![Emerging Global Trends: Increased Polarization Credit Information in White Hat Financial infrastructure necessary for development Key to credit access, opens door to asset building Alternative data (consumer, commercial) Tool for preventing future excessive risk Carol Wayman -- Sr. Legislative Director, CFED-- “ P resident Obama promised to make policies that strengthened the middle class. This policy would make the benefits of middle class status more attainable for millions of Americans - and with no budgetary impact. [Congress must] include affirmative permission for utility and telecom firms to report on-time utility payment information to any credit bureau [in the ARRA].” (January 2009)](https://image.slidesharecdn.com/57datasharingcooperfv3-123799456499-phpapp02/85/Global-Evolution-of-Data-Sharing-6-320.jpg)
Global Evolution of Data Sharing
- 1. The Global Evolution of Data Sharing A Panel Discussion
- 2. Some Food for Thought Why the Session is Relevant Access to predictive data is as critical as it has ever been Initiatives in all regions of the world: Developing the role of positive credit data Growing demand for cross-border data access Our Panel of Experts Michael Turner, President, PERC George Wilkinson, Principal, George Wilkinson Associates (GWA) John Hadlow, Director, Credit Bureaus & Scoring, Fair Isaac
- 3. Evolution in the UK Banking Law – Confidentiality – Tournier (1924) Younger (1972) and Lindrop (1978) – ‘IT’ focus Data Protection Acts (UK 1984 & ECD 1998) Industry-wide data sharing initiatives – including SCOR (1985 onwards) – especially ‘positive data’ and ‘full banking data’ Data Sharing Principles are not prescriptive and include: Fair & lawful Limited purpose Adequate, relevant Accurate Regulator highly respected Consumer interest high Retention Subject to rights (Human Rights Act) Secure Not outside EC – without adequate protection
- 4. Impact on Europe & the European Directive UK regulator tough/prescriptive to start with – SCOR helps Public interest allowed for breakthroughs on: Third party data (connected persons) Voters registration All subjected to scrutiny, defined rules and clear, public interest case Sharing of telecoms data OK but other utilities queried/debated Generally, quite different interpretations in each country: UK regulators listened, probed and reviewed Ireland – no telecoms data France – no positive data no voter’s information Stronger emphasis on ‘privacy/human rights/consumer input’ and consent issues
- 5. Emerging Global Trends: Increased Polarization Credit Information in Black Hat Full-file countries are worst hit Yes--but spurious correlation Prof. Rajan (a.k.a. “Black Swan” of Univ. of Chicago) -- “… loan originators would be better served by relying upon judgmental data, such as the firmness of someone’s handshake and the f ixity of their gaze, rather than credit scores or loan-to-value ratios for underwriting.” --The Economist (January 29, 2009) Prof. Kenney (UC Davis) -- “If this is not already released to credit bureaus, and in my opinion it should not be released to them, then you are advocating further intrusion into our privacy. Moreover, cramming more credit down poor people's mouths does not help them -- it hurts them. How many more folks do you want to see lose their homes and families. We don't need more credit in this country we need LESS!” --email response to release of PERC study New to Credit Through Alternative Data (March 2009)
- 6. Emerging Global Trends: Increased Polarization Credit Information in White Hat Financial infrastructure necessary for development Key to credit access, opens door to asset building Alternative data (consumer, commercial) Tool for preventing future excessive risk Carol Wayman -- Sr. Legislative Director, CFED-- “ P resident Obama promised to make policies that strengthened the middle class. This policy would make the benefits of middle class status more attainable for millions of Americans - and with no budgetary impact. [Congress must] include affirmative permission for utility and telecom firms to report on-time utility payment information to any credit bureau [in the ARRA].” (January 2009)
