It's like deja vu all over again, the man is like many posters here, doubling down on stupidity!
http://news.investors.com/ibd-edito...curve-scores-to-satisfy-regulators.htm?p=full
Credit Scores Relaxed Under Obama Pressure
Posted 03/13/2013 06:47 PM ET
Standards: Bullied by President Obama's new consumer watchdog, the Big Three consumer credit bureaus have curved credit scores for deadbeats. The capitulation is a bad omen for the economy.
The credit-scoring system underpins our economy. If lenders and insurers can't rely on it, they can't make sound judgments about the risks involved in millions of transactions each day.
Yet the system is being socialized thanks to a campaign by the administration to falsely smear it as inaccurate and biased against minorities.
The campaign began in 2011 when the Consumer Financial Protection Bureau investigated scoring models used by the consumer credit-reporting agencies. They include the VantageScore owned by the three biggest credit bureaus — Experian, Equifax and TransUnion — which provide scores and reports to underwriters.
Then last summer, the administration fed a front-page story to the Washington Post lamenting how "credit scores of black Americans have been systematically damaged" by subprime foreclosures, "haunting their financial futures." A week later, CFPB announced in Detroit that it would start policing Experian, Equifax and TransUnion.
"These companies have never before been subject to any federal supervision program," CFPB chief Richard Cordray said in July. "Now, they will be monitored just as big banks are monitored."
By that, he meant his diversity cops will subject them, as well, to "disparate impact" investigations. Under that dubious doctrine, policies found to have an adverse impact on minorities are deemed racist, even if they're racially neutral and applied evenly.
Federal studies show that blacks and Hispanics tend to have the lowest credit scores. So the bureau opened up a complaint line and portal for minorities with damaged credit, followed by on-site examinations at Experian, Equifax and TransUnion. Examiners last fall demanded they turn over data about their methods and practices.
Then the administration created a crisis in confidence about credit reporting overall, releasing a study claiming less than 80% of credit reports are accurate, which in turn triggered an avalanche of stories by Obama's press stenographers, followed by public outrage. "Can you trust your credit score?" went the typical headline.
In fact, 98% of reports contain no material errors. Also, a 2007 Fed study found no racial bias in credit scoring in a national sample of more than 300,000 credit bureau records. It found that scores typically underestimate the risk posed by black borrowers, who "show consistently higher incidences of bad (loan) performance than would be predicted" by their scores.
Still, Cordray insisted the private credit bureaus need to "reform." That's exactly what they've started to do.
This week, Experian, Equifax and TransUnion announced a new scoring model — Vantage 3.0 — that excludes some negative credit information. Past collections on bad debt will no longer factor into scores.
Nor will delinquencies or defaults related to a natural disaster, such as Hurricane Katrina.
The new system will for the first time use "nontraditional credit data," such as rent and utility payments, in standard scoring. This will help an estimated 30 million consumers who have no credit and pay their bills mostly in cash — many of them Hispanic immigrants — get a credit score, so they can apply for home loans and credit cards. Just in time for Obama's amnesty for illegals.
As we predicted in a July 18, 2012, editorial, the Big 3 consumer credit agencies have buckled. So what? Delinquencies will only rise as deadbeats now have even less reason to pay on time. (If scoring standards are adjusted down further, as we expect they will be, what incentive will any of us have to pay our bills on time?)
And who will pay for those additional delinquencies?
The creditworthy, as banks pass on losses to all customers in the form of higher interest rates and fees.
If lenders and insurers can no longer rely on credit scoring to accurately predict risk, they'll be flying blind when approving loans and credit cards.
If you thought the last financial crisis was bad, wait till you see the fallout from the house of cards being built on Obama's socialized credit scores.
