By George Coutros

 
As more and more lenders utilize direct mail as an acquisition channel, it is imperative for them to leverage true best practices to ensure their efforts remain profitable.

When consumers respond to direct mail campaigns, they are often post-screened to ensure that respondents have not drifted outside acceptable predetermined credit criteria, as well as to verify that consumers have incomes that satisfy minimums stated as part of the credit offering. Those lending to higher-risk non-prime consumers should take additional measures.

Best practices start even before lenders gain access to targeting models that leverage non-prime credit data available from Clarity. Many non-prime lenders assume that they’ve adequately addressed fraud risk by sourcing names from the traditional credit bureaus and applying credit criteria to determine those to be mailed. While third party fraud risk has been addressed, “intent to not repay” fraud has not been effectively managed. Targeting efforts may have identified those non-prime consumers that are likely to respond to firm offers of credit and that are acceptable from a credit risk perspective. However, many will be funded that have no intention whatsoever of repaying their loans, resulting in significantly higher-than-expected first payment defaults. Non-prime lenders can utilize tools such as Clarity’s Clear Fraud score™ to mitigate this risk on the back-end, and can do so immediately using post-screening rules available today.

For example, by employing a Clear Fraud™ score cutoff strategy during the post-screen, even a lender with relatively strict pre-screen criteria can identify respondents that will default on their first payment at a rate in excess of thirty percent. Factoring in the cost of accessing the Clear Fraud™ score, the lender can achieve a more than 10-to-1 return on their investment in Clarity data.

Proper pre-screening is important. But lenders who are targeting non-prime consumers for firm offers of credit should reach out to Clarity to optimize their campaigns through more effective screening on the back end as well.