In this second of two episodes with Kareem Saleh, Founder and CEO of FairPlay AI, host Vince Passione continues the conversation on how AI, to date, has fallen short of its potential to deliver a fairer lending environment for all consumers, but how addressing historical bias in the learning data can create a more equitable future.

Key takeaways:

0:00 Intro

1:00 How historical data–the data that AI is typically trained on–contains bias, and therefore can perpetuate bias in the future.

2:27 The challenges for lenders of using historical data that contains bias, but also has valuable insights, such as an individual’s repayment performance.

3:25 Sometimes lenders have to “test and learn” into new markets to define their risk parameters.

5:26 Racial and ethnic minority groups are often wrongly stereotyped as always being underserved and/or in need of fundamental financial services.

6:44 The more financial stimulus to enable lending in under-represented populations, the greater the opportunity to remove long-term bias from data sets and have a fairer AI-driven underwriting system in the future.

8:21 A detailed overview of FairPlay AI, the algorithms it uses to pursue fairer lending for all, and its outputs and outcomes.

13:02 The double-risks posed to lenders by climate change: The risks to their members and the commodities borrowed against, and the physical risk to lenders’ collateral.

14:47 How climate change also represents a powerful opportunity for credit unions to grow and deliver on their mission.

16:14 The lending opportunities for credit unions interested in addressing climate change.

16:48 The NCUA has made it clear they are hyper-focused on fair lending, particularly in the auto market.

Resources Mentioned:

• https://fairplay.ai/ Fairplay AI
• https://www.novacredit.com/ Nova Credit
• https://www.lendkey.com/podcast/credits-new-frontier-cross-border-records-and-the-role-of-cash-flow-data/ Misha Esipov episode
• https://www.cooperaconsulting.com/ Coopera Consulting
• https://www.lendkey.com/podcast/service-or-stereotypes-can-credit-unions-engage-multicultural-consumers/ Victor Corro episode
• https://www.filene.org/reports/the-changing-climate-for-credit-unions The Changing Climate for Credit Unions
• https://ncua.gov/regulation-supervision/regulatory-compliance-resources/consumer-compliance-regulatory-resources/fair-lending-compliance-resources Fair lending resources from the NCUA

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#CreditUnions #FairLending #AI #Lending

In this first of two episodes with Kareem Saleh, Founder and CEO of FairPlay AI, host Vince Passione takes a deep dive into the world of AI underwriting: How it’s been used in the past, how it has fallen short of its potential to remove bias in lending decisioning, and how the pioneering concept of Fairness-as-a-Service may yet revolutionize the AI lending game.

Key takeaways:

0:00 Intro

2:06 How the murder of George Floyd compelled Kareem Saleh to look for ways he could more effectively change the system he operates in, and increase fairness for everyone.

3:08 Machine learning is capable of learning, but also of learning the wrong things.

3:55 Financial services regulators have clearly defined definitions of “fairness”: One focusing on disparate treatment, the other focusing on disparate impact.

5:18 One of the core challenges (and/or failures to-date) for using AI to mitigate bias is that it can only learn from the data it is trained on; and that typically over-represents certain populations.

8:49 Traditional logistic regression models don’t always work because they assume credit behaviors are linear. In reality, an individual’s financial behaviors are non-linear.

9:31 Unfairness can be born out of AI-driven models when seemingly independent variables interact with one another in a way that most humans wouldn’t interpret, but machines do.

10:01 Underwriting regulation and compliance hasn’t yet caught up with the technological capabilities of our AI-driven world.

11:56 Why monitoring an AI model’s fairness trends is critical.

14:40 Examples of ways seemingly disparate or arbitrary variables can interact with one another to bias an outcome–and how personal attributes are still being leveraged to a greater or lesser extent in decisioning models.

19:53 Concerns vs. regulatory comfort with using personal attributes like age and gender in decisioning.

22:44 The privacy implications, particularly in light of 1033, and how finding a way to share your personal information in some way–even if it’s just through the census–will help contribute to a fairer credit system.

Resources Mentioned:

• https://fairplay.ai/ Fairplay AI
• https://www.fdic.gov/system/files/2024-06/iv-1-1.pdf Fair lending rules and regulations
• https://www.justice.gov/crt/equal-credit-opportunity-act-3 Equal Credit Opportunity Act
• https://www.justice.gov/crt/fair-housing-act-1 Fair Housing Act
• https://www.lendkey.com/podcast/modern-credit-reporting-can-old-tech-handle-new-data/ Christian Widhalm, Bloom Credit, episode

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#CreditUnions #FairLending #AI #Lending

In this episode, Misha Esipov, co-founder and CEO of Nova Credit, joins host Vince Passione to discuss the millions of “Credit Invisible” people in the country, and how innovations in credit reporting can help more lenders reach and serve them.

Key takeaways:

0:00 Introduction

1:29 Millions of people arrive in the U.S. each year, many of whom have been credit-worthy in their respective nations but the U.S. credit system doesn’t recognize their credit history.

