Creating a Systematic Monitoring Process for Consumer Lending

• Activity Number: 21
• Type: Topic Contributed
• Date/Time: Sunday, August 1, 2010 : 2:00 PM to 3:50 PM
• Sponsor: Business and Economic Statistics Section
• Author(s): Keith Schleicher+ and Rose Brunner and Lu Su and Leonard Roseman*
• Companies: Capital One and Capital One and Capital One and Capital One
• Keywords: lending ; banking ; Capital One ; feedback ; monitoring ; process

Abstract

In consumer lending, expectations of consumer behavior, especially risk and return, are used to approve loans and set prices. Business managers need to effectively detect, diagnose, and respond to discrepancies between their business expectations and their actual results because failure to identify shifts in performance can have significant financial ramifications. Statisticians at Capital One have created a repeatable process using statistical tools to facilitate a quick, easy and consistent way for business managers to do the detection and diagnostic work. In our experience, the practical considerations associated with the deployment of the process are often more critical than the methodology itself. We will describe this framework and some examples where the incorporation of feedback drove good business decisions.