Tag: compliance

Earlier this year, the Consumer Financial Protection Bureau (CFPB) issued a Notice of Proposed Rulemaking (NPRM) to implement the Fair Debt Collection Practices Act (FDCPA). The proposal, which will go into deliberation in September and won't be finalized until after that date at the earliest, would provide consumers with clear-cut protections against disturbance by debt collectors and straightforward options to address or dispute debts. Additionally, the NPRM would set strict limits on the number of calls debt collectors may place to reach consumers weekly, as well as clarify how collectors may communicate lawfully using technologies developed after the FDCPA’s passage in 1977. So, what does this mean for collectors? The compliance conundrum is ever present, especially in the debt collection industry. Debt collectors are expected to continuously adapt to changing regulations, forcing them to spend time, energy and resources on maintaining compliance. As the most recent onslaught of developments and proposed new rules have been pushed out to the financial community, compliance professionals are once again working to implement changes. According to the Federal Register, here are some key ways the new regulation would affect debt collection: Limited to seven calls: Debt collectors would be limited to attempting to reach out to consumers by phone about a specific debt no more than seven times per week. Ability to unsubscribe: Consumers who do not wish to be contacted via newer technologies, including voicemails, emails and text messages must be given the option to opt-out of future communications. Use of newer technologies: Newer communication technologies, such as emails and text messages, may be used in debt collection, with certain limitations to protect consumer privacy. Required disclosures: Debt collectors will be obligated to send consumers a disclosure with certain information about the debt and related consumer protections. Limited contact: Consumers will be able to limit ways debt collectors contact them, for example at a specific telephone number, while they are at work or during certain hours. Now that you know the details, how can you prepare? At Experian, we understand the importance of an effective collections strategy. Our debt collection solutions automate and moderate dialogues and negotiations between consumers and collectors, making it easier for collection agencies to reach consumers while staying compliant. Powerful locating solution: Locate past-due consumers more accurately, efficiently and effectively. TrueTraceSM adds value to each contact by increasing your right-party contact rate. Exclusive contact information: Mitigate your compliance risk with a seamless and unparalleled solution. With Phone Number IDTM, you can identify who a phone is registered to, the phone type, carrier and the activation date. If you aren’t ready for the new CFPB regulation, what are you waiting for? Learn more Note: Click here for an update on the CFPB's proposal.

The fact that the last recession started right as smartphones were introduced to the world gives some perspective into how technology has changed over the past decade. Organizations need to leverage the same technological advancements, such as artificial intelligence and machine learning, to improve their collections strategies. These advanced analytics platforms and technologies can be used to gauge customer preferences, as well as automate the collections process. When faced with higher volumes of delinquent loans, some organizations rapidly hire inexperienced staff. With new analytical advancements, organizations can reduce overhead and maintain compliance through the collections process. Additionally, advanced analytics and technology can help manage customers throughout the customer life cycle. Let’s explore further: Why use advanced analytics in collections? Collections strategies demand diverse approaches, which is where analytics-based strategies and collections models come into play. As each customer and situation differs, machine learning techniques and constraint-based optimization can open doors for your organization. By rethinking collections outreach beyond static classifications (such as the stage of account delinquency) and instead prioritizing accounts most likely to respond to each collections treatment, you can create an improved collections experience. How does collections analytics empower your customers? Customer engagement, carefully considered, perhaps comprises the most critical aspect of a collections program—especially given historical perceptions of the collections process. Experian recently analyzed the impact of traditional collections methods and found that three percent of card portfolios closed their accounts after paying their balances in full. And 75 percent of those closures occurred shortly after the account became current. Under traditional methods, a bank may collect outstanding debt but will probably miss out on long-term customer loyalty and future revenue opportunities. Only effective technology, modeling and analytics can move us from a linear collections approach towards a more customer-focused treatment while controlling costs and meeting other business objectives. Advanced analytics and machine learning represent the most important advances in collections. Furthermore, powerful digital innovations such as better criteria for customer segmentation and more effective contact strategies can transform collections operations, while improving performance and raising customer service standards at a lower cost. Empowering consumers in a digital, safe and consumer-centric environment affects the complete collections agenda—beginning with prevention and management of bad debt and extending through internal and external account resolution. When should I get started? It’s never too early to assess and modernize technology within collections—as well as customer engagement strategies—to produce an efficient, innovative game plan. Smarter decisions lead to higher recovery rates, automation and self-service tools reduce costs and a more comprehensive customer view enhances relationships. An investment today can minimize the negative impacts of the delinquency challenges posed by a potential recession. Collections transformation has already begun, with organizations assembling data and developing algorithms to improve their existing collections processes. In advance of the next recession, two options present themselves: to scramble in a reactive manner or approach collections proactively. Which do you choose? Get started

