and supports them in achieving their goals. Many millennials are interested in taking control of their financial lives but are not prepared to do so. This is a great opportunity for financial institutions to introduce themselves. Connect millennials to something bigger Earning a millennial’s trust is one of the greatest challenges for financial institutions. While money is important, millennials are motivated by becoming a part of something bigger than themselves. Institutions can connect with millennials by creating opportunities to give back or pay-it-forward. Examples include encouraging growth in underbanked markets, such as lending circles, peer-to-peer lending and small-business lending, or partnering with local universities and nonprofits. Strategic segmentation Millennials are the most diverse population group — yet strategic segmentation is still possible. One ideal segment is recent college graduates. As a group, they yield a much different profile than their counterparts without degrees. These ambitious millennials are more likely to focus on life choices that require major financial considerations, such as getting married, having children, buying their first home and earning higher salaries. These life events will require a diverse set of financial services products, and millennials will turn to the institution that has gained their trust first. Millennials are one of the most important markets as financial institutions look to invest in future, long-term growth. Financial institutions need to show millennials that they’re committed to listening and to laying the groundwork for relationships that will help them achieve their dreams. Remember, though, reaching this audience is not about an immediate return on investment but rather a long-term strategy to develop trust and brand preference. Begin the relationship now to reap the rewards later. For more insights and innovative strategies on how to best market and develop a strong relationship with millennials, download our recent white paper, Building lasting relationships with millennials.

As automotive leasing trends to new heights, a rapid influx of off-lease vehicles are returning to market. Experian Automotive’s latest infographic explores the surge in off-lease vehicles, including which models and vehicle segments are most popular. Click here to download this infographic.  

In today’s interconnected world, reaching consumers should be as simple as sending a text or calling their cell phone. However, complying with the Telephone Consumer Protection Act (TCPA) can create an almost insurmountable mountain. While the law has been in place since 1991, TCPA litigation continues to be a considerable source of potential legal and compliance risk for companies communicating with consumers.  There were 1,908 TCPA lawsuits in 2014, an increase of 30 percent over the previous year, and a 231 percent increase in the last four years. Is your business facing challenges in complying with TCPA? Do you want to learn more about the changing and challenging TCPA legal and regulatory framework? Are you looking for best practices on how to win the battle of right party contact? Then you should join us for a breakout session solely focused on TCPA at Experian’s Vision 2016 Conference. The panel features a number of subject matter experts who will be able to provide attendees with a look at this law and some of the best practices to manage risk and ensure compliance. Panelists include: Mary Anne Gorman, Experian Tony Hadley, Experian Tom Gilbertson, Venable LLC   To learn more more about TCPA best practices, check out Experian’s annual Vision Conference in May.

April is Financial Literacy Month, a special window of time dedicated to educating Americans about money management. But as stats and studies reveal, it might be wise to spend every month shining some attention on financial education, an area so many struggle to understand. Obviously no one wants to talk money day in and day out. It can be complicated, make us feel bad and serve as a source of stress. But as the saying goes, information is power. Over the years, Experian has worked to understand the country’s state of credit. Which states sport higher scores? Which states struggle? How do people pay down their debts? And what are the triggers for when accounts trail into collections? In the consumer space especially, we’ve surveyed individuals about how they feel about their own credit as it pertains to a number of different variables and life stages. Home Buying: 34% of future home buyers say their credit might hurt their ability to purchase a home 45% of future home buyers delayed a purchase to improve their credit to get better interest rates Holiday Shopping: 10% of consumers and 18% of millennials say holiday shopping has negatively affected their credit score Newlywed Life: 60% believe it is important for their future spouse to have a good credit score 39% say their spouse’s credit score or their credit score has been a source of stress in their marriage 35% of newlyweds believe they are “very knowledgeable” regarding credit scores and reports And let’s not forget Millennials: 71% of millennials believe they are knowledgeable when it comes to credit, yet: millennials overestimate their credit score by 29 points 32% do not know their credit score 61% check their credit report less than every 3 months 57% feel like the odds are stacked against them when it comes to finances and 59% feel like they are “going it alone” when it comes to finances The message is clear. Finances are simply a part of life, but can obviously serve as a source of stress. Establishing and growing credit often starts at a young age, and runs through every major life event. Historically, high school is where the bulk of financial literacy programs have targeted their efforts. But even older adults, who have arguably learned something about personal finances by managing their own, could stand a refresher on topics ranging from refinancing to retirement to reverse mortgages. Over the next month, Experian will touch on several timely financial education topics, including highlighting the top credit questions asked, the future of financial education in the social media space, investing in retirement, ways to teach your kids about money, and how to find a legit credit counselor. But Experian explores financial education topics weekly too, committed to providing consistent resources to both businesses and consumers via weekly tweet chats, blog posts and live discussions on periscope. There is always an opportunity to learn more about finances. Throughout the year, different issues pop up, and milestone moments mean we need to brush up on the latest ways to spend and save. It’s nice so many financial institutions make a special point to highlight financial education in April, but hopefully consumers and lenders alike continue to dedicate time to this important topic every month. Managing money is a lifelong task, so tips and insights are always welcome. Right? Check out the wealth of resources and pass it on. For a complete picture of consumer credit trends from Experian's database of over 230 million consumers, purchase the Experian Market Intelligence Brief.

