TransUnion Only Credit Bureau to Provide Multiple Income Models to Help Financial Services Firms Meet New Requirements of Credit CARD Act

CHICAGO, IL – With less than one month before key provisions of the Credit CARD Act go into effect on February 22, financial services firms need to finalize their internal processes to ensure they comply with the rules released by the Board of Governors of the Federal Reserve System. TransUnion is the only credit bureau that offers two models — Income Estimator and Debt-to-Income Estimator — that predict a consumer’s ability to pay as required under the final rule released by the Board of Governors on January 12 pursuant to the Credit CARD Act.

This Official Staff Interpretation of the final rule states that card issuers may use "empirically derived, demonstrably and statistically sound models that reasonably estimate a consumer’s income or assets" to assess a consumer’s ability to pay. The rule itself states that "reasonable policies and procedures to consider a consumer’s ability to make the required payments include a consideration of at least one of the following: the ratio of debt obligations to income; the ratio of debt obligations to assets; or the income the consumer will have after paying debt obligations."

"TransUnion’s income-related solutions can assist financial services firms in evaluating a prospective consumer’s income, assessing their current obligations and predicting their ability to pay," said Steve Sassaman, executive vice president of TransUnion’s financial services group. "The consideration of a consumer’s income and debt obligations, as part of consideration of the ability to pay, is a new element of the rules and these criteria may be met when using both Income Estimator and Debt-to-Income Estimator to segment populations and assist in the assignment of appropriate credit lines and offers."

When considering a consumer’s income or assets and current debt obligations, a creditor is permitted to rely on information provided by the consumer or information in a consumer’s credit report. The Income Estimator solution can help financial service firms:

• Estimate income when income is not supplied by the consumer as well as validate consumer-supplied data and previously captured consumer income.
• Reassess existing customer income and ability to pay in an account management environment.
• Segment the optimal populations for which consumer income or consumer proof of income should be requested.

A card issuer also may consider the consumer’s current obligations based on information provided by the consumer or in a consumer report. The Debt-to-Income Estimator provides an estimate of the ratio of debt obligations to income, and can be utilized to consider a consumer’s ability to make required payments.

Both TransUnion models are available for batch and online delivery and are available as a credit report add-on, reducing the likelihood that an issuer will need to undertake a major systems integration effort.

"We are pleased that the Federal Reserve Board agreed with TransUnion’s position articulated in our written comments to the Board related to income and debt-to-income information, as well as privacy issues in its final rule," said Sassaman. "However, achieving compliance with the Credit CARD Act by leveraging Income Estimator and Debt-to-Income Estimator is just the first of many strategies the industry must implement to help mitigate future risk, protect existing customers, foster loyalty and expand their business opportunities under the new Act’s framework."

More information on the Credit CARD Act’s potential impact, possible approaches and solutions for the industry as well as information on Income Estimator, and Debt-to-Income Estimator can be found at www.transunion.com/business or by contacting Jason Laky of TransUnion’s financial services group at jlaky@transunion.com.

About TransUnion
As a global leader in credit and information management, TransUnion creates advantages for millions of people around the world by gathering, analyzing and delivering information. For businesses, TransUnion helps improve efficiency, manage risk, reduce costs and increase revenue by delivering comprehensive data and advanced analytics and decisioning. For consumers, TransUnion provides the tools, resources and education to help manage their credit health and achieve their financial goals. Through these and other efforts, TransUnion is working to build stronger economies worldwide. Founded in 1968 and headquartered in Chicago, TransUnion has employees in more than 25 countries on five continents. www.transunion.com/business