Political & Economic Research Council   October 9, 2008 Overview of PERC:   Unleashing the Power of Information for Econom...
<ul><li>ABOUT US </li></ul><ul><li>PERC (est. 2002) is dedicated to unleashing the power of information for asset building...
PERC and Its Components <ul><li>Alternative data and widening credit access </li></ul><ul><li>Personal and commercial cred...
PERC and Its Components PERC Organizational Structure
<ul><li>Michael A. Turner, Ph.D. (President, Senior Scholar)   Dr. Turner currently serves as President and Senior Scholar...
PERC Staff <ul><li>. </li></ul><ul><li>Robin Varghese, Ph.D. (Director of International Research )  Dr. Varghese is Resear...
<ul><li>PERC Efforts = Policy and Market Outcomes </li></ul><ul><ul><li>2002   our research helped to stave off harmful op...
Speaking Engagements Figure 1:   Number of speaking engagements per year.  Note that PERC was in operation for only part o...
Budget Figure 2:   PERC’s operating budget per year.  PERC’s budget has grown from $115,000 in FY 2002 to $594,000 in FY 2...
Foreign vs. Domestic Projects Figure 3:   Percentage of PERC’s budget coming from international sources.  As the Informati...
PERC Expenses FY2006 Figure 4:   Breakout of PERC’s fiscal year 2006 expenses.  Figures are taken from an independent, 3 r...
PERC Publications Figure 5:  PERC’s publications.  Publications include studies published jointly with another organizatio...
Press Coverage Figure 6:  Press coverage.  Includes coverage in newspapers, television, and radio. Numbers are conservativ...
Funding Sources
Link Between Credit Reporting and Asset Building?  <ul><ul><li>Two primary means to create wealth are: </li></ul></ul><ul>...
Benefits of Fully Reporting  Payment Data <ul><ul><ul><li>Borrowers </li></ul></ul></ul><ul><ul><ul><li>Reduced probabilit...
The Economy Lenders Consumers A lternative D ata   I nitiative ADI
Why ADI?  <ul><ul><li>The problem  for consumers…   </li></ul></ul><ul><ul><li>35 to 54 million Americans “unscorable”due ...
Why ADI? <ul><ul><li>The problem for entrepreneurs and small business operators…   </li></ul></ul><ul><ul><li>High small b...
Why ADI?  <ul><ul><li>How did these problems come about? </li></ul></ul><ul><ul><li>The use of automated underwriting lowe...
<ul><ul><li>Many everyday payments made are not included in consumer credit files and not used in credit scores </li></ul>...
<ul><li>Full-file reporting to credit bureaus of the many everyday payments made by consumers holds the promise of closing...
The Roadmap: ADI Phase 1 <ul><li>Phase 1 Objectives </li></ul><ul><li>Define universe of alternative data </li></ul><ul><l...
The Roadmap: ADI Phase 1 <ul><li>Phase 1 Key Findings and Results   </li></ul><ul><li>Reporting of utility and telecom pay...
The Roadmap: ADI Phase 2 <ul><li>Why ADI Phase 2?   </li></ul><ul><li>PERC Identifies Market Failures </li></ul><ul><ul><l...
The Roadmap: ADI Phase 2 <ul><li>ADI Phase 2 Deliverables </li></ul><ul><li>Released “Give Credit Where Credit is Due” wit...
The Roadmap: ADI Phase 2 <ul><li>Phase 2 Key Findings and Results </li></ul><ul><li>Risk profile of thin- and no-file popu...
Total sample 7.5M Addition of Utility Data Has Small Impact on Score Distribution
Those With Alt Data Added Don’t  See Worsening Scores Over Time Change in score at end of observation period over beginnin...
Change in Acceptance Rates by Race/Ethnicity at 3% Delinquency Target Phase 2 Key Findings
Phase 2 Key Findings   Change in Acceptance Rates by Race/Ethnicity at 3% Delinquency Target
Phase 2 Results <ul><li>Making the market for alternative data </li></ul><ul><li>Bringing together bureaus and lenders to ...
Phase 2 Results <ul><li>Making the market for alternative data </li></ul><ul><li>Bureaus begin to prioritize alternative d...
ADI Phase 3 <ul><li>Why ADI Phase 3? </li></ul><ul><li>Too little fully reported alternative data </li></ul><ul><li>Poor r...
Phase 3 Deliverables <ul><li>ADI Phase 3 (Feb 07  –  September 08) </li></ul><ul><li>Build business case for full file rep...
Phase 3  Results <ul><li>Phase 3 Findings and Results:  You Score You Win: The Consequences of Giving Credit Where Credit ...
Consumer Benefits -  6 months Post Implementation <ul><li>6.2% of 2.2 million DTE Energy customers were able to be scored ...
Consumer Benefits –  2007 Reporting Cycle Source:  Experian <ul><li>DTE Energy opened 452,542 new accounts in 2007 </li></...
Changes in Score Due to DTE Trade   (Based on Records Not Delinquent) Source:  Experian <ul><li>64% of non-delinquent acco...
ADI Phase 4: 2009-2010 <ul><li>The Last Mile </li></ul><ul><li>Exhort data furnishers to report </li></ul><ul><ul><li>Deli...
G ulf  C oast E conomic R enewal   GCER
<ul><li>Little information on the financial impacts--credit and insurance--of disasters on consumers, small businesses, an...
<ul><li>PERC’s Solution </li></ul><ul><li>Combine available information with: </li></ul><ul><li>Consumer credit file infor...
<ul><li>Survey of small business owners/operators on 2 nd  and 3 rd   anniversary of Katrina’s Gulf Coast landfall </li></...
<ul><li>Some Key Findings, 2007 </li></ul><ul><ul><li>While there was evidence of recovery, it was unevenly distributed ac...