Whether it is an online marketplace lender offering to refinance the student loan debt of a recent college graduate or an online small-business lender providing an entrepreneur with a loan when no one else will, there is no doubt innovation in the online lending sector is changing how Americans gain access to credit. This expanding market segment takes great pride in using “next-generation” underwriting and credit scoring risk models. In particular, many online lenders are incorporating noncredit information such as income, education history (i.e., type of degree and college), professional licenses and consumer-supplied information in an effort to strike the right balance between properly assessing credit risk and serving consumers typically shunned by traditional lenders because of a thin credit history. Regulatory concerns The exponential growth of the online lending sector has caught the attention of regulators — such as the U.S. Treasury Department, the Federal Deposit Insurance Corporation, Congress and the California Business Development Office — who are interested in learning more about how online marketplace lenders are assessing the credit risk of consumers and small businesses. At least one official, Antonio Weiss, a counselor to the Treasury secretary, has publicly raised concerns about the use of so-called nontraditional data in the underwriting process, particularly data gleaned from social media accounts. Weiss said that “just because a credit decision is made by an algorithm, doesn’t mean it is fair,” citing the need for lenders to be aware of compliance with fair lending obligations when integrating nontraditional credit data. Innovative and “tried and true” are not mutually exclusive Some have suggested the only way to assuage regulatory concerns and control risk is by using tried-and-true legacy credit risk models. The fact is, however, online marketplace lenders can — and should — continue to push the envelope on innovative underwriting and business models, so long as these models properly gauge credit risk and ensure compliance with fair lending rules. It’s not a simple either-or scenario. Lenders always must ensure their scoring analytics are based upon predictive and accurate data. That’s why lenders historically have relied on credit history, which is based upon data consumers can dispute using their rights under the Fair Credit Reporting Act. Statistically sound and validated scores protect consumers from discrimination and lenders from disparate impact claims under the Equal Credit Opportunity Act. The Office of the Comptroller of the Currency guidance on model risk management is an example of regulators’ focus on holding responsible the entities they oversee for the validation, testing and accuracy of their models. Marketplace lenders who want to push the limit can look to credit scoring models now being used in the marketplace without negatively impacting credit quality or raising fair lending risk. For example, VantageScore® allows for the scoring of 30 million to 35 million more people who currently are unscoreable under legacy credit score models. The VantageScore® credit score does this by using a broader, deeper set of credit file data and more advanced modeling techniques. This allows the VantageScore® credit score model to capture unique consumer behaviors more accurately. In conclusion, online marketplace lenders should continue innovating with their own “secret sauce” and custom decisioning systems that may include a mix of noncredit factors. But they also can stay ahead of the curve by relying on innovative “tried-and-true” credit score models like the VantageScore® credit score model. These models incorporate the best of both worlds by leaning on innovative scoring analytics that are more inclusive, while providing marketplace lenders with assurances the decisioning is both statistically sound and compliant with fair lending laws. VantageScore® is a registered trademark of VantageScore Solutions, LLC.

