it’s in the business school in 2006 after the class discussion on credit
after the class discussion on credit
after the class discussion on credit card lending an undergrad share with me
card lending an undergrad share with me
card lending an undergrad share with me that just a year before he had
that just a year before he had
that just a year before he had accumulated so much credit card that he
accumulated so much credit card that he
accumulated so much credit card that he had to declare personal bankruptcy the
had to declare personal bankruptcy the
had to declare personal bankruptcy the 2008 financial crisis started a national
2008 financial crisis started a national
2008 financial crisis started a national conversation about responsibility in
conversation about responsibility in
conversation about responsibility in lending who is responsible when a
lending who is responsible when a
lending who is responsible when a borrower doesn’t repay a loan the
borrower doesn’t repay a loan the
borrower doesn’t repay a loan the borrower who took it my undergrad or the
borrower who took it my undergrad or the
borrower who took it my undergrad or the lender who gave did the credit card
lender who gave did the credit card
lender who gave did the credit card companies most people in the United
companies most people in the United
companies most people in the United States would say that it is the
States would say that it is the
States would say that it is the responsibility of the borrower the
responsibility of the borrower the
responsibility of the borrower the financial crisis showed us that mortgage
financial crisis showed us that mortgage
financial crisis showed us that mortgage lenders also had part of her also had
lenders also had part of her also had
lenders also had part of her also had part in this responsibility
part in this responsibility
part in this responsibility however the reasons why my undergrad
however the reasons why my undergrad
however the reasons why my undergrad declared bankruptcy and many bore with
declared bankruptcy and many bore with
declared bankruptcy and many bore with many borrowers many mortgage borrowers
many borrowers many mortgage borrowers
many borrowers many mortgage borrowers lost their houses depends on reasons
lost their houses depends on reasons
lost their houses depends on reasons connected with long term developers in
connected with long term developers in
connected with long term developers in the banking industry I will talk about
the banking industry I will talk about
the banking industry I will talk about one of them the replacement of loan
one of them the replacement of loan
one of them the replacement of loan officers by credit scoring creditors
officers by credit scoring creditors
officers by credit scoring creditors Corinne is an American invention of the
Corinne is an American invention of the
Corinne is an American invention of the 19th century it was dreamed up by Lewis
19th century it was dreamed up by Lewis
19th century it was dreamed up by Lewis Tappan Lewis Tubman is actually best
Tappan Lewis Tubman is actually best
Tappan Lewis Tubman is actually best known for being an abolitionist he was
known for being an abolitionist he was
known for being an abolitionist he was actually portrayed in a movie Amistad
actually portrayed in a movie Amistad
actually portrayed in a movie Amistad but he also founded the first credit
but he also founded the first credit
but he also founded the first credit score the lowest happened
score the lowest happened
score the lowest happened mercantile agency which is the precursor
mercantile agency which is the precursor
mercantile agency which is the precursor of current day dan and Bradstreet it was
of current day dan and Bradstreet it was
of current day dan and Bradstreet it was widely imitated initially it was just a
widely imitated initially it was just a
widely imitated initially it was just a letter full of rumor and hearsay
letter full of rumor and hearsay
letter full of rumor and hearsay eventually over the years it became the
eventually over the years it became the
eventually over the years it became the FICO scores experience course the
FICO scores experience course the
FICO scores experience course the TransUnion is forest course that we are
TransUnion is forest course that we are
TransUnion is forest course that we are all familiar with he particularly took
all familiar with he particularly took
all familiar with he particularly took off in the 1970s I have taken mortgages
off in the 1970s I have taken mortgages
off in the 1970s I have taken mortgages credit cards home equity loans car loans
credit cards home equity loans car loans
credit cards home equity loans car loans I have yet to meet a loan officer and I
I have yet to meet a loan officer and I
I have yet to meet a loan officer and I imagine that it’s very similar for many
imagine that it’s very similar for many
imagine that it’s very similar for many of you I have met many of launch
of you I have met many of launch
of you I have met many of launch salespeople and I have filled out plenty
salespeople and I have filled out plenty
salespeople and I have filled out plenty of long questionnaires but decisions
of long questionnaires but decisions
of long questionnaires but decisions about my repayment capacity have been
about my repayment capacity have been
about my repayment capacity have been taken in some backroom based on a
taken in some backroom based on a
taken in some backroom based on a mysterious algorithm over which I have
mysterious algorithm over which I have
mysterious algorithm over which I have little control I learn about the role of
little control I learn about the role of
little control I learn about the role of loan officers in responsibility in
loan officers in responsibility in