Today, Experian and Oliver Wyman announced the launch of Ascend CECL ForecasterTM, a solution built to help financial institutions of all sizes more quickly and accurately forecast lifetime credit losses. The Financial Accounting Standards Board’s current expected credit loss (CECL) model has been a hot discussion topic throughout the financial services industry - first when it was announced (and considered one of the most significant accounting changes in decades), and most recently with the FASB’s delay for implementation for smaller lenders. As the compliance deadlines approach, Experian and Oliver Wyman have joined forces to help financial institutions adhere their loan portfolios to the new guidelines. Delivered through Experian’s Ascend Technology PlatformTM, Ascend CECL Forecaster is a new user-friendly, web-based application that combines Experian’s vast loan-level data and Premier AttributesSM, third-party macroeconomic data, valuation data and Oliver Wyman’s industry-leading CECL modeling methodology to accurately calculate potential losses over the life of a loan. “Ascend CECL Forecaster is a critical capability needed urgently by all lending and financial institutions,” said Ash Gupta, a Senior Advisor to Oliver Wyman and former Chief Risk Officer for American Express, in a press release. “The collaboration between Experian and Oliver Wyman allows a frictionless synthesis of industry data, capabilities and experience to serve customers in both first and second line of defense.” The premise behind the model, which will need access to more data than that used to calculate reserves under the incurred loss model, Allowance for Loan and Lease Losses (ALLL), is for financial institutions to estimate the expected loss over the life of a loan by using historical information, current conditions and reasonable forecasts. Built using advanced machine learning and statistical techniques, the web-based application maximizes the more than 15 years of historical credit data spanning previous economic cycles to help financial institutions gauge loan portfolio performance under various scenarios. Ascend CECL Forecaster does not require additional data nor does it require a secondary integration from the financial institution and enables organizations to more quickly test their portfolios under different economic factors. Moreover, financial institutions receive guidance from industry experts to assist with implementation and strategy. Additionally, Experian and Oliver Wyman will host a webinar to help financial institutions better understand and prepare for the upcoming CECL standards. Register today! Read the Press Release Register for Webinar

Have you seen the latest Telephone Consumer Protection Act (TCPA) class action lawsuit? TCPA litigations in the communications, energy and media industries are dominating the headlines, with companies paying up to millions of dollars in damages. Consumer disputes have increased more than 500 percent in the past five years, and regulations continue to tighten. Now more than ever, it’s crucial to build effective and cost-efficient contact strategies. But how? First, know your facts. Second, let us help. What is the TCPA? As you’re aware, TCPA aims to safeguard consumer privacy by regulating telephone solicitations and the use of prerecorded messages, auto-dialed calls, text messages and unsolicited faxes. The rule has been amended and more tightly defined over time. Why is TCPA compliance important? Businesses found guilty of violating TCPA regulations face steep penalties – fines range from $500 to $1500 per individual infraction! Companies have been delivered hefty penalties upwards of hundreds of thousands, and in some cases, millions of dollars. Many have questions and are seeking to understand how they might adjust their policies and call practices. How can you protect yourself? To help avoid risk for compliance violations, it’s integral to assess call strategies and put best practices in place to increase right-party contact rates. Strategies to gain compliance and mitigate risk include: Focus on right and wrong-party contact to improve customer service: Monitoring and verifying consumer contact information can seem like a tedious task, but with the right combination of data, including skip tracing data from consumer credit data, alternative and other exclusive data sources, past-due consumers can be located faster. Scrub often for updated or verified information: Phone numbers can continuously change, and they’re only one piece of a consumer’s contact information. Verifying contact information for TCPA compliance with a partner you can trust can help make data quality routine. Determine when and how often you dial cell phones: Or, given new considerations proposed by the CFPB, consider looking at collections via your consumers’ preferred communication channel – online vs. over the phone. Provide consumers user-friendly mechanisms to opt-out of receiving communications At Experian, our TCPA solutions can help you monitor and verify consumer contact information, locate past-due consumers, improve your right-party contact rates and automate your collections process. Get started

