Post-Election 2016: What's on the horizon for the financial services industry?

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Inside the Beltway Webinar | November 17, 2016

Post-Election 2016:What’s on the horizon for the financial services industry?

2©2016 Experian Information Solutions, Inc. All rights reserved.

• CFPB Update• Financial Regulatory Reform? • Access to Credit Agenda• OML Regulatory Horizon• State Update• Q&A session

Today’s Discussion Agenda


SpeakersGovernment Affairs and Public Policy

Liz OesterleSenior Director

Murray JohnstonDirector

Jeremy HancockDirector

Zack SmithManager

Tony HadleySenior Vice President


Consumer Financial Protection BureauRulemakings impacting consumer credit ecosystem

Payday, vehicle titleand high costInstallment loans

Public comments under review

Debt collection Proposed rule inearly 2017

Credit Reporting Data accuracy; dispute resolution


Data Accuracy and Consumer Disputes

Credit Reporting Agency

Data Furnisher

Data User


What’s driving the focus on data accuracy?2013 FTC longitudinal study

2.2% of credit files contained a material error that would move a consumer to a different score band reflecting a higher risk

5.2% of consumers are affected by a material error, reflecting that consumers have three reports and not all reports contain an error

21% of credit reports contained an error that did not materially affect their score

26% of credit reports were alleged to containan inaccuracy


Data Accuracy and Consumer Disputes

Credit reporting complaints: Incorrect information

on a report (79%) Consumer reporting agency

investigation (8%) Inability to obtain report

and score (6%) Problems with credit

monitoring or identity protection services (4%)

Improper use of credit report (3%) 35%

Mortgages

Credit cards 8%

19%

Debt collectorsBank

account

Creditreporting

Other

31%8%

20%

14%

Complaints handled in 2015


Bank 1:50M

Experian:220M

CFPB May 2016 Report

December 2015 – February 2016 Average Monthly Complaints

Equifax Experian TransUnion Bank 1 Bank 2 Bank 3 Bank 4 Credit Card Co. Servicer Mortgage Co.

1014911

765 754 736 685

541

322 316 283


Debt Collection Practices

Report the name of the original creditor and creditor classification code (June 2016)

Collectors cannot report debt that did not arise from a contract or agreement to pay (June 2016)

Collectors cannot report medical collection accounts less than 180 days old (September 2017)

Multi-state AgreementAssuring maximum possible accuracy


Multi-state AgreementAssuring maximum possible accuracy

All Data Furnishers

• Retirement of Metro 1 (September 2017)

• Minimum reporting requirements for consumer identifying information (September 2017)

• In routine collection and reporting of consumer credit information• Full month/date/year of birth for authorized users


CRA Duties• Streamlined application form and enhanced consumer education materials on AnnualCreditReport.com

• Enhanced escalation of dispute involving mixed files and identity fraud

• Improved communications to consumers following a consumer dispute

Multi-state AgreementImproving the customer experience


Financial Regulatory Reform

Congressional Committees have passed legislation that will serve as a marker for consideration by the next Congress and Administration

• The Senate Banking Committee passed The Financial Regulatory Improvement Act in May 2015.

• In September 2016, the House Financial Services Committee passed the Financial Choice Act.

• Both measures, passed on party-line votes, include reforms to Dodd-Frank and would make changes to the CFPB’s governance and funding structures.

What reform provisions will Senate Democrats support? • Community bank and credit union relief

• Roll back of auto finance guidance

In the background of this debate: PHH v. CFPB• The unconstitutionality of the CFPB’s single-director structure;


H.R. 347 – Facilitating Access to Credit Act of 2015Would free CFPB-supervised credit bureaus to introduce next-gen consumer education products into the marketplace by removing barriers required by the Credit Repair Organizations Act

H.R. 4172 and S. 2355 – Credit Access and Inclusion Act of 2015Would remove regulatory barriers that prevent furnishing consumer payment histories to credit bureaus for telecommunication, utilities and rental bills

H.R. 4211 -- The Credit Score Competition and Equal Access ActWould require Fannie Mae and Freddie Mac to establishing a transparent and open process for the validation and approval of credit score models

Congressional Access to Credit Agenda


Congressional Access to Credit AgendaAlternative Data

A May 2015 report from the CFPB estimates that there are roughly 45 million “credit invisibles” in the U.S.

Alternative data is payment information for:• Rent• Telecommunications (phone, cable and wireless)• Utilities (electric, gas, water)

Telecoms / Utilities report derogatory but not on-time payments, or the full file

Credit invisibles are consumers with no or “thin” credit files that cannotbe scored


Congressional Access to Credit AgendaCredit score competition

Fannie Mae and Freddie Mac underwriting guidelines require use of a specific branded credit score

• Pre-recession credit behavior• Older software

Score competition would allow lenders to chose among alternative score models to:

• Improve risk prediction with newer scoring technology/more granularity• Score more consumers


Congressional Access to Credit AgendaCredit Building and Recovery through CROA Reform

Personalized Credit EducationConsumers are directed to Experian by the

disclosures on reports and scores, but CROA’s misapplication stands in the way of further education when the consumer asks:

“How can I improve my score?”

What is the Credit Repair Organizations Act (CROA)?

• Enacted in 1996 to protect consumers from “credit repair” scams

• “Credit Repair”: Fraudulently representing to consumers that an entity can remove accurate, but negative data from a consumer’s file. Often for an exorbitant fee.

• 3 business day waiting period

• Onerous/scary consumer disclosure

• Complete disgorgement of funds as remedy

?


• Growth and lending models have caught the attention of regulators

• Continued inquiries by Treasury, CFPB, FDIC, FTC, States and Congress

• OML/FinTech as part of Congressional Innovation Agenda• Madden fix • Automate IRS Income Verification Data• Regulatory Sandbox

OML Regulatory Horizon

More regulations to come?


State Updatewhat to expect in 2017

There is growing concern that laws will not keep pace with the increasinguse of consumer information.

• Tightening of data security standards

• Shifting expectation of sensitive information

There is a blurring of the distinction between identifiable information and anonymous or de-identified information


Questions?


Economy & Finance

Post-Election 2016: What's on the horizon for the financial services industry?