When checking access accounts were first introduced, it wasn’t uncommon for banks to provide new customers “basic” transaction services in starter checking accounts. These services typically included an automatic teller machine (ATM) access card and the ability to withdraw cash at their local branch. As consumers developed a relationship and established financial trust with their bank, they eventually would get a checkbook, which allowed check-writing access. This took time and a consumer demonstrating both the willingness and ability to manage finances to the bank’s expectations. Establishing the financial relationship was a trust-building process. With the onset of general-purpose debit cards and a host of other digital money-movement capabilities, such as online banking, the majority of banks now offer just basic and preferred checking. A minimum acceptance standard leaves many consumers out of the financial transaction system, which is something that concerns regulatory bodies such as the Consumer Financial Protection Bureau (CFPB). Approval criteria vary across financial institutions, but a typical basic checking account has some form of overdraft feature enabled, and some consumers may not be able to afford these fees even if they elect to opt in for overdraft functionality. Nonetheless, banks still screen applicants to ensure prior accounts at other institutions were managed with no losses incurred by other banks. In today’s modern world, it is difficult to participate fully in our credit-driven society without a checking account at a recognized bank or credit union. The answer in many cases would be checking accounts for consumers that have either overdraft functionality assigned based on the consumer’s wish to opt in or overdraft access that matches that same consumer’s ability to pay. In early February, the CFPB passed new guidelines to increase access to basic check products. While a step towards making checking accounts available to all, the most recent actions still leave unresolved regulatory actions regarding what the CFPB refers to as “affordable” checking access. For instance, for those consumers without disposable income, the issue of fees for overdraft and nonsufficient funds is still an unresolved regulatory matter. In the most recent announcement, the CFPB took several actions related to its focus on increasing consumer access to checking transaction accounts with banks: Sending a letter to CEOs of the top 25 banks encouraging them to take steps to help consumers with affordable checking account access such as “no fee” and/or “no overdraft” checking accounts Providing several new resources to consumers such as a guide to “Low Risk Checking, Managing Checking and Consumer Guide to Checking Account Denial” Introducing the Consumer Protection Principles, which include a drive toward: Faster funds availability Improved consumer transparency into checking account fee structure, funds availability and security Tailoring products to reach a larger percentage of consumers Developing no-overdraft type checking products, which only a handful of large banking institutions had What lurks ahead for banks is the need to develop products that are designed to reach a larger population that includes under banked and unbanked consumers with troubled financial repayment history. Coupling this product development effort with the CFPB desire for no-overdraft-fee type products makes me wonder if we should look to account features from several decades ago, such as creating a 21st century version of the checking account with digital money-movement features that protects consumers’ privacy, but doesn’t put them in a position to rack up large amounts of overdraft fees they can’t afford to pay in the event they overdraw the checking account. Experian® suggests taking the following steps: Conduct a Business Review to ensure that your product offering includes the type of account the CFPB is advocating and your existing core banking platform can operationalize this account Align your checking account prospect and opening procedures to key segments to ensure more consumers are approved and right-sized to the appropriate checking product Enhance your business profitability by cross-selling credit products that fit the affordability and disposable income of various consumer segments you originate These steps will make your journey “back to the future” much less turbulent and ensure you don’t break the bank in your efforts to address CFPB’s well-intentioned focus on check access for consumers.

In recent years, leasing has strongly returned as an option for consumers to choose when looking to get into a new vehicle and maintain an affordable monthly payment. Experian Automotive’s latest infographic examines the lift in leasing, as well as key attributes in the auto finance market. Click here to download the PDF.  

Identity management traditionally has been made up of creating rigid verification processes that are applied to any access scenario. But the market is evolving and requiring an enhanced Identity Relationship Management strategy and framework. Simply knowing who a person is at one point in time is not enough. The need exists to identify risks associated with the entire identity profile, including devices, and the context in which consumers interact with businesses, as well as to manage those risks throughout the consumer journey. The reasoning for this evolution in identity management is threefold: size and scope, flexible credentialing and adaptable verification. First, deploying a heavy identity and credentialing process across all access scenarios is unnecessarily costly for an organization. While stringent verification is necessary to protect highly sensitive information, it may not be cost-effective to protect less-valuable data with the same means. A user shouldn’t have to go through an extensive and, in some cases, invasive form of identity verification just to access basic information. Second, high-friction verification processes can impede users from accessing services. Consumers do not want to consistently answer multiple, intrusive questions in order to access basic information. Similarly, asking for personal information that already may have been compromised elsewhere limits the effectiveness of the process and the perceived strength in the protection. Finally, an inflexible verification process for all users will detract from a successful customer relationship. It is imperative to evolve your security interactions as confidence and routines are built. Otherwise, you risk severing trust and making your organization appear detached from consumer needs and preferences. This can be used across all types of organizations — from government agencies and online retailers to financial institutions. Identity Relationship Management has three unique functions delivered across the Customer Life Cycle: Identity proofing Authentication Identity management Join me at Vision 2016 for a deeper analysis of Identity Relationship Management and how clients can benefit from these new capabilities to manage risk throughout the Customer Life Cycle. I look forward to seeing you there!