2:19 There are around 100 million Americans whose credit data is inaccurate or incomplete and are missing out on loan opportunities as a consequence.

5:04 An overview of Nova Credit’s three core products: Cash Atlas, Income Navigator, and Credit Passport.

8:10 How, as a credit reporting agency (CRA) Nova Credit furnishes data to lenders and other credit bureaus.

9:00 The three core swimlanes of Nova Credit’s operations: data collection, analytics, and FCRA compliance.

9:48 The challenges preventing cash flow data from being recorded in traditional credit reporting bureaus' data–and the benefits for consumers and lenders when it is captured and used.

13:35 How government stimulus incentives issued through the pandemic may have skewed consumer credit information, and is leading to long-term underperformance on certain loans.

15:57 How Buy Now Pay Later transactions remain under-reported.

18:47 Augmenting underwriting with cash flow information is a journey. Any step towards it is progress.

21:09 Key takeaways from the inaugural Cash Flow Underwriting Summit, held in September 2024.

Resources Mentioned:

• https://www.novacredit.com/ Nova Credit
• https://www.unfcu.org/ United Nations Federal Credit Union
• https://www.novacredit.com/cash-atlas Cash AtlasTM
• https://www.novacredit.com/income-navigator Income Navigator
• https://www.novacredit.com/credit-passport Credit Passport®
• https://www.cashflowunderwritingsummit.com/ Cash Flow Underwriting Summit 2024

Thanks for listening to the 22 Minutes in Lending podcast. If you enjoyed this episode, please leave a 5-star review to help get the word out about the show and be sure to subscribe so you never miss another insightful conversation.

#CreditUnions #Lending #CreditReporting

Join host Vince Passione as he meets with Bill Moniz, CEO of Cinch, to discuss the turbulence and trends of the auto finance industry. From the rise of negative equity to prime-only lending strategies, Bill shares insights on how credit unions can navigate credit quality challenges, discusses educating members on financing options, and gives his thoughts on market reactions to an expected Federal rates drop.

Key takeaways:

1:21 - The history of Credit Union Loan Source and Cinch: Two organizations operating as one.

3:07 - ‘Market Day Supply’–the metric used to calculate how many days it would take to sell all of a specific car model–is still higher than long-term trends, but is leveling out to near pre-Covid levels.

6:50 - Almost a quarter of new vehicles financed have negative equity rolled into them.

9:08 - While credit unions’ market share of auto loans has increased over the last two years, so too has delinquencies–increasing risk for credit unions.

10:48 - Consumer debt priorities have changed. Now, cell phone bills are the priority.

12:59 - Could subvention be utilized more effectively in the EV market?

16:23 - Auto-focused fintechs are cutting back, not making as many inroads as they have done in previous years, but direct-to-consumer innovation remains.

18:17 - Inventory management is an underutilized innovation category that could support more auto-purchasing.

19:55 - Personal unsecured loans have underperformed, and this is a concern for lenders and a risk for credit union balance sheets.

21:17 - Auto-lending is a nuanced service that takes time and expertise to navigate successfully.

23:28 - Expectations of what happens if and when the Fed lowers rates.

Resources Mentioned:

• https://site.manheim.com/en/services/consulting/used-vehicle-value-index.html Manheim index
• https://www.businesswire.com/news/home/20240628537547/en/KBRA-Releases-Research-%E2%80%93-CMBS-Loan-Performance-Trends-June-2024 KBRA, delinquencies on asset-backed securities report
• https://www.cbsnews.com/news/cdk-attack-update-outage-car-sales-impact/ CDK outage
• https://www.occ.treas.gov/topics/supervision-and-examination/bank-operations/accounting/current-expected-credit-losses/index-current-expected-credit-losses.html CECL reserves
• https://www.cinchautofinance.com/ Cinch

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#CreditUnions #Lending #AutoFinance #AutoLending

If the 67 million Hispanic consumers in the USA were their own nation, they’d have the sixth largest GDP in the world. And yet, they’re overlooked and underserved by mainstream banks and credit unions alike. On this episode, host Vince Passione and Victor Corro, CEO of Coopera Consulting, discuss how credit unions can earn the right to serve these nuanced members.

Key takeaways:

03:17 - “Hispanic, Latino, Latinx” are imperfect labels that fail to acknowledge the depth and nuance of individual identity.

06:51 - Credit unions need to increase their research in, and understanding of, multicultural members as the nation prepares to be “Majority minority.”

10:26 - How building and earning the trust of underserved communities is key to a credit union’s mission, and its long-term growth.

13:08 - Hispanic members gravitate towards fintech solutions because fintech have done a better job of reducing friction points.

16:05 - Key products, services and solutions to support the breadth and scale of Hispanic members.

21:27 - The credit union system is lacking a sense of urgency, and needs to be more proactive about investing in serving multicultural members.