loan officers in responsibility in London because of my research in
London because of my research in
London because of my research in microfinance in Latin America
microfinance in Latin America
microfinance in Latin America microfinance is a peculiar type of
microfinance is a peculiar type of
microfinance is a peculiar type of London in which the involvement of loan
London in which the involvement of loan
London in which the involvement of loan officers is absolutely fundamental
officers is absolutely fundamental
officers is absolutely fundamental at least until recently I first heard of
at least until recently I first heard of
at least until recently I first heard of my client out of microfinance in the
my client out of microfinance in the
my client out of microfinance in the early 90s when I was conducting research
early 90s when I was conducting research
early 90s when I was conducting research in the Northeast of Brazil I was
in the Northeast of Brazil I was
in the Northeast of Brazil I was sustained in shoemaker’s as part of a
sustained in shoemaker’s as part of a
sustained in shoemaker’s as part of a research project on programs to evaluate
research project on programs to evaluate
research project on programs to evaluate micro enterprise programs to evaluate
micro enterprise programs to evaluate
micro enterprise programs to evaluate the way the government could support the
the way the government could support the
the way the government could support the development of micro enterprises back
development of micro enterprises back
development of micro enterprises back then it was called new micro enterprise
then it was called new micro enterprise
then it was called new micro enterprise finance he was called micro enterprise
finance he was called micro enterprise
finance he was called micro enterprise finance because he thought it was about
finance because he thought it was about
finance because he thought it was about lending to micro enterprises for example
lending to micro enterprises for example
lending to micro enterprises for example a shoemaker in Brazil needs leather and
a shoemaker in Brazil needs leather and
a shoemaker in Brazil needs leather and micro enterprise shoemaker didn’t have
micro enterprise shoemaker didn’t have
micro enterprise shoemaker didn’t have the money to buy the leather a micro
the money to buy the leather a micro
the money to buy the leather a micro enterprise noun could give him the cash
enterprise noun could give him the cash
enterprise noun could give him the cash to actually go to them to the leather
to actually go to them to the leather
to actually go to them to the leather merchant and negotiate a better price
merchant and negotiate a better price
merchant and negotiate a better price that he could get otherwise it was
that he could get otherwise it was
that he could get otherwise it was called new because of that it is because
called new because of that it is because
called new because of that it is because of the will to distinguish it from prior
of the will to distinguish it from prior
of the will to distinguish it from prior micro enterprise lending programs which
micro enterprise lending programs which
micro enterprise lending programs which were rather irresponsible let me tell
were rather irresponsible let me tell
were rather irresponsible let me tell you a story spite of my research project
you a story spite of my research project
you a story spite of my research project on shoemakers I attended a meeting of
on shoemakers I attended a meeting of
on shoemakers I attended a meeting of the month the monthly meeting of an
the month the monthly meeting of an
the month the monthly meeting of an association of shoemakers in the
association of shoemakers in the
association of shoemakers in the Northeast of Brazil and I presented
Northeast of Brazil and I presented
Northeast of Brazil and I presented myself and doing research I’m helping
myself and doing research I’m helping
myself and doing research I’m helping the government figure out ways of
the government figure out ways of
the government figure out ways of supporting your micro enterprise what do
supporting your micro enterprise what do
supporting your micro enterprise what do you need and predictably they set loans
you need and predictably they set loans
you need and predictably they set loans we need loans so then I followed up and
we need loans so then I followed up and
we need loans so then I followed up and I said I said you you ever taken a
I said I said you you ever taken a
I said I said you you ever taken a government loan and I told his lender
government loan and I told his lender
government loan and I told his lender man raised his hand yes yes and without
man raised his hand yes yes and without
man raised his hand yes yes and without my prompting he shared with me that he
my prompting he shared with me that he
my prompting he shared with me that he had used this loan to build a nice
had used this loan to build a nice
had used this loan to build a nice addition to his house not to buy leather
addition to his house not to buy leather
addition to his house not to buy leather and I was like what’s going on so sure a
and I was like what’s going on so sure a
and I was like what’s going on so sure a room over the garage made this man’s
room over the garage made this man’s
room over the garage made this man’s life better but similar to dispenses of
life better but similar to dispenses of
life better but similar to dispenses of my credit that the credit card expenses
my credit that the credit card expenses
my credit that the credit card expenses of my undergrad he did not generate any
of my undergrad he did not generate any
of my undergrad he did not generate any revenue to pay back that loan lucky for
revenue to pay back that loan lucky for