It’s the “Battle of the Sexes” credit edition. Who sports higher scores, less debt and more on-time payments? According to Experian’s latest analysis, women take the credit title. Thank you very much. The report analyzed multiple categories including credit scores, average debt, number of open credit cards, utilization ratios, mortgage amounts and mortgage delinquencies of men and women in the United States. Results revealed: Women’s average credit score of 675 compared to men’s score of 670 Women have 3.7 percent less average debt than men Women have 23.5 percent more open credit cards Women and men have the same revolving utilization ratio of 29.9 percent Women’s average mortgage loan amount is 7.9 percent less than men’s Women have a lower incidence of late mortgage payments by 8.1 percent “There were several gaps between men and women in this study, including the five-point credit score lead that the women hold,” said Michele Raneri, Experian’s Vice President of Analytics and New Business Development. “Even with more credit cards, women have fewer overall debts and are managing to pay those debts on time.” The report also takes a look at the vehicle preferences of men and women and how those choices play into their overall credit and financial health. Below are the top-line results: Women were more likely to purchase a more functional, utilitarian vehicle, while men tended to lean toward sports cars and trucks The top three vehicle segments men purchased in 2015 were mid-size pickup trucks, large pickup trucks and standard specialty cars. In fact, they were 1.37 times more likely to purchase a mid-sized pickup truck than the general population The top three vehicle segments for women were small crossover-utility vehicles, mid-size sports-utility vehicles and compact crossover-utility vehicles. Women were 1.40 times more likely to purchase the small crossover-utility vehicle than the general population Experian conducted a similar study, comparing men and women on various credit attributes in 2013. At that time, women also scored higher than men in the credit score category - holding steady with a 675 VantageScore® credit score compared to the men’s 674 VantageScore® credit score, but the gap has widened, with the men’s score further lowering to 670. While men’s scores have dropped since 2013, the overall financial health for both sexes is strong. Most notably, the mortgage 60-plus delinquency rate has dropped significantly. In the 2013 pull, men were tracking at 5.7 percent and women were 5.3 percent. Today, those numbers have dropped to .86 percent for men and .79 percent for women. What a difference a few years has made in regards to the recovering housing market. Time will tell if the country’s state of credit will continue to trend higher, as indicated in the 2015 annual report, or if the buzz of potential recession and an election year will reverse the positive trend. As for now, the women once again claim bragging rights as it pertains to credit. Analysis methodology The analysis is based on a statistically relevant, sampling of depersonalized data of Experian’s consumer credit database from December 2015. Gender information was obtained from Experian Marketing Services.