- 7. Emerging Global Trends: Asia Pacific Regional approach developing APCC ( www.apeccredit.org ) Promoting regional standard (comprehensive, full-file, private) Intense efforts on outliers (Aus, NZ) Research on transition to full-file, comprehensive Active in China (PAFIRC, PKU) Two-level approach (APEC, member economies as neeed) APEC taking up issue Viewed as financial infrastructure Considered from commercial perspective Trans-border data flows (Wellington, February 2009) Endorsed by ABAC, ABA Australia and New Zealand contemplating reform ALRC endorses “fair file” NZ Privacy Commissioner expected to rule in May 2009 Japan has reform effort afoot China--PBOC, CRBC have pledged to make market competitive Short-term focus on value-added services Data collection and provision of information services medium-term
- 8. Emerging Global Trends: Latin America Reform is the Word Promoting reform in Chile Mostly retail credit (85%), only publish negative, positive is privacy invasion State to select private vendor to maintain catalog Supporting reform in Mexico Buro de Credito must share with other Bureau negative data base Offer a collective report with data from other Bureaus upon request Implementing reform in Brazil Serasa Experian undertook policy push Court ruled that positive reporting permissible
- 9. Emerging Global Trends: Africa & MENA South Africa vs. the rest of Africa South Africa catalyzes comprehensive reporting Developing PCR (public credit registry) for short-run Will mandate reporting of data, then share with private bureaus NCR supports alternative data USAID FinMark Trust Kenya Began bureau licensing process in February 2009 Mandated negative reporting (positive to come) Banks face fines for non-compliance Nigeria IFC, Central Bank, NBA, and Accenture Great plan, terrible implementation MENA--making progress, but gaping holes Saudi Arabia has solid bureau Oman recruited solid ED from Sri Lanka
- 10. Emerging Global Trends: US Focus on the fundamentals--some expansion possible Still in disaster relief mode Fall out from subprime and ongoing financial crisis elsewhere Increased perception that information sharing not problem Congress focused on behavioral targeting Particularly concerned about online information collection No PII, used by advertisers 20% to 30% chance bill could pass Credit information sharing may be attacked in states Alternative data will dominate state and federal policy PERC and allies pushing for removal of state barriers Federally preemptive legislation in the works
- 11. Discussion Amongst Our Panel Members Questions and Discussion from the Floor © 2009 Fair Isaac Corporation.. Agenda
- 12. Open But Focused Discussion Between Experts How can we properly build public interest cases to off set consumer distrust, mitigate the Big Brother image and allay fears of automation? What is the best way to balance (perceived) commercial need against (genuine and testable) consumer/public interest? What moves are being made towards sounder international standards using tested base models that can mirror the trend towards global financials standardisation.? How can best use be made of data research on positive data sharing, consumer rights and protection and how can that be extended to issues of ‘consent’, security and enlightened ‘high standard’ practices?
- 13. Open But Focused Discussion Between Experts How has the use of positive data in recent years impacted decisioning, and how useful is cross-border data access? Lender expectations of widely shared credit data are high - but will corresponding scoring systems/decisions work? What is different in this crisis compared to previous downturns and what is the impact on current systems? What is changing in relation to the crisis and what are the key triggers which will drive change looking forward? Is there a case for more sharing of more data across borders as a cure and is better data enough?
- 14. Open But Focused Discussion Between Experts Is there a counter case for a minimal, more manual model going forward as political and regulatory change is imposed? What are the key considerations for balancing consumer rights and concerns with industrial necessities, especially in an EU context? What are the existing and new initiatives which will positively affect the way you do business locally and across borders? How can we properly determine what the longer term commercial and practical realities are?
- 15. Learn More at InterACT Related Sessions New Laws and Regulations for Lenders Global Privacy / Security Update Legislative / Regulatory Efforts to Harmonize Retail Credit Markets in the EU Validating Basel II Retail LGD Models Product Expo FICO Scores (International) Experts at InterACT Brian Cooper John Hadlow Vance Gudmundsen Discussion Online decisions.fairisaac.com/interac
- 16. THANK YOU Turn in your session evaluation Join the discussion at decisions.fairisaac.com/interact
Editor's Notes
- #2: Page