From a capricious economic environment to increased competition from new market entrants and a customer base that expects a seamless, customized experience, there are a host of evolving factors that are changing the way financial institutions operate. Now more than ever, financial institutions are turning to their data for insights into their customers and market opportunities. But to be effective, this data must be accurate and fresh; otherwise, the resulting strategies and decisions become stale and less effective. This was the challenge facing OneMain Financial, a large provider of personal installment loans serving 10 million total customers across more than 1,700 branches—creating accurate, timely and robust insights, models and strategies to manage their credit portfolios. Traditionally, the archive process had been an expensive, time-consuming, and labor-intensive process; it can take months from start to finish. OneMain Financial needed a solution to reduce expenses and the time involved in order to improve their core risk modeling.   In this recent IDC Customer Spotlight, sponsored by Experian, "Improving Core Risk Modeling with Better Data Analysis," Steven D’Alfonso, Research Director spoke with the Senior Managing Director and head of model development at OneMain Financial who turned to Experian’s Ascend Analytical Sandbox to improve its core risk modeling through reject inferencing. But OneMain Financial also realized additional benefits and opportunities with the solution including compliance and economic stress testing. Read the customer spotlight to learn more about the explore how OneMain Financial: Reduced expense and effort associated with its archive process Improved risk model development timing from several months to 1-2 weeks Used Sandbox to gain additional market insight including: market share, benchmarking and trends, etc. Read the Case Study

There’s no question today’s consumers have high expectations. As financial services companies wrestle with the laws and consumer demands, here are a few points to consider: While digital delivery channels may be new, the underlying credit product remains the same. With digital delivery, adhere to credit regulations, but build in enhanced policies and technological protocols. Consult your legal, risk and compliance teams regularly. Embrace the multitude of delivery methods, including email, text, digital display and beyond. When using the latest technology, you need to work with the right partners. They can help you respect the data and consumer privacy laws, which is the foundation on which strategies should be built. Learn more

In March 2015, Experian, Equifax and Trans Union announced an agreement to enhance collecting accurate consumer information and providing consumers with a better experience interacting with the National Credit Reporting Agencies (CRA’s) about their credit reports, through the National Consumer Assistance Plan (NCAP). Since then, a series of mandatory updates to data reporting and collections procedures have been announced and implemented. Have you made the required changes and are you prepared for the next implementation? Understanding how these changes affect your business and reporting processes can be difficult to navigate. Some of these changes affect all data furnishers while others are relevant to collection agencies and debt buyers only. Here’s what you need to know: What’s coming up that ALL consumer data furnishers need to know? Effective Sept. 15, 2017, new requirements for reporting personally identifiable information will be in place. This new minimum standard will apply to accounts reported with a date opened after Sept. 15, 2017 and must be included for the CRAs to accept these records for processing. Following the Metro 2® Format, furnishers must report: Full name (First, middle or middle initial (if available), last and generation code/ suffix) Address Full Social Security Number (If full Social Security Number is not available, full Date of Birth (mmddyyyy) will be required) Date of birth (mmddyyyy) As of Feb. 1, 2018, consumer data will no longer be accepted by the CRAs in the older MetroTM format. Prior to the effective date you will need to take the necessary action to ensure that your organization will convert to the Metro 2® Format. You can access information about the Metro 2® Format on the Consumer Data Industry Association website. Should you have any questions about your Experian conversion, we’re here to help, contact us at Experian Experian_Metro2_Conv@experian.com Do you report Authorized User trades? Effective Sept. 15, 2017 you must report the full date of birth for newly added authorized users on all pre-existing and newly opened accounts. If you are a collection agency or debt buyer, the following changes are ALSO applicable to your business: As of Sept. 15, 2017, you will need to stop reporting medical debt collection accounts until they are at least 180 days past the date of first delinquency with the original creditor and delete any accounts that are being paid by insurance or paid in full through insurance. Effective Sept. 1, 2016, you must report a full file monthly. This means reporting all accounts monthly, including open collection accounts, collection accounts paid in full, and accounts requiring deletion or correction. In June 2016, the CRA’s agreed to adopt a certain industry standard with respect to the reporting of debts that did not arise from a contract or agreement to pay. Experian’s policy even prior to June 2016 is not to accept any data that falls outside of a contract or agreement to pay including, but not limited to, certain fines, tickets, and other assessments. For example, library fees or fines, parking tickets, speeding tickets, and court fees or fines. Also, the name of the Original Creditor and Creditor Classification Code became requirements to include in all reporting per the Metro 2® Format. These changes are important to the quality of our data and ultimately provide a positive impact to the consumer and your business. Are you prepared?