revenue to pay back that loan lucky for this shoemaker the micro-enterprise
this shoemaker the micro-enterprise
this shoemaker the micro-enterprise lender that gave him the money closed
lender that gave him the money closed
lender that gave him the money closed the doors before payment was to you
the doors before payment was to you
the doors before payment was to you microfinance completely changed this it
microfinance completely changed this it
microfinance completely changed this it began hiring and training highly-skilled
began hiring and training highly-skilled
began hiring and training highly-skilled loan officers the job of a microfinance
loan officers the job of a microfinance
loan officers the job of a microfinance loan officer is very hard I learned
loan officer is very hard I learned
loan officer is very hard I learned about it while walking in the streets of
about it while walking in the streets of
about it while walking in the streets of El Alto in Bolivia with this loan
El Alto in Bolivia with this loan
El Alto in Bolivia with this loan officers in the morning they do sales
officers in the morning they do sales
officers in the morning they do sales they go to street markets and they talk
they go to street markets and they talk
they go to street markets and they talk with people like this woman selling
with people like this woman selling
with people like this woman selling cheese your cheeses are wonderful and
cheese your cheeses are wonderful and
cheese your cheeses are wonderful and absolutely fabulous how do you finance
absolutely fabulous how do you finance
absolutely fabulous how do you finance where do you get your milk I work for
where do you get your milk I work for
where do you get your milk I work for Carlos Saunders do you need a loan not
Carlos Saunders do you need a loan not
Carlos Saunders do you need a loan not today
today
today please keep my business card in the
please keep my business card in the
please keep my business card in the afternoon they do repayment evaluation
afternoon they do repayment evaluation
afternoon they do repayment evaluation they visit this woman’s house or whoever
they visit this woman’s house or whoever
they visit this woman’s house or whoever they have identified as a potential
they have identified as a potential
they have identified as a potential borrower and they evaluate how much can
borrower and they evaluate how much can
borrower and they evaluate how much can they actually repay they learn funny
they actually repay they learn funny
they actually repay they learn funny things for example taxi drivers in the
things for example taxi drivers in the
things for example taxi drivers in the past in Bolivia when their boar what
past in Bolivia when their boar what
past in Bolivia when their boar what they do is they stop for a bite so what
they do is they stop for a bite so what
they do is they stop for a bite so what happens when business is down expenses
happens when business is down expenses
happens when business is down expenses are up and so is the waistline in the
are up and so is the waistline in the
are up and so is the waistline in the evening they visit late hares and they
evening they visit late hares and they
evening they visit late hares and they visit defaulting borrowers is not a very
visit defaulting borrowers is not a very
visit defaulting borrowers is not a very pleasant it’s not a very pleasant job
pleasant it’s not a very pleasant job
pleasant it’s not a very pleasant job you can imagine they don’t like it
you can imagine they don’t like it
you can imagine they don’t like it whatsoever in Bolivia people will put
whatsoever in Bolivia people will put
whatsoever in Bolivia people will put their furniture and their TVs as
their furniture and their TVs as
their furniture and their TVs as warranty for repayment can you imagine
warranty for repayment can you imagine
warranty for repayment can you imagine going into someone’s house to take out
going into someone’s house to take out
going into someone’s house to take out their furniture to take out the TV and
their furniture to take out the TV and
their furniture to take out the TV and the kids are crying and the dogs are
the kids are crying and the dogs are
the kids are crying and the dogs are barking I remember they’re telling me
barking I remember they’re telling me
barking I remember they’re telling me that we never see the house when we’re
that we never see the house when we’re
that we never see the house when we’re evaluating the launch but with these
evaluating the launch but with these
evaluating the launch but with these dogs come from seems like they get them
dogs come from seems like they get them
dogs come from seems like they get them just for this from their neighbors
just for this from their neighbors
just for this from their neighbors right after they have to go back to
right after they have to go back to
right after they have to go back to their office with their memories is
their office with their memories is
their office with their memories is still fresh on exactly this on how
still fresh on exactly this on how
still fresh on exactly this on how unpleasant it is to collect from someone
unpleasant it is to collect from someone
unpleasant it is to collect from someone who cannot pay their loan and this is
who cannot pay their loan and this is
who cannot pay their loan and this is when they file the paperwork and it’s
when they file the paperwork and it’s
when they file the paperwork and it’s also when as part of credit committees
also when as part of credit committees
also when as part of credit committees they decide on new loans microfinance
they decide on new loans microfinance
they decide on new loans microfinance work with loan officers rely on loan
work with loan officers rely on loan
work with loan officers rely on loan officers until mm why Brazil Bolivia and