Proven identity and device authentication to minimize identity tax return fraud Identity fraud places an enormous burden on its victims and presents a challenge to businesses, organizations and government agencies, including the IRS and all state revenue authorities. Tax return fraud occurs when an attacker uses a consumer’s stolen Social Security number and other personal information to file a tax return, often claiming a significant refund. The IRS is challenged by innovative fraudsters continually trying to outsmart its current risk strategies around prevention, detection, recovery and victim assistance. And with the ever-increasing number of identity data compromised and tax return fraud victims, it’s necessary to question whether tax preparation companies are doing all they can to keep personally identifiable information (PII) secure and screen for fraud before forms are submitted. “ID theft isn’t just credit card fraud,” said Rod Griffin, Director of Public Education for Experian. A recent Experian online survey indicated that nearly 76 percent of consumers are familiar with ID theft and tax fraud — up significantly from the past two years. And 28 percent of those surveyed have been a victim or know a victim of tax fraud. To protect all parties’ interests, tax preparation agencies are challenged by today’s savvy fraudsters who have reaped the benefits of recent breaches. In order to protect consumers, organizations need to apply comprehensive, data-driven intelligence to help thwart identity fraud and the use of stolen identity data via fraudulent returns. The key to securing transactions, reducing friction and providing a consistently satisfying customer experience, online and offline, is authenticating consumers in a clear and frictionless environment. As a result, it’s necessary to have reliable customer intelligence based on both high-quality contextual identity and device attributes alongside other authentication performance data. Comprehensive customer intelligence means having a holistic, bound-together view of devices and identities that equips companies and agencies with the tools to balance cost and risk without increasing transactional friction. Businesses and agencies must not rely on a singular point of customer intelligence gathering and decisioning, but must move to more complex device identification and out-of-wallet verification procedures. Effective solutions typically involve a layered approach with several of the following: Identity transaction link analysis and risk attribute derivation Device intelligence and risk assessment Credit and noncredit data and risk attributes Multifactor authentication, using one-time passcodes via SMS messaging Identity risk scores Dynamic knowledge-based authentication questions Traditional PII validation and verification Biometrics and remote document verification Out-of-band alerts, communications and confirmations Contextual account, transaction and channel purview Additionally, government agencies must adhere to recognized standards, such as those prescribed by the National Institute of Standards and Technology to establish compliance. The persistent threat of tax fraud highlights the urgent need for businesses and agencies to continue educating consumers and more importantly, to improve the strategic effectiveness of their current solutions processes. Learn more about Experian Fraud and Identity Solutions, including government-specific treatments, and how the most effective fraud prevention and identity authentication strategy leverages multiple detection capabilities to highlight attackers while enabling a seamless, positive experience for legitimate consumers.

It’s hard to remember a world without online lenders. Today, fintech players continue to pop up, making it easier to cross-shop loans and land instant approvals.  Gone are the days of lengthy applications and waiting to hear if you’ve scored the latest credit line or personal loan. Consumers, especially with top-tier credit, can easily seek lower monthly payments or consolidate another loan with a cash-out option. Whatever the need, there’s a lender ready to serve. Strike that. There’s actually two or three lenders waiting to serve you. In fact, a recent Experian data pull revealed an increasing share of personal loan balances is actually going to lenders outside of the traditional banks and credit union space (they still own the lion’s share of the business). In 2013 (Q4), these more non-traditional lenders had 15.36 percent of personal loan balances. In Q4 of 2015, that number increased to 27.26 percent. The personal loan business today is just over $222.9 billion in outstanding balances. As the competition heats up, lenders will need to diversify, stand out and provide more value to consumers. Those that engage with new, value-added services, and deliver timely, personalized needs-based messages will capture the greatest share of the market. Here is a sampling of ways to draw consumers in and deliver the value they seek in a financial institution: Be Transparent Lending Club, one of the original peer-to-peer lenders and currently the biggest in terms of dollars funded, continues to grow by providing consumers and investors with transparency, good loan terms and speed. Prosper, on the other hand, recently acquired an app that allows their customers to track spending, budget and monitor their credit. They plan to leverage this technology in the near future and offer it to customers and investors for free. Research reveals Millennials especially are looking to tech and free services to manage their personal finances. A recent Experian survey focused on Millennials and credit revealed 48 percent have used free financial services, like Mint, to manage their finances. Additionally, 57 percent use on average three financial apps. Know Your Customers Payoff uses survey data to segment their customers into roughly 10 financial personalities based on how they use and think about their debt. These personality types are used to tailor marketing messages and customer service conversations about how to improve their financial situation. Their site features a quiz, Discover the Secrets of Your Financial Personality, helping consumers and Payoff understand more about trends attached to spending, saving and managing money. Offer Solutions for Debt Consolidation Even after consumers consolidate debt and pay it off successfully, unforeseen expenses, unexpected life events, evolving spending habits and the increasing cost-of-living expenses mean there will always be a market for debt consolidation solutions. Understanding consolidation credit account behavior is mandatory for lenders looking to stand out and stay ahead of the consolidation needs of consumers. Having visibility to consumers’ interest rates, revolving loan balances and the remaining months on existing loans provides unique ways to segment and engage clients with need-based offers. Consumer-tailored messages during the prospecting, acquisition and account management stages of the relationship sets the stage for repeat business. The research is clear. Individuals are willing to switch brands if they feel a different provider will better meet their needs. Lenders – in both the traditional and fintech spaces – should not expect many chances when it comes to getting it right with consumers. Fail to keep them engaged and you’ll fail to keep them. Period.   Learn more about identifying profitable consolidation candidates, check out Experian’s annual Vision Conference in May.