Regardless of personal political affiliation or opinion, the presidential election is over, and the focus has shifted from debate to the impact the new administration will have on the regulatory landscape for banks. While many questions remain regarding the policy direction of a Trump administration, one thing is near certain: change is on the horizon. While on the campaign trail, Trump took aim at banking regulation: “Dodd-Frank has made it impossible for bankers to function. It makes it very hard for bankers to loan money…for people with businesses to create jobs. And that has to stop.” And in his first post-election interview, Trump outlined named financial industry deregulation to allow “banks to lend again” as a priority. Before Election Day, Experian surveyed members of the financial community about their thoughts on regulatory affairs. An overwhelming majority—85 percent—believed the election outcome would impact the current environment. Most surveyed are also feeling the weight of financial regulations established by the Obama administration in the wake of the severe financial crisis of 2008. Five out of six respondents feel current regulations have placed an undue burden on financial institutions. Three-quarters believe the regulations reduce the availability of credit. And less than half believe the regulations are positive for consumers. According to our survey, complying with Dodd-Frank and other regulations has a financial impact for most, with 76 percent realizing a significant increase in spend since 2008. Personnel and technology spend top the list, with an increase of 78 percent and 76 percent, respectively. Top regulations that require the most resources to ensure compliance: the Dodd-Frank Act (70 percent), Fair Lending Act (55), Bank Secrecy Act/Anti-Money Laundering (47) and Fair Credit Reporting Act (42). Specifically, the Dodd Frank and TILA-RESPA Integrated Disclosure were the two most frequently mentioned regulations requiring additional investment, followed by the Military Lending Act and Bank Secrecy Act/Anti-Money Laundering. What lies ahead? It’s difficult to determine how the Trump administration will tackle banking regulations and policy, but change is in the air.

Call if you need to, but protect yourself from TCPA exposure first. Follow these steps when creating your dialing strategy: Obtain customer consent Determine if the number is attached to a landline or a wireless device Verify ownership Scrub your database   Calling cell numbers can be a risky business, so be sure to set the proper workflow in motion to remain compliant. >>Learn more