<ul><li>Partnered with World Bank and Brookings Institution on initial report examining financial health of households, sm...
<ul><li>Some Key Findings </li></ul><ul><ul><li>Small businesses in Orleans and St. Bernard Parishes show a good deal of f...
  GCER Financial Well-Bring Report <ul><li>Some Key Findings, 2008 </li></ul><ul><li>Sales performance has improved or sta...
<ul><li>Partners and groups </li></ul><ul><li>Louisiana State University (LSU), Dek Terrell and Ryan Bilbo </li></ul><ul><...
GCER “ The findings generated by PERC’s report on the recovery of small businesses along the Gulf Coast in the wake of Hur...
GCER “ Recovery, Renewal, and Resiliency” sheds light on the continuing struggles of business owners  to fully recover in ...
I nformation- L ed D evelopment ILD
<ul><li>How can information sharing practices be structured in emerging economies to: </li></ul><ul><ul><li>Improve financ...
<ul><li>Improving credit access for urban and rural poor in emerging economies (with CGAP, World Bank): </li></ul><ul><ul>...
<ul><li>Improving credit access for urban and rural poor in emerging economies (with CGAP, World Bank): </li></ul><ul><ul>...
<ul><li>Approaches to information sharing and broader financial access in China: </li></ul><ul><ul><li>Conference with Bei...
<ul><li>Improving access to small medium and micro enterprise (SMME) financing in South Africa  </li></ul><ul><li>(with Na...
<ul><li>Credit reporting standards through APEC: </li></ul><ul><ul><li>Working with information firms and lenders in Asia ...
<ul><li>Developing metrics for evaluation financial stability projects (with United Way): </li></ul><ul><li>Test and refin...
<ul><li>Developing metrics for evaluation financial stability projects (with United Way): </li></ul><ul><li>Develop indice...
<ul><li>Developing metrics for evaluation financial stability projects (with United Way): </li></ul><ul><li>Evaluate wheth...
<ul><li>Measuring impact of financial stability projects for improved interventions (with United Way): </li></ul><ul><li>P...
<ul><li>Measuring impact of financial stability projects for improved interventions (with United Way): </li></ul><ul><li>P...
<ul><li>Measuring  impact of financial stability projects for improved interventions (with United Way): </li></ul><ul><li>...
<ul><li>What are the consequences of financial data quality for access and distribution and what practice can improve data...
<ul><li>What are the consequences of financial data quality for access and distribution and what practice can improve data...
<ul><li>Alternative score development for improving SMME financing in emerging markets (IDB, SAS, IFC): </li></ul><ul><li>...
<ul><li>Alternative score development for improving SMME financing in emerging markets (IDB, SAS, IFC): </li></ul><ul><li>...
<ul><li>Opportunities on hold or lost owing to bandwidth constraints: </li></ul><ul><li>FTC Data Quality --  requested to ...
Political & Economic Research Council 100 Europa Drive, Suite 403 Chapel Hill, NC 27517 www.infopolicy.org Phone: (919) 33...
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PERC Overview

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Overview of latest PERC projects, as of October 2008.

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  • PERC Overview

    1. 1. Political & Economic Research Council October 9, 2008 Overview of PERC: Unleashing the Power of Information for Economic Development
    2. 2. <ul><li>ABOUT US </li></ul><ul><li>PERC (est. 2002) is dedicated to unleashing the power of information for asset building and wealth creation--a phenomenon we call “ information led development ” </li></ul><ul><li>State, federal and international experience and capabilities in: </li></ul><ul><ul><li>quantitative policy research--economic and social impact analysis; </li></ul></ul><ul><ul><li>education and outreach; </li></ul></ul><ul><ul><li>policy development and implementation; and, </li></ul></ul><ul><ul><li>solutions and applications. </li></ul></ul>History and Overview
    3. 3. PERC and Its Components <ul><li>Alternative data and widening credit access </li></ul><ul><li>Personal and commercial credit reporting and scoring </li></ul><ul><li>Community economic development performance metrics </li></ul><ul><li>Data privacy/security </li></ul><ul><li>Media concentration </li></ul><ul><li>3rd party info sharing </li></ul><ul><li>Data accuracy and data integrity </li></ul><ul><li>Information-led development </li></ul><ul><li>Trans-border data flows </li></ul><ul><li>Financial services infrastructure </li></ul>
    4. 4. PERC and Its Components PERC Organizational Structure
    5. 5. <ul><li>Michael A. Turner, Ph.D. (President, Senior Scholar) Dr. Turner currently serves as President and Senior Scholar of the PERC, and was the founder of the Information Policy Institute. After serving as a Graduate Fellow at the Columbia Institute for Tele-Information (CITI) at the Columbia Business School in New York City, he was named Executive Director of the Information Services Executive Council (ISEC). Dr. Turner is a prominent expert on privacy and dataflow issues. He has testified before Congress and numerous state legislatures, and presented studies to a host of government agencies including the FTC, the FRB Board of Governors, the GAO, the FDIC, the White House, and the Council of Economic Advisers. Recently, Dr. Turner recently completed a two-year term on the Department of Homeland Security’s Data Privacy and Integrity Advisory Committee, and he currently serves on the Advisory Board for the Brookings Institution Urban Markets Initiative. Dr. Turner received his Ph.D. from Columbia University in Political Economy, and his B.A. from Miami University in Economics. Turner is an affiliate scholar at the Alfred P. Sloan Foundation. </li></ul><ul><li>Joseph W. Duncan, Ph.D. (Director of CCC) Dr. Duncan served as Chief Economist for Dun & Bradstreet, where he oversaw a team of economists generating economic and strategic business analysis for D&B. Duncan has authored several books, contributed to scores of other books and authored hundreds of articles, many of which focus on information economics. Duncan was involved in the crafting of the Privacy Act, was the Chief Statistician of