Case Studies

Payday Loan Provider Credit Decision Engine Review and Implementation

Situation: A new regulatory body, the Financial Conduct Authority (FCA), was established for the UK market. The FCA put all lenders on temporary permissions and required each of them to re-apply for their permanent permissions. A large payday loan provider needed to rapidly determine the efficacy of migrating its decision engine to a new platform as well as its ability to achieve compliance in regards to the regulatory requirements for High Cost Short Term Credit (HCSTC). Underlying these events was a need to establish a credit cycle management strategy and operation. Loss mitigation became increasingly more important with the introduction of industry rate caps.

Solution: Convergence Group conducted a comprehensive review of underwriting criteria, the decision engine and credit policy in order to develop a path forward that leveraged a new decision engine inclusive of incorporating affordability, suitability and sustainability in the attributions. First party fraud, first payment default, curing, collections and recovery strategies were developed to align with new regulatory requirements and earnings necessities.

Result: Convergence Group reviewed several decision engines and ultimately selected FICO’s Blaze Advisor and Decision Management Platform (DMP). Convergence Group project managed the installation and made policy recommendations. This was FICO’s first cloud implementation worldwide. We also managed the development of a new score card and real time reporting as well as a quality assurance audit of the revised credit policy changes. The new decision engine passed the FCA’s compliance review and the client received its permanent permissions.