Collection: Behavioral Scorecard For Delinquent Accounts
by: Lucy Griffin, BOL Guru BIO AND CONTACT INFO
Question: Our institution wants to develop a behavioral scorecard for delinquent accounts for collection purposes. The only information I can find regarding scorecards and fair lending deals with evaluating creditworthiness in making the initial loan decision. Is there any information about re-evaluating credit once it has gone bad? They want to use age as an attribute. Do I need to be concerned?
Answer: The same rules apply throughout the life of the credit relationship. ECOA and Regulation B define application to cover the full life of a loan.
Credit scoring is a legitimate approach to credit decisions, including the decision to continue or close an account. If your system considers the applicant's age, you need to follow the Regulation B guidelines for credit scoring systems. Otherwise, your system is "judgmental" and need not be statistically sound. You should always consider any discriminatory impact, no matter what kind of decision system you use.
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