the United States, and helped architect the Standard Industrial Classification system (SIC) for tracking economic data across the entire U.S. economy. He has a long list of formal testimony to Congressional committees. He has been an active consultant since his formal retirement from D&B. </li></ul><ul><li>Edward M. Roche, Ph.D. (Director of COGIE) Dr. Roche serves as Director of Scientific Intelligence for the Information Policy Institute. Before he served as Head of Research at the Gartner Group, and with the Conference Board. He has done extensive field work examining Japan's industrial policies towards the computing and telecommunication sectors. He has published several books including Telecommunications and Business Strategy, Managing Information Technology in Multinational Corporations , and his latest book is Computer Crime, Criminal Justice and Information Technology. He has an MA in International Relations from the Johns Hopkins University School of Advanced International Studies, and a doctorate in international relations from Columbia University. </li></ul><ul><li>Alyssa Stewart Lee (Executive Director of Markets and Information Nexus (MAIN) at PERC Ms. Lee is the Executive Director at MAIN. Her primary responsibilities include directing activities and projects related to industry investment in urban markets using her knowledge and experience in the strategic use of data to impact decision-making within the public and private realm. Prior to joining MAIN at PERC, Ms. Lee served as the Deputy Director of the Urban Markets Initiative at the Brookings Institution. Ms. Lee holds a Master of City and Regional Planning with distinction from the Georgia Institute of Technology. She received a double Bachelor of Arts in Sociology and Urban Studies from Northwestern University. She has spoken on topics such as land planning policy, corporate development and location trends. </li></ul><ul><li>. </li></ul>PERC Staff
    6. 6. PERC Staff <ul><li>. </li></ul><ul><li>Robin Varghese, Ph.D. (Director of International Research ) Dr. Varghese is Research Director at PERC. He has worked extensively on issues of information privacy and security, data quality, credit reporting and scoring in the US and abroad. He is the co-author of many PERC studies on credit reporting and financial access, and has published in refereed academic journals. Varghese was a senior researcher and Graduate Fellow at the Columbia Institute of Tele-Information (CITI). Varghese received his Ph.D. from Columbia University in 2004. Varghese is an affiliate scholar at the Alfred P. Sloan Foundation. </li></ul><ul><li>Patrick Walker, M. Phil (Director of Research) As a Fellow for the Information Policy Institute, Mr. Walker focuses on credit reporting and consumer credit issues. Mr. Walker received a B.A. in Economics from the University of North Florida, and his Masters of Philosophy in Economics from Duke University, where he teaches micro-economics and econometrics. </li></ul><ul><li>Katrina Dusek, MA (Fellow) Ms. Dusek is the Special Projects Manager at PERC. She received her BA from the University of Rochester and her MA in Russian and East European Studies from the University of North Carolina at Chapel Hill. Her graduate work focused on democratic transition theory. She has experience in policy through her work with the Department of Homeland Security’s Office of International Enforcement. She is currently a Lieutenant in the United States Navy Reserve. </li></ul><ul><li>Adam Rodman (Special Projects Manager) Mr. Rodman earned his BS in Chemistry from the University of North Carolina at Chapel Hill in 2007. He has served as the Special Projects Manager for PERC for 18 months. He plays an integral part in team and project organization, and provides substantial contribution to research efforts. </li></ul>
    7. 7. <ul><li>PERC Efforts = Policy and Market Outcomes </li></ul><ul><ul><li>2002 our research helped to stave off harmful opt-in bill in CA </li></ul></ul><ul><ul><li>2003 our report shifted national debate on FCRA from privacy to distributional consequences and helped to make permanent the 7 preemptive provisions of FCRA with safeguards </li></ul></ul><ul><ul><li>2004 helped to counter security fears in offshore outsourcing debate </li></ul></ul><ul><ul><li>2004 helped to rationalize free disclosure provisions of FACTA </li></ul></ul><ul><ul><li>2005 our outreach led to Parliamentary Inquiry on credit reporting reform in Australia </li></ul></ul><ul><ul><li>2006-7 our alternative data studies helped re-start the issue of non- financial payment sharing by recasting it as an issue of inclusion </li></ul></ul><ul><ul><li>2008 our alternative data research was presented through Congressional testimony, and has earned the attention of CA state legislators, TX Senators, and the Illinois State Treasury </li></ul></ul>Record of Results
    8. 8. Speaking Engagements Figure 1: Number of speaking engagements per year. Note that PERC was in operation for only part of calendar year 2002. Numbers are also conservative estimations and more accurately measure number of outreach trips. For the calendar year 2008, speaking engagements through October 2008 are included.
    9. 9. Budget Figure 2: PERC’s operating budget per year. PERC’s budget has grown from $115,000 in FY 2002 to $594,000 in FY 2007. Note that PERC was in operation for only part of fiscal year 2002. Figures for fiscal years 2002-2006 are based on independent 3 rd party audits. Fiscal year 2007 audit is still in process, so the figure is based on accounts receivable data. Projection for FY 2008 is derived from accounts receivable and projects under contract.
    10. 10. Foreign vs. Domestic Projects Figure 3: Percentage of PERC’s budget coming from international sources. As the Information Policy Institute grew and evolved into PERC, it began to diversify its funding sources. International organizations and governments now make up a significant portion of PERC’s operating budget. The fiscal year 2008 figure is only an approximation based on money already pledged. Figures from FY 2004-2006 from independent third party audits. The estimation from FY2007 is from internal accounts receivable data, as audit for that year is currently underway.