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

Compliance definitions LOA, CIP, FACTA, KYC — These acronyms seem endless, and navigating compliance can be both confusing and a painful drain on resources. How do you know the best approach for your institution? Should you look at regulations for Know Your Customer (KYC) or the Customer Identification Program (CIP)? What about the levels of assurance (LOAs) or the Fair and Accurate Credit Transactions Act (FACTA) Red Flags Rule? Does the USA PATRIOT Act affect your industry? The myriad guidelines, rules and mandates surrounding fraud compliance are changing the way organizations do business. Let’s start with some brief definitions. CIP/KYC The Customer Identification Program requires banks to form a reasonable belief that they know the true identity of each customer. The CIP must include procedures that specify the identifying information that will be obtained from each customer, along with reasonable and practical risk-based procedures for verifying each customer’s identity. The Know Your Customer provision is a financial regulatory rule mandated by the Bank Secrecy Act and the USA PATRIOT Act. These guidelines focus on prevention of money laundering and the use of financial institutions to finance terrorist activities. This process has three stages: the CIP, customer due diligence (CDD) and enhanced due diligence (EDD). The last two stages address customer risk from an anti–money laundering perspective. LOA/FACTA (Red Flags Rule) Levels of assurance regarding identity focus on the extent to which electronic authentication may be used to verify that the individual identified in the input data truly is the same person engaging in the electronic transaction. This can be a daunting task — even the National Institute of Standards and Technology acknowledges that electronic authentication of individual people is a technical challenge when performed remotely over an open network. To choose the level of assurance that works within your company structure, you must determine what is needed to maintain the internal compliance and risk thresholds for each business requirement. LOAs are based on two categories: trustworthiness of the identity-proofing process and trustworthiness of the credential-management function (which includes technology and implementation/management). There are four LOA levels: Minimal Assurance Moderate Assurance Substantial Assurance High Assurance The FACTA Red Flags Rule requires institutions to establish a program that identifies ecommerce “red flags.” This program should consist of a pattern, practice or specific activity that indicates the possible existence of identity theft applicable to account-opening activities, existing account maintenance and new activity on accounts that have been inactive for two years or more. Don’t be discouraged In this world of compliance regulations that read like alphabet soup, we understand the challenges of meeting regulations while providing a frictionless customer experience. When an organization strikes the perfect balance between compliance and customer service, it has a competitive advantage that can lead to additional revenue opportunities (e.g., profitably acquiring new customers, detecting fraud and reducing charge-offs, minimizing operational costs, and improving operational efficiencies). To achieve this, businesses need cost-effective, flexible tools that allow them to meet current and future guidelines, manage risk and ultimately authenticate as many true customers as possible — all while segmenting out only the real fraudsters and noncompliant identities. You can be assured that new regulations will come, existing regulations will be redefined and communications on how to comply will be difficult to interpret. To find out more about compliance, click here.

