TransUnion Announces New Debt Management Scoring Model for Industry, Consumers

CHICAGO – With the recent passage of a bill by both houses of Congress to overhaul U.S. bankruptcy laws, TransUnion, a leading global information solutions company, today announced the availability of a new score that works hand-in-hand with the new legislation. TransUnion’s debt management score has the potential to change the way consumer credit counseling organizations and lenders implement and measure debt management programs and other strategies.

“The debt management score provides both efficiencies and a tailored approach for credit counseling organizations and lenders,” said Mike Rosenthal, director of Debt Management Solutions for TransUnion’s Analytic Decision Services (ADS) division. “But the real value comes from the solution’s ability to help ensure consumers receive the credit counseling and debt management support that best meets their individual needs, further complementing the spirit and letter of the law.”

TransUnion’s debt management solution creates a score that credit counseling companies and lenders can use to quickly assess the need for concessions to a specific consumer, such as lower minimum payments, reduced interest rates or the removal of late penalty fees. In addition, consumers who exhibit strong indicators for rehabilitation can be candidates for temporary restructurings or a simple debt management plan through financial counseling.

The score predicts a consumer’s likelihood to be placed in collections, file for bankruptcy or charge-off. By using measurable, empirically derived risk-based decisions, credit counseling organizations and lenders can structure programs that have their focus on the consumer’s best interests. The solution leverages the power of TransUnion’s advanced analytics capabilities and expertise in predicting consumer behavior with a combination of information from the consumer’s credit report and interview data from their initial credit counseling session.

TransUnion is proactively working with the industry to develop a multi-pronged approach to debt management – this score is the critical first step. In addition to the score, TransUnion facilitated the creation of an industry-wide steering committee, comprised of executives from the largest U.S. lenders as well as debt counseling organizations and a leading university credit research center. The committee’s purpose is to study and validate current trends, issues and possible solutions for future enhancements to TransUnion’s debt management solutions.

For years, the only option available to the industry was a cumbersome, one-size-fits-all approach to developing consumer debt management plans. This approach created an environment that limited the ability of organizations to help high-risk clients and made it more difficult for lenders to get the best return on less risky accounts.

“We applaud TransUnion’s efforts in this space,” said Dr. David C. Jones, president of the Association of Independent Consumer Credit Counseling Agencies. “A solution that is pro-actively working with the industry and addressing it in parallel with the new law is an important first step. We look forward to working with TransUnion on this and future issues that directly impact our members and the vital services they provide to consumers.”

According to the American Bankruptcy Institute, one of every 72.8 households in the U.S. filed for bankruptcy protection during the 12-month period that ended in March 2004. “This statistic points to a growing issue that the industry, Congress and consumer groups are actively addressing, both with legislation and information technology,” said Rosenthal.