    11. 11. PERC Expenses FY2006 Figure 4: Breakout of PERC’s fiscal year 2006 expenses. Figures are taken from an independent, 3 rd party audit. Administrative costs are the costs of keeping an office, including rent, office supplies, utilities, and shipping. Outside services include fees paid to consultants and other non-financial services, including printing.
    12. 12. PERC Publications Figure 5: PERC’s publications. Publications include studies published jointly with another organization. Different versions of the same studies (for example, abridged versions) also count as separate publications. Translations, however, do not. Publications for 2008 include all publications through October.
    13. 13. Press Coverage Figure 6: Press coverage. Includes coverage in newspapers, television, and radio. Numbers are conservative estimates, and representations in foreign media are undercounted. Several stories about PERC in USA Today and the Washington Post were picked up by wire services and reprinted in papers around the country. These are not reported in these figures. For 2008, media coverage through October is reported.
    14. 14. Funding Sources
    15. 15. Link Between Credit Reporting and Asset Building? <ul><ul><li>Two primary means to create wealth are: </li></ul></ul><ul><ul><ul><li>Home ownership </li></ul></ul></ul><ul><ul><ul><li>Owning a small business </li></ul></ul></ul><ul><ul><li>Given this, a credit score--which is derived from a credit file--become critical to one’s life and life’s chances. </li></ul></ul><ul><ul><li>As scores are used in a growing number of areas, this becomes more so over time. </li></ul></ul>
    16. 16. Benefits of Fully Reporting Payment Data <ul><ul><ul><li>Borrowers </li></ul></ul></ul><ul><ul><ul><li>Reduced probability of over-extension </li></ul></ul></ul><ul><ul><ul><li>Greater and fairer access </li></ul></ul></ul><ul><ul><ul><li>Credit offers reflect credit risk and credit capacity </li></ul></ul></ul><ul><ul><ul><li>Lenders </li></ul></ul></ul><ul><ul><ul><li>Improved loan portfolio performance </li></ul></ul></ul><ul><ul><ul><li>Basel 2 compliance </li></ul></ul></ul><ul><ul><ul><li>Sustainable growth into new markets </li></ul></ul></ul><ul><ul><ul><li>Furnishers </li></ul></ul></ul><ul><ul><ul><li>Improved cash flow </li></ul></ul></ul><ul><ul><ul><li>Improved relation with customers </li></ul></ul></ul><ul><ul><ul><li>The Economy </li></ul></ul></ul><ul><ul><ul><li>Better financial services efficiencies </li></ul></ul></ul><ul><ul><ul><li>Affordable growth in domestic consumption </li></ul></ul></ul>
    17. 17. The Economy Lenders Consumers A lternative D ata I nitiative ADI
    18. 18. Why ADI? <ul><ul><li>The problem for consumers… </li></ul></ul><ul><ul><li>35 to 54 million Americans “unscorable”due to few or no payment histories in their credit files </li></ul></ul><ul><ul><li>Primarily low income, immigrants, elderly, and ethnic minorities </li></ul></ul><ul><ul><li>Lender assume little information = high risk </li></ul></ul><ul><ul><li>Billions spent on fees for payday lender, check cashing services, and predatory lenders </li></ul></ul><ul><ul><li>Access to credit crucial for asset formation, such as automobiles, homes, and small businesses </li></ul></ul>
    19. 19. Why ADI? <ul><ul><li>The problem for entrepreneurs and small business operators… </li></ul></ul><ul><ul><li>High small business failure rate, credit access can be an important factor </li></ul></ul><ul><ul><li>African-American and Latino owners face greater loan denial rates (SBA) </li></ul></ul><ul><ul><li>Business owner’s consumer credit often used for business purposes </li></ul></ul><ul><ul><li>Small business loans often underwritten using the personal credit history of owner </li></ul></ul>
    20. 20. Why ADI? <ul><ul><li>How did these problems come about? </li></ul></ul><ul><ul><li>The use of automated underwriting lowered the cost of loan origination made lending more objective. </li></ul></ul><ul><ul><li>Is this a policy issue? </li></ul></ul><ul><ul><li>FACTA mandated FTC to study issue. </li></ul></ul><ul><ul><li>FTC report concluded the market was taking care of it. </li></ul></ul>
    21. 21. <ul><ul><li>Many everyday payments made are not included in consumer credit files and not used in credit scores </li></ul></ul><ul><ul><ul><li>Utility payments </li></ul></ul></ul><ul><ul><ul><li>Telephone payments </li></ul></ul></ul><ul><ul><ul><li>Cable / Satellite payments </li></ul></ul></ul><ul><ul><ul><li>Internet payments </li></ul></ul></ul><ul><ul><ul><li>Rental payments </li></ul></ul></ul><ul><ul><ul><li>Unless the consumer has been delinquent </li></ul></ul></ul><ul><ul><ul><li>(passed on to bureaus either directly or via collection agency) </li></ul></ul></ul><ul><ul><li>While some consumers are punished </li></ul></ul><ul><ul><li>Many more go unrewarded </li></ul></ul>The Solution
    22. 22. <ul><li>Full-file reporting to credit bureaus of the many everyday payments made by consumers holds the promise of closing a critical information gap. </li></ul><ul><ul><ul><li>Credit scores have grown ever more important (insurance, employment screening) </li></ul></ul></ul><ul><ul><ul><li>Due to current credit crisis, credit availability has diminished, especially for riskier borrowers and for borrowers on which there is little information </li></ul></ul></ul><ul><ul><ul><li>Moving forward, regulators, GSEs, and lenders will continue to tighten standards requiring more hard data when lending </li></ul></ul></ul>Importance of the Solution
    23. 23. The Roadmap: ADI Phase 1 <ul><li>Phase 1 Objectives </li></ul><ul><li>Define universe of alternative data </li></ul><ul><li>Assess which are most promising and useful </li></ul><ul><li>Frame the issue, identify the problem and the way forward </li></ul>
