The economic downturn is having a negative impact on borrowers’ credit quality and ability to repay loans. In addition, new requirements associated with the Unfair or Deceptive Acts or Practices (UDAP) and Regulation Z (disclosure) will impact lenders’ business practices beginning next year.

CFSC conducted interviews with key managers in risk, finance, and marketing to understand how lenders are managing risk under this changing economic and regulatory environment. Here’s what we found:

• In an effort to preserve capital, lenders are shifting resources from acquisitions to account management and collections. They are also avoiding nonprime customers.
• Underwriting criteria for acquisitions and account management have tightened, and account closures, credit line decreases, and collections efforts are more prevalent.
• Full-service banks are leveraging selected customer information from other products to help manage credit card risk.
• Credit card issuers are contemplating pricing and fee increases, as well as reductions in rewards program benefits. They are only in the early stages of UDAP planning and are postponing changes that may be unattractive to consumers.

It starts with research. CFSC analyzed leading competitors to understand elements and principles of a successful service-to-sales program.

Working with our client, we established objectives and created a test plan, then wrote the training and scripts that would be used by call center representatives. To make sure the plan was implemented effectively, we managed the process onsite, conducting more than 20 test-and-learn pilots. Then, based on pilot outcomes, we assisted with program rollout by outlining benchmarks, creating a model CSR profile, and defining technology requirements.

As a result, our client’s customer service division is now a profit center, generating more than $1 billion in incremental annual revenue, and yielding conversion rates as high as 15%.