Our clients are facing three primary issues when it comes to regulatory compliance: time resources knowledge Many are facing Matters Requiring Attention (MRA) and Matters Requiring Immediate Attention (MRIA) and don’t have the staff or the capacity to complete all of the work themselves within tight deadlines. They also want their limited resources to work on internal, proprietary initiatives to grow the business and maximize profit and return. These activities cannot be outsourced as easily as regulatory and compliance work, which is relatively easy to parse out and give to an external third party. Quite often, a level of independent oversight and effective challenge is also a requirement that can easily be solved through the use of an objective, external third party. A lot of the regulations are still relatively new, and there are still many issues and knowledge gaps our clients are facing. They have insight into their own organization only and quite often aren’t aware of or able to leverage industry best practice without the view of an external third party with broader industry knowledge and experience. In terms of best practice, it all really starts with the data, leading to the attributes used in models to create sound risk management strategies, manage capital adequacy, and ensure the safety and soundness of the overall U.S. and global financial system. The integrity of data reporting, dispute management and compliance with all applicable regulatory requirements need to be an enterprise-wide effort. In the area of attribute governance, there are three primary areas of focus: Attribution creation — definitions; logic, code and accuracy; and how to reduce implementation timelines. Monitoring and maintenance — looking for shifts in attributes and their potential impact and facilitating updates to attributes based upon changes in reporting and upgrades to newer versions of attributes as the credit environment changes, such as during the most recent mortgage crisis, where loan modification and associated attributes were created and took on increased importance. And last but definitely not least, documentation — We cannot say enough about the importance of documentation, especially to regulators. Documentation ensures accuracy and consistent application and must record all general conventions and limitations. For model risk management and governance, focus areas should follow the expanded Office of the Comptroller of the Currency (OCC) Guidance from Bulletin 2011-12. This guidance includes expanded requirements for model validations including not just standard back testing, but also benchmarking, effective challenge, sensitivity analysis and stress testing. It also expands the guidance beyond just validation to model development and usage, implementation, governance and controls. In response to these OCC expanded guidance requirements, one of our clients was seeking an industry expert to serve as an independent third party to 1) conduct industry best practice and benchmarking in areas of reject inference methodologies and 2) validate production models used for risk underwriting, line assignment, pricing and targeting. After a full review and assessment, we provided the client with a clear road map to improve the process to conduct reject inference through knowledge transfer and best practices. We established a best-in-class approach to annual model validations on a model inventory consisting of retail, small business and wealth segment portfolios. We also delivered expedited results that also identified alternative methods of validation that assess variability in point estimates, as well as comply with OCC requirements for precision, ranking and population measurement statistics. Through our work, the client was able to leverage Experian to establish a global approach to reject inference methodologies, to augment existing staffing and to offshore resources in a cost-effective manner. There are three primary areas of loss forecasting, stress testing and capital adequacy planning: International —  Basel accord National — U.S. Dodd-Frank Act Stress Testing (DFAST), including Comprehensive Capital Analysis and Review (CCAR) supervisory review Internal — Allowance for Loan and Lease Losses requirements Although there are similarities, there are also important differences among each of these three requirements and practices. For these reasons, most financial institutions in the United States are still providing and managing them separately. This obviously creates a strain on internal staff and resources. One of our clients had an initial compliance strategy in place but did not have the sufficient in-house staff and resources required to create, document and review its modeling and stress testing to satisfy regulators and internal auditors. The organization needed a consultant that could work closely with its in-house team to support sophisticated models that were tailored to meet its specific compliance obligations. We worked closely with the client’s team to provide extensive consulting support for a complex set of loss-forecasting models and other tools, applying industry best practices to fully document the models. Throughout the process, our consulting team discovered and identified content gaps to help ensure that all documentation was complete. We also provided ad hoc analytics to support the client’s model development effort and strategic and tactical guidance on stress testing model development for compliance. This enabled the client to develop primary and challenge models for DFAST’s CCAR requirements, as well as internal stress scenarios. It also provided the client with the following tangible business benefits: balance compliance with maximum profitability and revenue; provided knowledge sharing and best practices to help empower client employees; helped refine models based on feedback from internal and external governance organizations; supported models with academic research to help align the correct model to the correct processes; and provided assistance with model implementation and application. Click here for a recent video I did on how capital-adequacy positions are becoming crucial in analyst recommendations.

There are two sides to every coin and in banking the question is often to you want to chase the depositor of that coin, or lend it out? Well the Federal Reserve’s decision to hold interest rates at record lows since the economic downturn gave the banks’ in the United States loan portfolios a nice boost from 2010-2011, but the subsequent actions and banking environment resulted in deposit growth outpacing loans – leading to a marked reduction in loan-to-deposit ratios across banks since 2011. In fact currently there is almost $1.30 in deposits for every loan out there today.  This, in turn, has manifested itself as a reduction in net interest margins for all U.S. banks over the last three years – a situation unlikely to improve until the Fed hikes interest rates. Additionally, the banks’ have found that while they are now holding on to more of these deposits that additional regulations in the form of the CFPB looking to evaluate account origination processes,  Basel III Liquidity concerns, CCAR and CIP & KYP have all made the burden of holding these deposits more costly.   In fact the CFPB suggests four items they believe will improve financial institution’s checking account screening policies and practices: Increase the accuracy of data used from CRA’s Identify how institutions can incorporate risk screening tools while not excluding   potential accountholders unnecessarily Ensure consumers are aware and notified of information used to decision the account opening process Ensure consumers are informed of what account options exist and how they access products that align with their individual needs Lastly, to add to this already challenging environment, technology has switched the channel of choice to your smartphone and has introduced a barrage of risks associated with identity authentication – as well as operational opportunities. As leaders in retail banking and in addressing the needs of your customers, I would like to extend an invitation on behalf of Experian for you to participate in our latest survey on the changing landscape of DDA opportunities.  How are regulations changing your product set, what role does mobile play now and in the future, and what are your top priorities for 2015 and beyond?  These are just a few of the insights we would like to gain from experts such as you. To access our survey, please click here.  Our brief survey should take no more than seven minutes to complete and your insights will be highly valued as we look to better support you and your organization’s demand product needs.  Our survey period will close in three weeks, so please respond now. As a sign of our appreciation for your insights, we will send all participants an anonymous aggregation of the responses so that you can see how others view the retail banking marketplace. So take advantage of this chance to learn from your peers and participate in this industry study and don’t leave your strategy to a flip of a coin.

