Clarity Services has developed a groundbreaking new approach to loan reporting that can help lenders prevent a growing industry problem, loan stacking. Clarity’s Temporary Account Record is a patent-pending solution that helps eliminate the lag time that occurs between loan approval and loan reporting.
When an extension of credit or a loan is made to a consumer, a lender will generally only report the transaction on a periodic basis, often ranging from 45-60 days for a traditional credit bureau. Even those lenders who claim to report in real time typically do not report new loans until the loan has funded. This funding and reporting lag can be as long as 36 hours.
During this time, it is possible for a consumer to obtain credit or additional loans from additional lenders, a practice known as loan stacking. Loan stacking has a significant effect on a consumer’s ability to pay and can often indicate intent to not pay.
Clarity’s Temporary Account Record goes beyond a simple ability-to-pay solution by eliminating the reporting lag time. Once a consumer is approved for a loan, lenders pulling new reports would immediately be aware of the transaction.
“Not only does this capability close the reporting gap and improve a lender’s product performance,” said Tim Ranney, president and founder of Clarity Services. “It will also be essential to help lenders meet many of the proposed small-dollar lending regulations.”
The proposed CFPB regulations include strict guidelines concerning the number and frequency of loans allowed to a consumer. The immediacy of this new reporting approach would protect lenders from unknowingly funding a loan to a consumer who should be ineligible.