    24. 24. The Roadmap: ADI Phase 1 <ul><li>Phase 1 Key Findings and Results </li></ul><ul><li>Reporting of utility and telecom payments hold most near term promise </li></ul><ul><li>Technological and economic barriers are surmountable </li></ul><ul><li>Legislative barriers and “regulatory uncertainty” need to be addressed </li></ul>
    25. 25. The Roadmap: ADI Phase 2 <ul><li>Why ADI Phase 2? </li></ul><ul><li>PERC Identifies Market Failures </li></ul><ul><ul><li>Chicken vs. Egg --Not business priority for bureaus since FSIs are not demanding alternative data. FSIs not demanding alternative data as bureaus not collecting it. </li></ul></ul><ul><ul><li>No Better Mousetrap --Few actors with viable solutions since data is not collected </li></ul></ul><ul><ul><li>Data Under-supplied- -Utilities and telecoms don’t see the business case for fully reporting </li></ul></ul><ul><li>Congress holds hearings in 2005 </li></ul><ul><ul><li>22 representatives make statements </li></ul></ul>Demand Supply
    26. 26. The Roadmap: ADI Phase 2 <ul><li>ADI Phase 2 Deliverables </li></ul><ul><li>Released “Give Credit Where Credit is Due” with Brookings UMI </li></ul><ul><li>Built broad coalition of supporters including lenders, credit bureaus, CRAs, and consumer advocates </li></ul><ul><li>Extensive outreach with public and private sectors. </li></ul>
    27. 27. The Roadmap: ADI Phase 2 <ul><li>Phase 2 Key Findings and Results </li></ul><ul><li>Risk profile of thin- and no-file population similar to general population when alternative data added. </li></ul><ul><ul><li>Many who are denied credit are good risks </li></ul></ul><ul><li>10% of utility and telecom customers had no other payment history and are disproportionately ethnic minority, immigrants, low income, young, and over 65. </li></ul><ul><ul><li>Virtually eliminates unscoreability </li></ul></ul><ul><li>Credit score performance improves with utility and telecom payment data. </li></ul><ul><ul><li>Vast majority see scores improve, regardless of demographics </li></ul></ul><ul><li>Credit access can expand while improving loan performance. </li></ul>
    28. 28. Total sample 7.5M Addition of Utility Data Has Small Impact on Score Distribution
    29. 29. Those With Alt Data Added Don’t See Worsening Scores Over Time Change in score at end of observation period over beginning, by income and race/ethnicity
    30. 30. Change in Acceptance Rates by Race/Ethnicity at 3% Delinquency Target Phase 2 Key Findings
    31. 31. Phase 2 Key Findings Change in Acceptance Rates by Race/Ethnicity at 3% Delinquency Target
    32. 32. Phase 2 Results <ul><li>Making the market for alternative data </li></ul><ul><li>Bringing together bureaus and lenders to overcome chicken vs. egg </li></ul><ul><li>Quantifying the value of alternative data to borrowers and lenders </li></ul>Demand Q P
    33. 33. Phase 2 Results <ul><li>Making the market for alternative data </li></ul><ul><li>Bureaus begin to prioritize alternative data </li></ul><ul><li>Lenders increase testing and underwriting more with alternative data (e.g. GE Money’s “Road to Credit” program). </li></ul><ul><li>Proliferation of solutions </li></ul><ul><ul><li>PRBC </li></ul></ul><ul><ul><li>FICO Expansion </li></ul></ul><ul><ul><li>CREDCO Anthem </li></ul></ul><ul><ul><li>L2C </li></ul></ul><ul><ul><li>Experian </li></ul></ul><ul><ul><li>VantageScore </li></ul></ul>Demand Q P
    34. 34. ADI Phase 3 <ul><li>Why ADI Phase 3? </li></ul><ul><li>Too little fully reported alternative data </li></ul><ul><li>Poor results from “black box” approaches </li></ul><ul><li>Existing barriers to reporting </li></ul><ul><li>State policy dilemmas </li></ul>Q P Supply
    35. 35. Phase 3 Deliverables <ul><li>ADI Phase 3 (Feb 07 – September 08) </li></ul><ul><li>Build business case for full file reporting (furnisher survey) </li></ul><ul><li>Open data valve by exhorting furnishers to report </li></ul><ul><li>Test “optimized” approaches and new data (rental, wage, and employment) </li></ul><ul><li>Remove statutory/regulator barriers to reporting </li></ul><ul><li>Build policy coalition - consumer advocates and industry </li></ul>
    36. 36. Phase 3 Results <ul><li>Phase 3 Findings and Results: You Score You Win: The Consequences of Giving Credit Where Credit is Due </li></ul><ul><li>Strong furnisher case studies highlighting the business value of full-file reporting (industry outreach--peer testimonial) </li></ul><ul><li>Most utilities and telecoms do not fully report but do send their derogatories on to collection agencies (PERC survey) </li></ul><ul><li>Most utilities and telecoms that fully report see positive net benefits to their bottom lines from reporting (PERC survey) </li></ul><ul><li>The costs involved in fully reporting are reasonable (PERC survey) </li></ul><ul><li>The inclusion of non-financial payment data in consumer credit files has been shown to dramatically broaden and deepen access to affordable sources of mainstream credit </li></ul>
    37. 37. Consumer Benefits - 6 months Post Implementation <ul><li>6.2% of 2.2 million DTE Energy customers were able to be scored for the first time with the addition of the DTE Energy trade </li></ul><ul><li>New records were established for an additional 1.9% of our customers (primarily lower income, ethnic minorities) </li></ul>Source: Experian
    38. 38. Consumer Benefits – 2007 Reporting Cycle Source: Experian <ul><li>DTE Energy opened 452,542 new accounts in 2007 </li></ul><ul><li>The 14,397 new records generated by credit reporting in 2007 had no prior history and represent 3.18%of total new accounts opened. While many of these may not be scorable they are building a credit history </li></ul><ul><li>9,117 additional customers now have a credit score because DTE Energy credit reports </li></ul>