2015 data shows where billing and shipping e-commerce fraud attacks occur in the United States Experian e-commerce fraud attacks and rankings now available Does knowing where fraud takes place matter? With more than 13 million fraud victims in 2015,[1] assessing where fraud occurs is an important layer of verification when performing real-time risk assessments for e-commerce. Experian® analyzed millions of e-commerce transactions from 2015 data to identify fraud-attack rates across the United States for both shipping and billing locations. View the Experian map to see 2015 e-commerce attack rates for all states and download the top 100 ZIP CodeTMrankings. “Fraud follows the path of least resistance. With more shipping and billing options available to create a better customer experience, criminals attempt to exploit any added convenience,” said Adam Fingersh, Experian general manager and senior vice president of Fraud & Identity Solutions. “E-commerce fraud is not confined to larger cities since fraudsters can ship items anywhere. With the switch to chip enabled credit card transactions, and possible growth of card-not-present fraud, our fraud solutions help online businesses monitor their riskiest locations to prevent losses both in dollars and reputation in the near term.” For ease of interpretation, billing states are associated with fraud victims (the address of the purchaser) and shipping states are associated with fraudsters (the address where purchased goods are sent). According to the 2015 e-commerce attack rate data: Florida is the overall riskiest state for billing fraud, followed by Delaware; Washington, D.C.; Oregon and California. Delaware is the overall riskiest state for shipping fraud, followed by Oregon, Florida, California and Nevada. Eudora, Kan., has the overall riskiest billing ZIP Code (66025). The next two riskiest ZIPTM codes are located in Miami, Fla. (33178) and Boston, Mass. (02210). South El Monte, Calif., has the overall riskiest shipping ZIP Code (91733). The next four riskiest shipping ZIP codes are all located in Miami. Overall, five of the top 10 riskiest shipping ZIP codes are located in Miami. Defiance, Ohio, has the least risky shipping ZIP Code (43512). The majority of U.S. states are at or below the average attack rate threshold for both shipping and billing fraud, with only seven states — Florida, Oregon, Delaware, California, New York, Georgia and Nevada — and Puerto Rico ranking higher than average. This indicates that attackers are targeting consumers equally in the higher-risk states while leveraging addresses from both higher- and lower-risk states to ship and receive fraudulent merchandise. Many of the higher-risk states are located near a large port-of-entry city, including Miami; Portland, Ore.; and Washington, D.C., perhaps allowing criminals to move stolen goods more effectively. All three cities are ranked among the riskiest cities for both measures of fraud attacks. Neighboring proximity to higher-risk states does not appear to correlate to any additional risk — Pennsylvania and Rhode Island are ranked as two of the lower-risk states for both shipping and billing fraud. Other lower-risk states include Wyoming, South Dakota and West Virginia. Experian analyzed millions of e-commerce transactions to calculate the e-commerce attack rates using “bad transactions” in relation to the total number of transactions for the 2015 calendar year.   View the Experian map to see 2015 e-commerce attack rates for all states and download the top 100 ZIP Code rankings.       [1]According to the February 2016 Javelin study 2016 Identity Fraud: Fraud Hits an Inflection Point.