23:25 - Multicultural consumers are often pigeonholed–and that’s leading to poor service from financial institutions.

Resources Mentioned:

• https://www.brookings.edu/articles/latinos-and-the-future-of-finance-why-we-need-to-examine-the-motivations-and-effects-of-latinos-fintech-adoption Brookings study
• https://www.cooperaconsulting.com/ Coopera Consulting

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#CreditUnions #Lending #Credit

Serious mistakes on credit reports is the number one consumer complaint, but are these issues really a surprise? The systems were developed decades ago, and were never intended to take the scale and breadth of information the modern consumer can now provide. On this episode, host Vince Passione is joined by Christian Widhalm, CEO at Bloom Credit, to discuss the opportunities for improvement.

Key takeaways:

01.24: Almost a quarter of people find serious mistakes in their credit reports. The CFPB cites errors as the number one consumer complaint.

02:18: The rails credit data is transmitted on were never designed to take the modern volume and breadth of data inputs.

05:05: Even long-tenured, established lenders continue to make fundamental mistakes on credit reporting–partly due to the systems being decades old, and the data requirements being increasingly nuanced.

07.38: Bloom Credit has developed a bi-directional API providing lenders with consistent information, regardless of what credit bureau they’re pulling from.

11.12: Bloom Plus is a new product to enhance consumer management of their own credit data.

14.00: CFPB announced a new rule on Buy Now Pay Later lenders, requiring updated standards, but BNPL credit reporting continues to lag.

15.12: With each credit reporting bureau pursuing its own solution to BNPL reporting, BNPL lenders have been able to sit back and await their decisions without taking proactive steps.

18.12: Why credit reporting would also be good for BNPL lenders.

20.14: CFPB has been critical of credit reporting, and there may be a potential ‘New standard of care’ introduced.

Resources Mentioned:

• https://bloomcredit.io/ Bloom Credit
• https://bloomcredit.io/products/bloomplus/ Bloom Plus

Thanks for listening to the 22 Minutes in Lending podcast. If you enjoyed this episode, please leave a 5-star review to help get the word out about the show and be sure to subscribe so you never miss another insightful conversation.

#CreditUnions #Lending #Credit

Is the key to credit union success just better marketing? On this episode, host Vince Passione is joined by Barry Kirby, co-founder and chief revenue officer of Union Credit, to discuss the products and placements that could revolutionize consumer preferences.

Key takeaways:

2:07 - How a “marketplace” helps expand credit unions’ institutional reach and brand awareness.

5:25 - Opportunities for credit unions to leverage credit cards to reach younger audiences.

8:28 - The ‘08 financial crisis shifted consumer trends away from credit cards and towards personal loans–but those trends are now reversing again.

10:46 - A key risk for community lenders is marketing budget.

12:09 - Is there a liquidity crisis for credit unions? Some leaders are starting to consider the temporary challenges of the last few years as macroscopic norms.

13:26 - Securing payroll is critical for credit unions to be seen as a member’s primary financial institution.

15:59 - Can digital marketing help credit unions more effectively penetrate low-income communities to increase and improve financial wellness?

18:34 - Focusing on the most pressing challenges and identifying the right partners to address those is the most effective way for credit unions to navigate the booming fintech ecosystem.

21:00 How fintech strategically benefits from credit union investors.

Resources Mentioned:

https://www.unioncredit.app/ Union Credit

https://www.trustage.com/ventures TruStage Ventures

https://www.curql.com/ Curql

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#CreditUnions #Lending #CreditCards #Marketing

On this episode, host Vince Passione is joined by Dave Ledwell, SVP, Consumer and Business Lending at Navy Federal Credit Union–the world’s largest credit union. The discussion covers all things auto-lending, the opportunities and risks facing fintech, and how credit unions can thrive in both areas by focusing on outstanding member service.

Key takeaways:

2:24 - How member service–proactive, clear communication, and efficient support–can be the bedrock of credit union growth and member loyalty.

4:33 - Excellent member service leads to trust which, at scale, can provide a credit union with a competitive advantage against traditional direct lenders, particularly in the auto-lending space.

7:28 - The strategic decision behind growing auto-lending during the Covid pandemic.

10:36 - How credit unions can protect members’ financial wellness when faced with negative equity loans.

14:01 - Strategies for navigating the turbulent electric vehicle (EV) market and what it means for auto-lending in the credit union space.

18:19 - The short- and long-term implications of embedded finance on the credit union system, and financial institutions can remain relevant in a transactional ecosystem.

21:43 - Members don’t care about the size of a credit union; they care about the service and value they receive.

Resources Mentioned:

https://www.navyfederal.org/ Navy Federal Credit Union

https://us.dealertrack.com/ Dealertrack

Thanks for listening to the 22 Minutes in Lending podcast. If you enjoyed this episode, please leave a 5-star review to help get the word out about the show and be sure to subscribe so you never miss another insightful conversation.