    39. 39. Changes in Score Due to DTE Trade (Based on Records Not Delinquent) Source: Experian <ul><li>64% of non-delinquent accounts saw no change in credit scores </li></ul><ul><li>24% of non-delinquent accounts saw a slight improvement in credit scores </li></ul><ul><li>Almost 4% of all non-delinquent accounts since implementation of credit reporting in August 2006 are now scorable due to DTE Energy’s tradelines </li></ul>
    40. 40. ADI Phase 4: 2009-2010 <ul><li>The Last Mile </li></ul><ul><li>Exhort data furnishers to report </li></ul><ul><ul><li>Deliver findings from furnisher survey </li></ul></ul><ul><ul><li>Provide guidance and referrals </li></ul></ul><ul><li>Remove barriers to reporting </li></ul><ul><ul><li>Work with states (CA, IL) </li></ul></ul><ul><ul><li>Work with Congress/regulators </li></ul></ul><ul><li>Test new alternative data </li></ul><ul><ul><li>Rental payment data </li></ul></ul><ul><ul><li>Wage and employment </li></ul></ul><ul><ul><li>Remittance payment </li></ul></ul>
    41. 41. G ulf C oast E conomic R enewal GCER
    42. 42. <ul><li>Little information on the financial impacts--credit and insurance--of disasters on consumers, small businesses, and communities </li></ul><ul><li>Information that is available </li></ul><ul><ul><li>Often is not very current </li></ul></ul><ul><ul><li>More akin to lagging indicators than leading indicators </li></ul></ul><ul><ul><li>Describes quantities and levels of impact and recovery (employment, number of businesses, population estimates) and not quality of impact and recovery </li></ul></ul><ul><ul><li>Long-term renewal of Gulf-Coast will require “organic” growth, a function of underlying financial health </li></ul></ul>GCER
    43. 43. <ul><li>PERC’s Solution </li></ul><ul><li>Combine available information with: </li></ul><ul><li>Consumer credit file information </li></ul><ul><li>Business credit file information </li></ul><ul><li>Other private sector datasets (Acxiom, ratings agencies) </li></ul><ul><li>Survey data designed to fill gaps </li></ul><ul><li>View recovery/renewal holistically: </li></ul><ul><li>Recovery depends on the simultaneous recoveries and financial conditions of households, businesses and communities. </li></ul>GCER
    44. 44. <ul><li>Survey of small business owners/operators on 2 nd and 3 rd anniversary of Katrina’s Gulf Coast landfall </li></ul><ul><ul><li>Survey design took account of other national surveys to benchmark </li></ul></ul><ul><ul><li>Small business credit data (Experian) appended to survey </li></ul></ul><ul><ul><li>Socio-economic data (Acxiom) appended to survey </li></ul></ul>GCER Small Business Survey
    45. 45. <ul><li>Some Key Findings, 2007 </li></ul><ul><ul><li>While there was evidence of recovery, it was unevenly distributed across varying socio-economic groups </li></ul></ul><ul><ul><ul><li>6 in 10 Hispanic-owned small business at or above pre-Katrina revenues </li></ul></ul></ul><ul><ul><ul><li>3 in 4 Black-owned small businesses below pre-Katrina revenues </li></ul></ul></ul><ul><ul><li>Business phone disconnection rate much higher for minority owned businesses (proxy for business failure) </li></ul></ul><ul><ul><li>African-American owners reported a much harder time accessing affordable credit than other owners </li></ul></ul>GCER Survey Key Findings
    46. 46. <ul><li>Partnered with World Bank and Brookings Institution on initial report examining financial health of households, small businesses, and communities </li></ul><ul><ul><li>World Bank’s first project in the USA </li></ul></ul><ul><ul><li>WB so satisfied with results that it is moving to the next stage, piloting the concept in less developed countries </li></ul></ul><ul><ul><li>Study in final “revise and resubmit phase” </li></ul></ul>GCER Financial Well-Being Report
    47. 47. <ul><li>Some Key Findings </li></ul><ul><ul><li>Small businesses in Orleans and St. Bernard Parishes show a good deal of financial stress (spikes in derogatories and collections) </li></ul></ul><ul><ul><li>Low income individuals, African-Americans, and the young saw greater than average rises in relative indebtedness </li></ul></ul><ul><ul><li>Homeowners and married couples showed greater financial stability and less of a rise in indebtedness </li></ul></ul>GCER Financial Well-Being Report
    48. 48. GCER Financial Well-Bring Report <ul><li>Some Key Findings, 2008 </li></ul><ul><li>Sales performance has improved or stayed constant for the majority of small businesses since 2007, but has not yet reached pre-Katrina levels. </li></ul><ul><li>Sales performance in relation to pre-Katrina levels continues to inch forward with some variation. </li></ul><ul><li>The key challenges to small business owners center on the fundamentals of labor, capital and demand. </li></ul><ul><li>The perceived magnitude of some challenges associated with small business recovery has declined significantly. </li></ul><ul><li>Nonprofits and charities continue to be viewed as the organizations that have had the most positive impact in recovery. </li></ul><ul><li>There remain disparities in business recovery by the ethnicity of owner or operator. </li></ul>
    49. 49. <ul><li>Partners and groups </li></ul><ul><li>Louisiana State University (LSU), Dek Terrell and Ryan Bilbo </li></ul><ul><li>Louisiana Recovery Authority (LRA) </li></ul><ul><li>Lousiana Disaster Recovery Authority (LDRF) </li></ul><ul><li>Foundation for the Mid-South (FMS) </li></ul><ul><li>Ewing Marion Kauffman Foundation </li></ul><ul><li>Greater New Orleans Community Data Center (GNOCDC) </li></ul><ul><li>Other local (Gulf Coast) groups </li></ul>GCER
