The FACT Act of 2003:  Notice and Request For Public Comment On the Effects of Credit Scores and Credit-Based Insurance Scores on the Availability and Affordability of Financial Products #514719-00001

Submission Number:
514719-00001
Commenter:
Michael Richardson
State:
Maryland
Initiative Name:
The FACT Act of 2003:  Notice and Request For Public Comment On the Effects of Credit Scores and Credit-Based Insurance Scores on the Availability and Affordability of Financial Products
I've been in lending at credit unions since 1977 (NavyFCU 72-77, MAFCU 77-present). MAFCU was originally the Washington Metropolitian Area IBM Employees FCU. I've been Loan Mgr. since 1982. After nearly 20 years of judgemental lending to IBM employees, their family member and related SEGs,we added Risk based scoring/pricing for our consumer loans (autos, signature, VISA cards) in Oct. 1998. We did it with the help of professionals (CIA and Experian). Our approval ratio immediately moved from 46% in March 98 up to 83% by Dec 98. For the past 6 years we have been averaging an approval ratio of 74%. The most important point to mention is that we have maintained a relatively low delinquency rate of less than 1% for the entire time. This is documented proof that we are enhancing more member's lives that have tarnished credit issues that we would have normally rejected in the past under a judgemental review system. Our highest risk rates are far below the alternative financial options that members are forced to turn to. For example, our highest fixed rate used vehicle loan for 60 months is 9.85%. We've refinanced vehicles for members that have been paying 24% and higher from other lenders. As of March 1, we will be extending risk based scoring/pricing to our home equity products as well. If a financial origanization is responsible with the administration of it's program and on a yearly basis preforms a re-validation of its program, credit scoring can truely be extremly helpful for millions of credit union members and their families. Michael A. Richardson, Sr., VP/CLO