Time to dust off those compliance plans and ensure you are prepared for the new regulations, specifically surrounding the Military Lending Act (MLA). Last July, the Department of Defense (DOD) published a Final Rule to amend its regulation implementing the Military Lending Act, significantly expanding the scope of the existing protections. The new, beefed-up version encompasses new types of creditors and credit products, including credit cards. While the DOD was responsible for implementing the rule, enforcement will be led by the Consumer Financial Protection Bureau (CFPB). The new rule became effective on October 1, 2015, and compliance is required by October 3, 2016. Compliance, however, with the rules for credit cards is delayed until October 3, 2017. While there is no formal guidance yet on what federal regulators will look for in reviewing MLA compliance, there are some insights on the law and what’s coming. Why was MLA enacted? It was created to provide service members and their dependents with specific protections. As initially implemented in 2007, the law: Limited the APR (including fees) for covered products to 36 percent; Required military-specific disclosures, and; Prohibited creditors from requiring a service member to submit to arbitration in the event of a dispute. It initially applied to three narrowly-defined “consumer credit” products: Closed-end payday loans; Closed-end auto title loans; and Closed-end tax refund anticipation loans. What are the latest regulations being applied to the original MLA implemented in 2007? The new rule expands the definition of “consumer credit” covered by the regulation to more closely align with the definition of credit in the Truth in Lending Act and Regulation Z. This means MLA now covers a wide range of credit transactions, but it does not apply to residential mortgages and credit secured by personal property, such as vehicle purchase loans. One of the most significant changes is the addition of fees paid “for a credit-related ancillary product sold in connection with the credit transaction.”  Although the MAPR limit is 36 percent, ancillary product fees can add up and — especially for accounts that carry a low balance — can quickly exceed the MAPR limit. The final rule also includes a “safe harbor” from liability for lenders who verify the MLA status of a consumer. Under the new DOD rule, lenders will have to check each credit applicant to confirm that they are not a service member, spouse, or the dependent of a service member, through a nationwide CRA or the DOD’s own database, known as the DMDC. The rule also permits the consumer report to be obtained from a reseller that obtains such a report from a nationwide consumer reporting agency. MLA status for dependents under the age of 18 must be verified directly with the DMDC. Experian will be permitted to gain access to the DMDC data to provide lenders a seamless transaction. In essence, lenders will be able to pull an Experian profile, and MLA status will be flagged. What is happening between now and October 2016, when lenders must be compliant? Experian, along with the other national credit bureaus, have been meeting with the DOD and the DMDC to discuss providing the three national bureaus access to its MLA database. Key parties, such as the Financial Services Roundtable and the American Bankers Association, are also working to ease implementation of the safe harbor check for banks and lenders. The end goal is to enable lenders the ability to instantly verify whether an applicant is covered by MLA by the Oct. 1, 2016 compliance date. --- If you have inquiries about the new Military Lending Act regulations, feel free to email MLA.Support@experian.com or contact your Experian Account Executive directly. Next Article: A check-in on the latest Military Lending Act news

For lenders, credit bureau data is vitally important in making informed risk determinations for consumer and small business loans. And the backbone of this data is credit reporting. With the rise of online marketplace lenders, there is a renewed focus on reporting credit data, particularly in light of the rapid growth of this sector. According to Morgan Stanley research, online marketplace loan volumes in the U.S. have doubled every year since 2010, reaching $12 billion in 2014. It is predicted this growth will nearly double by 2020. As more consumers and small businesses flock to online marketplace lenders, these lenders have a growing responsibility to be good stewards of the credit ecosystem, doing their part to support the value of information available for the entire industry – and for their own benefit. After all, failure to report credit data could have an adverse impact on the financial landscape, affecting consumers, small businesses and online lenders themselves. While there are already several online lenders currently reporting credit data, there is still a significant number of the marketplace that do not. So why specifically should marketplace lenders report? 1. Stay One Step Ahead of Regulators. It’s true data reporting is currently voluntary for marketplace lenders. But the Consumer Financial Protection Bureau’s (CFPB) recent activities reflect a growing focus by regulators to advocate for and protect consumers. Voluntary data reporting reflects the spirit of transparency and aligns with many regulatory priorities. By taking proactive steps and reporting data on their own, online lenders can stay one step ahead of regulators, hopefully alleviating the need for new regulations. 2. Gain a Competitive Advantage in the Long Run. Sure, data reporting is about “doing the right thing” for consumers, but it can be good for business too. Online marketplace lenders can gain distinct advantages by reporting. For example, with access to more accurate consumer information, lenders are able to develop and offer more competitive products tailored to the unique needs of their customers. By expanding their offerings, online lenders can differentiate themselves and thereby grow market share. Reporting also enables lenders to emphasize their commitment to consumers as part of their value proposition, demonstrating how they are helping to grow customer credit. Reporting rewards customers with good payment history, allowing them to take advantage of better loan rates and lower fees available to those with exemplary credit scores. This in turn can lead to higher customer satisfaction, loyalty and return business. With access to more complete and comprehensive consumer credit data, online lenders gain a clearer picture of a consumer’s credit worthiness, enabling them to make more informed, and less risky, lending decisions. Reporting also encourages on-time payments. When customers know that lenders report, they are more likely to pay on-time and less likely to default on their debt. 3. Have You Heard of the “Millennials?”  