officers until mm why Brazil Bolivia and
officers until mm why Brazil Bolivia and most of the countries where you have
most of the countries where you have
most of the countries where you have microfinance widespread they don’t have
microfinance widespread they don’t have
microfinance widespread they don’t have the score in the national scoring
the score in the national scoring
the score in the national scoring systems available in the United States
systems available in the United States
systems available in the United States but what has happened over the years
but what has happened over the years
but what has happened over the years computing capabilities big data this has
computing capabilities big data this has
computing capabilities big data this has facilitated for financial institutions
facilitated for financial institutions
facilitated for financial institutions to develop their own scoring systems why
to develop their own scoring systems why
to develop their own scoring systems why is so interesting for them including in
is so interesting for them including in
is so interesting for them including in microfinance well it’s very interesting
microfinance well it’s very interesting
microfinance well it’s very interesting because it generates what efficiencies
because it generates what efficiencies
because it generates what efficiencies is much more efficient to evaluate
is much more efficient to evaluate
is much more efficient to evaluate borrowers repayment capacity with the
borrowers repayment capacity with the
borrowers repayment capacity with the scoring algorithm than with an army of
scoring algorithm than with an army of
scoring algorithm than with an army of loan officers the scoring thereby is
loan officers the scoring thereby is
loan officers the scoring thereby is here to stay it’s not gonna go away the
here to stay it’s not gonna go away the
here to stay it’s not gonna go away the challenge is to convince lenders that
challenge is to convince lenders that
challenge is to convince lenders that they need to invest on systems that
they need to invest on systems that
they need to invest on systems that avoid over in depth in their borrowers
avoid over in depth in their borrowers
avoid over in depth in their borrowers dire avoid having their clients
dire avoid having their clients
dire avoid having their clients defaulting on their loans they can
defaulting on their loans they can
defaulting on their loans they can afford it let me show you some numbers
afford it let me show you some numbers
afford it let me show you some numbers these graphs shows you the average
these graphs shows you the average
these graphs shows you the average return on assets of all the US banks and
return on assets of all the US banks and
return on assets of all the US banks and this is at a time of record profits in
this is at a time of record profits in
this is at a time of record profits in banking this shows you actually a
banking this shows you actually a
banking this shows you actually a comparison between the average of the US
comparison between the average of the US
comparison between the average of the US banks and the pro credit Bank the pro
banks and the pro credit Bank the pro
banks and the pro credit Bank the pro credit Bank is the bank that actually
credit Bank is the bank that actually
credit Bank is the bank that actually has an army of loan officers decided on
has an army of loan officers decided on
has an army of loan officers decided on the repayment capability isn’t it
the repayment capability isn’t it
the repayment capability isn’t it interesting that it almost matches
interesting that it almost matches
interesting that it almost matches perfectly this right here we have I have
perfectly this right here we have I have
perfectly this right here we have I have added the return on assets of
added the return on assets of
added the return on assets of the car backs which actually rely
the car backs which actually rely
the car backs which actually rely majorly on the scoring so what do you
majorly on the scoring so what do you
majorly on the scoring so what do you notice
notice
notice well you know this is the profitability
well you know this is the profitability
well you know this is the profitability it’s much higher but what else do you
it’s much higher but what else do you
it’s much higher but what else do you see there’s a high there’s a high
see there’s a high there’s a high
see there’s a high there’s a high volatility what is that is at the deep
volatility what is that is at the deep
volatility what is that is at the deep at the deepest of repayment crisis at
at the deepest of repayment crisis at
at the deepest of repayment crisis at the deepest borrowers the happy Fulton
the deepest borrowers the happy Fulton
the deepest borrowers the happy Fulton under launch and many who might have
under launch and many who might have
under launch and many who might have declared bankruptcy this is problematic
declared bankruptcy this is problematic
declared bankruptcy this is problematic miss Annette and it is problematic at
miss Annette and it is problematic at
miss Annette and it is problematic at least for two reasons first borrowers
least for two reasons first borrowers
least for two reasons first borrowers actually like scoring base lending they
actually like scoring base lending they
actually like scoring base lending they like scoring based lending for many
like scoring based lending for many
like scoring based lending for many reasons remember my undergrad so why did
reasons remember my undergrad so why did
reasons remember my undergrad so why did my undergrad declare bankruptcy the
my undergrad declare bankruptcy the
my undergrad declare bankruptcy the reason he declared bankruptcy is because
reason he declared bankruptcy is because
