Closing each issue of The Score is a question-and-answer column with a thought leader in the credit industry. High-profile journalists, advocates, academics and risk managers have all participated in 2013.
A few snapshots are below along with links to the full interview.
MARCH: CONGRESSMAN JIM HIMES (D-CT)
Do you think there is need for or a benefit that consumers could derive from competition in the credit scoring marketplace?
In general, competition in any marketplace keeps competitors sharp and singularly focused on serving the needs of their clients. Given how essential credit scoring is to Americans’ ability to finance education, homes and other needs, it is critical that credit scoring businesses operate in as close to an error-free manner as possible. They should also think “outside the box” to create avenues for the traditionally unbanked and lower-income populations to enter the credit world in a safe and responsible way.
I’m proud that VantageScore Solutions, an innovative company headquartered in the 4th Congressional District of Connecticut, which I represent, has made a viable credit scoring alternative available to lenders for a number of years. I am excited by the release of their version 3.0, which I understand is not only more predictive but is able to score millions of people for whom it was previously very difficult to provide credit scores. This could increase access to capital for millions of Americans, which will, in turn, help stimulate the consumer demand we know is essential to a robust economy.
The time and financial burdens to consumers trying to manage their financial history are not insignificant. Increasing competition should encourage companies to provide consumers with their personal data at a lower cost. But many consumers also experience the frustrating consequences of inaccurate financial data being shared with credit scoring agencies. As the intermediary between data providers and individuals, scoring companies have the power to demand better consumer information. As more and more companies demand better data from credit providers, the quality of reporting should improve and reduce the time consumers now spend correcting misinformation about their financial history.
JUNE: STEVEN BROBECK, EXECUTIVE DIRECTOR, CONSUMER FEDERATION OF AMERICA
What are CFA’s concerns with respect to the student loan market?
The accumulation by many students of tens of thousands of dollars of student debt may severely limit their future opportunities — the jobs they can afford to take and their ability to begin building the wealth needed to ensure long-term financial stability. This is a complex issue aggravated by rising college expenses, irresponsible marketing of debt by some institutions, likely increases in loan costs and unwise decisions by some students and their parents about what schools to attend and whether students should work while they’re in school.
What types of borrowers are likely to be most impacted by the 43 percent debt-to-income ratio standard in determining which loans are considered qualified mortgages (QM)?
Certainly there are borrower segments such as first-time homebuyers in high-cost areas of the country that will be hard-pressed to obtain mortgage financing at a reasonable price due to QM. Imagine a creditworthy borrower with sufficient down payment looking to buy a home in Oakland, California, and has a 44 percent DTI. That borrower will have to look at fringe markets ready to make that loan and as a result pay a higher rate than a similarly situated borrower in a lower-cost area.
AUGUST: DAN BERGER, PRESIDENT AND CEO, NATIONAL ASSOCIATION OF FEDERAL CREDIT UNIONS
NAFCU’s “Preferred Provider” program offers credit unions a rich collection of resources for managing operations and growing membership. What characteristics does NAFCU look for when choosing which companies can carry the distinction of being a “Preferred Provider”?
Before earning the Preferred Partner designation, companies must pass the scrutiny of one committee and two boards, each comprising credit union CEOs and senior executives. They consider factors such as: Does the company add value to credit unions? Do they understand the credit union mission? Can they accelerate credit union growth and productivity? It’s this type of rigorous and ongoing evaluation that ensures only top-quality market leaders are presented to the credit community with the NAFCU Services seal of approval. Our partners represent more than 50 solutions, each with the specific goal of helping credit unions improve their bottom lines. That’s the high level of performance and commitment that I insist upon.
OCTOBER: NEIL WEINBERG, EDITOR-IN-CHIEF, AMERICAN BANKER
Are new [financial] regulations affecting consumer behaviors?
Actually, regulations are having a bigger effect on the behavior of the industry than on consumers. Namely, they’re having a big impact on the financial products and services that can be offered and how they’re disclosed. Regulations have already led to cutbacks in areas that previously drove big slices of revenue. Everything from overdraft fees to payment protection and variable-rate mortgages. And the Consumer Financial Protection Bureau is just getting warmed up.