Millennials, and their passion for all things Internet-enabled, are the perfect match for online marketplace lenders. In fact, the latest research from Experian reveals 47 percent of millennials expect to use alternative finance sources in the near future. And 57 percent reported they are willing to use alternative companies and services that innovate to meet their needs. Millennials are clearly more open to nontraditional banking, but at the same time have a greater expectation of transparency, making it all the more important for online marketplace lenders to report credit data. 4. Achieve Data Quality. Complying with Fair Credit Reporting Act (FCRA) data furnishing requirements might seem daunting for marketplace lenders, but there are tools and solutions available to help lenders proactively assess the accuracy of credit data and help identify systemic issues. Marketplace lenders can measure and monitor quality and completeness, dispute metrics, as well as industry and peer-benchmarking data. 5. Qualify More Consumers. With reporting, marketplace lenders can gain access to an invaluable wealth of information that goes well beyond the traditional credit score. Armed with robust analytics, online lenders are in a position to qualify more consumers and small businesses, which creates a significant opportunity to gain long-term customers by improving the overall customer experience. --- Reporting really is a win for marketplace lenders and consumers. In the end, it will contribute to a healthy credit ecosystem and ensure lending decisions are based on the highest quality of information available. For more information about data reporting, including how to start, visit www.experian.com/datareporting. Learn more about data reporting, or about our Online Marketplace Lending track, at Experian's annual Vision Conference in May.

Loyalty fraud and the customer experience Criminals continue to amaze me. Not surprise me, but amaze me with their ingenuity. I previously wrote about fraudsters’ primary targets being those where they easily can convert credentials to cash. Since then, a large U.S. retailer’s rewards program was attacked – bilking money from the business and causing consumers confusion and extra work. This attack was a new spin on loyalty fraud. It is yet another example of the impact of not “thinking like a fraudster” when developing a program and process, which a fraudster can exploit. As it embarks on new projects, every organization should consider how it can be exploited by criminals. Too often, the focus is on the customer experience (CX) alone, and many organizations will tolerate fraud losses to improve the CX. In fact, some organization build fraud losses into their budgets and price products accordingly — effectively passing the cost of fraud onto the consumers. Let’s look into how this type of loyalty fraud works. The criminal obtains your login credentials (either through breach, malware, phishing, brute force, etc.) and uses the existing customer profile to purchase goods using the payment method on file for the account. In this type of attack, the motivation isn’t to receive physical goods; instead, it’s to accumulate rewards points — which can then be used or sold. The points (or any other form of digital currency) are instant — on demand, if you will — and much easier to fence. Once the points are credited to the account, the criminal cashes them out either by selling them online to unsuspecting buyers or by walking into a store, purchasing goods and walking right out after paying with the digital currency. A quick check of some underground forums validates the theory that fraudsters are selling retailer points online for a reduced rate — up to 70 percent off. Please don’t be tempted to buy these! The money you spend will no doubt end up doing harm, one way or another. Now, back to the customer experience. Does having lax controls really represent a good customer experience? Is building fraud losses into the cost of your products fair to your customers? The people whose accounts have been hacked most likely are some of your best customers. They now have to deal with returning merchandise they didn’t purchase, making calls to rectify the situation, having their personally identifiable information further compromised and having to pay for the loss. All in all, not a great customer experience. All businesses have a fiduciary responsibility to protect customer data with which they have been entrusted — even if the consumer is a victim of malware, phishing or password reuse. What are you doing to protect your customers? Simple authentication technologies, while nice for the CX, easily can fail if the criminal has access to the login credentials. And fraud is not a single event. There are patterns and surveillance activities that can help to detect fraud at every phase of your loyalty program — from new account opening to account logins and updates to transactions that involve the purchase of goods or the movement of currency. As fraudsters continue to evolve and look for the least-protected targets, loyalty programs have come to the forefront of the battleground. Take the time to understand your vulnerability and how you can be attacked. Then take the necessary steps to protect your most profitable customers — your loyalty program members. If you want to learn more, join us MRC Vegas 16 for our session “Loyalty Fraud; It’s Brand Protection, Not Just Loss Prevention” and hear our industry experts discuss loyalty fraud, why it’s lucrative, and what organizations can do to protect their brand from this grey-area type of fraud.