Read More At Investor's Business Daily: http://news.investors.com/ibd-edito...cores-to-satisfy-regulators.htm#ixzz2PVpqn2jP
Follow us: @IBDinvestors on Twitter | InvestorsBusinessDaily on Facebook
http://news.investors.com/ibd-edito...curve-scores-to-satisfy-regulators.htm?p=full
Credit Scores Relaxed Under Obama Pressure
Posted 03/13/2013 06:47 PM ET
Standards: Bullied by President Obama's new consumer watchdog, the Big Three consumer credit bureaus have curved credit scores for deadbeats. The capitulation is a bad omen for the economy.
The credit-scoring system underpins our economy. If lenders and insurers can't rely on it, they can't make sound judgments about the risks involved in millions of transactions each day.
Yet the system is being socialized thanks to a campaign by the administration to falsely smear it as inaccurate and biased against minorities.
The campaign began in 2011 when the Consumer Financial Protection Bureau investigated scoring models used by the consumer credit-reporting agencies. They include the VantageScore owned by the three biggest credit bureaus — Experian, Equifax and TransUnion — which provide scores and reports to underwriters.
Then last summer, the administration fed a front-page story to the Washington Post lamenting how "credit scores of black Americans have been systematically damaged" by subprime foreclosures, "haunting their financial futures." A week later, CFPB announced in Detroit that it would start policing Experian, Equifax and TransUnion.
"These companies have never before been subject to any federal supervision program," CFPB chief Richard Cordray said in July. "Now, they will be monitored just as big banks are monitored."
By that, he meant his diversity cops will subject them, as well, to "disparate impact" investigations. Under that dubious doctrine, policies found to have an adverse impact on minorities are deemed racist, even if they're racially neutral and applied evenly.
Federal studies show that blacks and Hispanics tend to have the lowest credit scores. So the bureau opened up a complaint line and portal for minorities with damaged credit, followed by on-site examinations at Experian, Equifax and TransUnion. Examiners last fall demanded they turn over data about their methods and practices.
Then the administration created a crisis in confidence about credit reporting overall, releasing a study claiming less than 80% of credit reports are accurate, which in turn triggered an avalanche of stories by Obama's press stenographers, followed by public outrage. "Can you trust your credit score?" went the typical headline.
In fact, 98% of reports contain no material errors. Also, a 2007 Fed study found no racial bias in credit scoring in a national sample of more than 300,000 credit bureau records. It found that scores typically underestimate the risk posed by black borrowers, who "show consistently higher incidences of bad (loan) performance than would be predicted" by their scores.
Still, Cordray insisted the private credit bureaus need to "reform." That's exactly what they've started to do.
This week, Experian, Equifax and TransUnion announced a new scoring model — Vantage 3.0 — that excludes some negative credit information. Past collections on bad debt will no longer factor into scores.
Nor will delinquencies or defaults related to a natural disaster, such as Hurricane Katrina.
The new system will for the first time use "nontraditional credit data," such as rent and utility payments, in standard scoring. This will help an estimated 30 million consumers who have no credit and pay their bills mostly in cash — many of them Hispanic immigrants — get a credit score, so they can apply for home loans and credit cards. Just in time for Obama's amnesty for illegals.
As we predicted in a July 18, 2012, editorial, the Big 3 consumer credit agencies have buckled. So what? Delinquencies will only rise as deadbeats now have even less reason to pay on time. (If scoring standards are adjusted down further, as we expect they will be, what incentive will any of us have to pay our bills on time?)
And who will pay for those additional delinquencies?
The creditworthy, as banks pass on losses to all customers in the form of higher interest rates and fees.
If lenders and insurers can no longer rely on credit scoring to accurately predict risk, they'll be flying blind when approving loans and credit cards.
If you thought the last financial crisis was bad, wait till you see the fallout from the house of cards being built on Obama's socialized credit scores.
Read More At Investor's Business Daily: http://news.investors.com/ibd-edito...cores-to-satisfy-regulators.htm#ixzz2PVpqn2jP
Follow us: @IBDinvestors on Twitter | InvestorsBusinessDaily on Facebook