    50. 50. GCER “ The findings generated by PERC’s report on the recovery of small businesses along the Gulf Coast in the wake of Hurricane Katrina were exceptional. The Foundation for the Mid South was particularly interested in this project because of the snapshot it provided of recovery by combining credit and socio-demographic data. Consequently, the information informed our work and grantmaking because the report highlighted certain inequities and ineffective policies during the rebuilding phase after the disaster .” Chris Crothers Director Foundation for the Mid South
    51. 51. GCER “ Recovery, Renewal, and Resiliency” sheds light on the continuing struggles of business owners to fully recover in the aftermath of the Katrina disaster. PERC has made an important contribution to the continuing national debate on the hurricane recovery. PERC’s disaster recovery dashboard has the potential to make sure that the long recovery process that affected Gulf Coast small business owners doesn’t happen again in other areas affected by disaster.” Robert Strom Ph.D. Director of Research and Policy Kauffman Foundation
    52. 52. I nformation- L ed D evelopment ILD
    53. 53. <ul><li>How can information sharing practices be structured in emerging economies to: </li></ul><ul><ul><li>Improve financial access for economic development </li></ul></ul><ul><ul><li>Expand credit access to the urban and rural poor for asset formation </li></ul></ul><ul><ul><ul><li>Enable microlending for microenterprises </li></ul></ul></ul><ul><ul><ul><li>Support small medium enterprise development </li></ul></ul></ul>Information Led Development
    54. 54. <ul><li>Improving credit access for urban and rural poor in emerging economies (with CGAP, World Bank): </li></ul><ul><ul><li>Alternative data approach: Survey of alternative data sources for lending for microfinance in emerging economies worldwide </li></ul></ul><ul><ul><ul><ul><li>Reorient mainstream finance to urban and rural poor </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Identify reporting needs to assist poor majorities </li></ul></ul></ul></ul>Current Projects— Information Led Development I
    55. 55. <ul><li>Improving credit access for urban and rural poor in emerging economies (with CGAP, World Bank): </li></ul><ul><ul><li>Alternative scoring approach: Use cell phone payment and pre-payment for mircoloan score to </li></ul></ul><ul><ul><ul><ul><li>Lower cost of loans and widen access by reorienting major lenders to poorer households </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Expand mobile-banking services to loan origination </li></ul></ul></ul></ul>Current Projects— Information Led Development I
    56. 56. <ul><li>Approaches to information sharing and broader financial access in China: </li></ul><ul><ul><li>Conference with Beijing University (March 2008) </li></ul></ul><ul><ul><ul><li>Two day conference on lending and information sharing issues </li></ul></ul></ul><ul><ul><ul><li>Global players on issue </li></ul></ul></ul><ul><ul><li>Closed door open agenda discussions with the People’s Bank of China on </li></ul></ul><ul><ul><ul><li>Standards </li></ul></ul></ul><ul><ul><ul><li>Data quality </li></ul></ul></ul><ul><ul><ul><li>Alternative data for wider inclusion </li></ul></ul></ul>Current Projects— Information Led Development II
    57. 57. <ul><li>Improving access to small medium and micro enterprise (SMME) financing in South Africa </li></ul><ul><li>(with National Credit Regulator, South Africa): </li></ul><ul><ul><li>Survey of information sharing and SMME financing </li></ul></ul><ul><ul><ul><li>Practices and standards </li></ul></ul></ul><ul><ul><ul><li>Scope of sharing </li></ul></ul></ul><ul><ul><ul><li>Alternative data </li></ul></ul></ul><ul><ul><li>Deployed for reform efforts aimed at: </li></ul></ul><ul><ul><ul><li>Expanding lending to SMMEs , especially for </li></ul></ul></ul><ul><ul><ul><ul><li>Black-owned businesses </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Women-owned businesses </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Lower-income households </li></ul></ul></ul></ul><ul><ul><ul><li>Monitor and address recklessness in lending (overextensions) </li></ul></ul></ul>Current Projects— Information Led Development III
    58. 58. <ul><li>Credit reporting standards through APEC: </li></ul><ul><ul><li>Working with information firms and lenders in Asia Pacific—including emerging economies such as China, (also) India, Mexico, Russia, and Singapore </li></ul></ul><ul><ul><li>Formulate research, standards, and outreach program </li></ul></ul><ul><ul><li>Generate momentum behind adoption reporting standards that take into consideration </li></ul></ul><ul><ul><ul><li>Wider inclusion </li></ul></ul></ul><ul><ul><ul><li>Improved data quality </li></ul></ul></ul><ul><ul><ul><li>Data subject rights to access and security </li></ul></ul></ul><ul><ul><ul><li>Data privacy </li></ul></ul></ul>Current Projects— Information Led Development IV
    59. 59. <ul><li>Developing metrics for evaluation financial stability projects (with United Way): </li></ul><ul><li>Test and refine a tracking methodology which uses the individual credit file data of participants and control groups with </li></ul><ul><ul><li>Field research in the cities </li></ul></ul><ul><ul><li>Assessments of database by UW program, to supplement credit data </li></ul></ul><ul><ul><li>Observations of running and implementation of programs </li></ul></ul><ul><ul><li>Interviews of beneficiaries </li></ul></ul>Pending Projects I