reason he declared bankruptcy is because he had used his credit card for daily
he had used his credit card for daily
he had used his credit card for daily expenses because he lost his job and he
expenses because he lost his job and he
expenses because he lost his job and he didn’t want to move back with Daddy and
didn’t want to move back with Daddy and
didn’t want to move back with Daddy and because he didn’t want to move back with
because he didn’t want to move back with
because he didn’t want to move back with that is I wanted I use my credit card
that is I wanted I use my credit card
that is I wanted I use my credit card can you imagine him having that
can you imagine him having that
can you imagine him having that conversation with one of my loan
conversation with one of my loan
conversation with one of my loan officers my loan officer would have
officers my loan officer would have
officers my loan officer would have never gave me him alone for that so
never gave me him alone for that so
never gave me him alone for that so borrowers particularly the responsible
borrowers particularly the responsible
borrowers particularly the responsible ones like scoring the other reason is
ones like scoring the other reason is
ones like scoring the other reason is that the responsible lending has
that the responsible lending has
that the responsible lending has actually moved beyond credit cards it’s
actually moved beyond credit cards it’s
actually moved beyond credit cards it’s not a problem of credit cards credit
not a problem of credit cards credit
not a problem of credit cards credit cards where the ones are the user in
cards where the ones are the user in
cards where the ones are the user in scoring more broadly but this has
scoring more broadly but this has
scoring more broadly but this has actually moved to other areas of lending
one of the areas of lending that this
one of the areas of lending that this has moved to is actually student loans
has moved to is actually student loans
has moved to is actually student loans student loans and car loans these are
student loans and car loans these are
student loans and car loans these are actually lenders these are lenders who
actually lenders these are lenders who
actually lenders these are lenders who don’t care about the repayment
don’t care about the repayment
don’t care about the repayment capability of their borrowers so what
capability of their borrowers so what
capability of their borrowers so what can we do is Corrine is here to stay but
can we do is Corrine is here to stay but
can we do is Corrine is here to stay but with responsibility in lending doesn’t
with responsibility in lending doesn’t
with responsibility in lending doesn’t have to there’s a couple of things that
have to there’s a couple of things that
have to there’s a couple of things that we can do first on the side of borrowers
we can do first on the side of borrowers
we can do first on the side of borrowers we can increase financial literacy
we can increase financial literacy
we can increase financial literacy second on the side of lenders we can
second on the side of lenders we can
second on the side of lenders we can actually support financial institutions
actually support financial institutions
actually support financial institutions that are responsible lenders in
that are responsible lenders in
that are responsible lenders in microfinance we can
microfinance we can
microfinance we can well through our crowdfunding platforms
well through our crowdfunding platforms
well through our crowdfunding platforms such as kiva.org I had plan to end this
such as kiva.org I had plan to end this
such as kiva.org I had plan to end this talk on a high note talking to you and
talk on a high note talking to you and
talk on a high note talking to you and telling you about the Consumer Financial
telling you about the Consumer Financial
telling you about the Consumer Financial Protection agent Beryl which had just
Protection agent Beryl which had just
Protection agent Beryl which had just issued legislation protecting
issued legislation protecting
issued legislation protecting encouraging and pressuring borrowers to
encouraging and pressuring borrowers to
encouraging and pressuring borrowers to incorporate to incorporate systems so
incorporate to incorporate systems so
incorporate to incorporate systems so they don’t over in depth their borrowers
they don’t over in depth their borrowers
they don’t over in depth their borrowers this legislation went through all the
this legislation went through all the
this legislation went through all the process it became effective January 16
process it became effective January 16
process it became effective January 16 2018 unfortunately Friday last week the
2018 unfortunately Friday last week the
2018 unfortunately Friday last week the current administration stripped the CFPB
current administration stripped the CFPB
current administration stripped the CFPB of his enforcement capabilities thereby
of his enforcement capabilities thereby
of his enforcement capabilities thereby I want to end this talk urging the
I want to end this talk urging the
I want to end this talk urging the current administration to restore to
current administration to restore to
current administration to restore to debt CFPB is enforcement capabilities I
debt CFPB is enforcement capabilities I
debt CFPB is enforcement capabilities I think it will go a long way to restore
think it will go a long way to restore
think it will go a long way to restore the responsibility in lending that we
the responsibility in lending that we
the responsibility in lending that we lost when loan officers became replaced
lost when loan officers became replaced
lost when loan officers became replaced by creditors Corrine thank you very much
”
Be First to Comment