By: Staci Baker Just before the holidays, the Fed released proposed rules, which implement Sections 165 and 166 of the Dodd-Frank Act. According to The American Bankers Association, “The proposals cover such issues as risk-based capital requirements, leverage, resolution planning, concentration limits and the Fed’s plans to regulate large, interconnected financial institutions and nonbanks.” How will these rules affect you? One of the biggest concerns that I have been hearing from institutions is the affect that the proposed rules will have on profitability. Greater liquidity requirements, created by both the Dodd-Frank Act and Basel III Rules, put pressure on banks to re-evaluate which lending segments they will continue to participate in, as well as impact the funds available for lending to consumers.   What are you doing to proactively combat this? Within the Dodd-Frank Act is the Durbin Amendment, which regulates the interchange fee an issuer can charge a consumer. As I noted in my prior blog detailing the fee cap associated with the Durbin Amendment, it’s clear that these new regulations in combination with previous rulings will continue to put downward pressures on bank profitability. With all of this to consider, how will banks modify their business models to maintain a healthy bottom line, while keeping customers happy? Over my next few blog posts, I will take a look at the Dodd-Frank Act’s affect on an institution’s profitability and highlight best practices to manage the impact to your organization.

As E-Government customer demand and opportunity increases, so too will regulatory requirements and associated guidance become more standardized and uniformly adopted.  Regardless of credentialing techniques and ongoing access management, all enrollment processes must continue to be founded in accurate and, most importantly, predictive risk-based authentication. Such authentication tools must be able to evolve as new technologies and data assets become available, as compliance requirements and guidance become more defined, and as specific fraud threats align with various access channels and unique customer segments. A risk-based fraud detection system allows institutions to make customer relationship and transactional decisions based not on a handful of rules or conditions in isolation, but on a holistic view of a customer’s identity and predicted likelihood of associated identity theft.  To implement efficient and appropriate risk-based authentication procedures, the incorporation of comprehensive and broadly categorized data assets must be combined with targeted analytics and consistent decisioning policies to achieve a measurably effective balance between fraud detection and positive identity proofing results. The inherent value of a risk-based approach to authentication lies in the ability to strike such a balance not only in a current environment, but as that environment shifts as do its underlying forces. The National Institute of Standards and Technology, in special publication 800-63, defines electronic authentication (E-authentication) as “the process of establishing confidence in user identities electronically presented to an information system”. Since, as stated in publication 800-63, “individuals are enrolled and undergo an identity proofing process in which their identity is bound to an authentication secret, called a token”, it is imperative that identity proofing is founded in an approach that generates confidence in the authentication process. Experian believes that a risk-based approach that can separate valid from invalid identities using a combination of data and proven quantitative techniques is best. As “individuals are remotely authenticated to systems and applications over an open network, using a token in an authentication protocol”, enrollment processes that drive ultimate provision of tokens must be implemented with an eye towards identity risk, and not simply a series of checks against one or more third party data assets. If the “keys to the kingdom” are housed in the ongoing use of tokens provided by Credentials Service Providers (CRA) and binding credentials to that token, trusted Registration Authorities (RA) must employ highly predictive identity proofing techniques designed to segment true, low-risk identities from identities that may have been manipulated, fabricated, or in true-form are subject to fraudulent use, abuse or victimization. Many compliance-oriented authentication requirements (ex. USA PATRIOT Act, FACTA Red Flags Rule) and resultant processes hinge upon identity element (ex. name, address, Social Security number, phone number) validation and verification checks. Without minimizing the importance of performing such checks, the purpose of a more risk-based approach to authentication is to leverage other data sources and quantitative techniques to further assess the probability of fraudulent behavior.