    60. 60. <ul><li>Developing metrics for evaluation financial stability projects (with United Way): </li></ul><ul><li>Develop indices from a set of financial metrics that: </li></ul><ul><ul><li>Enable the specification of outcomes through data comparisons with control groups; </li></ul></ul><ul><ul><li>Allow for a more accurate identification of individuals in need; </li></ul></ul><ul><ul><li>Permit faster and more accurate monitoring of progress in economic well-being projects. </li></ul></ul>Pending Projects I
    61. 61. <ul><li>Developing metrics for evaluation financial stability projects (with United Way): </li></ul><ul><li>Evaluate whether generalizable metrics are possible or need to be customized, and if so to what extent </li></ul><ul><ul><li>Retrospective testing of archived data to accelerate (depending on data quality) </li></ul></ul><ul><ul><li>Live deployment of metrics </li></ul></ul>Pending Projects I
    62. 62. <ul><li>Measuring impact of financial stability projects for improved interventions (with United Way): </li></ul><ul><li>Problem: how to assess the real effect of financial literacy and economic stability and well-being projects </li></ul><ul><ul><li>What are appropriate measures? </li></ul></ul><ul><ul><li>What is the appropriate time-frame? </li></ul></ul><ul><ul><li>What are the relevant benchmarks and control groups? (how many variables can be taken account of?) </li></ul></ul>Pending Projects I
    63. 63. <ul><li>Measuring impact of financial stability projects for improved interventions (with United Way): </li></ul><ul><li>Proposed solution: evaluate the impact of United Way financial literacy and economic well-being programs in Boston, MA (pending), Brownsville, TX, Charlotte, NC, Chicago, IL, Columbus, OH, Miami, FL, West Palm Beach, FL, Winston Salem, NC </li></ul><ul><ul><li>Track the changes in the credit and financial profiles of participants </li></ul></ul><ul><ul><li>Benchmark performance against randomly selected individuals who are geographical and socio-demographically “close”—and to the extent that some who apply don’t join the program, serve as randomized trials (akin to procedures suggested by Poverty Action Lab) </li></ul></ul>Pending Projects I
    64. 64. <ul><li>Measuring impact of financial stability projects for improved interventions (with United Way): </li></ul><ul><li>Provide mid-project assessments of any need for additional interventions </li></ul><ul><li>Identify differential program impacts on varying socio-demographic segments </li></ul><ul><li>Assess efficacy of program combinations </li></ul>Pending Projects I
    65. 65. <ul><li>What are the consequences of financial data quality for access and distribution and what practice can improve data quality? (with IFC, World Bank Group): </li></ul><ul><li>Developed methodology for </li></ul><ul><ul><li>Identify data quality issues </li></ul></ul><ul><ul><li>Segment sources of inaccuracies by sector </li></ul></ul><ul><ul><li>Match to social segments to measure differential impact </li></ul></ul><ul><li>Measure consequences of data quality problems for financial access, price and stability </li></ul>Pending Projects II
    66. 66. <ul><li>What are the consequences of financial data quality for access and distribution and what practice can improve data quality? (with IFC, World Bank Group): </li></ul><ul><li>Prescribe </li></ul><ul><ul><li>Best practices based on comparative lessons </li></ul></ul><ul><ul><li>Redress procedures </li></ul></ul><ul><ul><li>Regulatory reform </li></ul></ul><ul><li>Develop applications to assist credit counselors, regulators, etc., more quickly address data quality problems </li></ul>Pending Projects II
    67. 67. <ul><li>Alternative score development for improving SMME financing in emerging markets (IDB, SAS, IFC): </li></ul><ul><li>Developed conditional score in partnership with microlenders in emerging markets </li></ul><ul><ul><li>Identify available data sources </li></ul></ul><ul><ul><li>Segment different data types available by sector </li></ul></ul><ul><ul><li>Develop a score that begins with local judgment but develops statistically </li></ul></ul>Pending Projects III
    68. 68. <ul><li>Alternative score development for improving SMME financing in emerging markets (IDB, SAS, IFC): </li></ul><ul><li>Test at small scale </li></ul><ul><ul><li>Caribbean </li></ul></ul><ul><ul><li>Latin America </li></ul></ul><ul><ul><li>South Africa </li></ul></ul><ul><li>Measure impact on target groups </li></ul><ul><li>Diffuse to lenders, microfinance institutions, m-bankers </li></ul>Pending Projects III
    69. 69. <ul><li>Opportunities on hold or lost owing to bandwidth constraints: </li></ul><ul><li>FTC Data Quality -- requested to submit proposal for consumer-centric credit file data quality study, as mandated by Congress in FACTA. </li></ul><ul><ul><li>Budget was $25,000 </li></ul></ul><ul><ul><li>Lost to consortium owing to their ability to cross-subsidize </li></ul></ul><ul><ul><li>Study being done by industry with predictable results </li></ul></ul><ul><li>FDIC Subprime analysis -- invited to partner on study examining HMDA, performance, and credit file data </li></ul><ul><li>FRB Disparate Impacts -- requested to collaborate with FRB to examine how credit files and credit scores could be modified to reduce perceived inequities. </li></ul><ul><li>External Relations -- </li></ul><ul><ul><li>CFSI -- advisory board for segmentation analysis </li></ul></ul><ul><ul><li>Credit Builders Alliance -- research advisory board, financial literacy </li></ul></ul>Over-Pending Projects
    70. 70. Political & Economic Research Council 100 Europa Drive, Suite 403 Chapel Hill, NC 27517 www.infopolicy.org Phone: (919) 338-2798
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