AFFORDABILITY AND CREDITWORTHINESS

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1.        This procedure sets out the Firm’s approach to lending with regard to affordability and creditworthiness.

2.        Loans issued by the Firm will be repayable in accordance with their term. In order to ensure that the loan is affordable to the borrower the Firm must make an assessment of the borrower’s creditworthiness and affordability.

3.        Creditworthiness must be undertaken by way of sufficient information from the borrower and a credit reference agency check where required and is used to determine whether the borrower is a credit worthy individual.

4.        Affordability requires an assessment of the borrower and a decision as to whether the credit is affordable for the duration of the product.

5.        Creditworthiness and affordability assessments will be made on every application including repeat customers.

RESPONSIBLE LENDING

6.        Loans must not be issued by the Firm unless it is clear as a result of the creditworthiness and affordability assessments that the borrower is both worthy of credit and is able to afford the repayment of the product for its duration.

6.1.   Such decisions should be based upon:

6.1.1.           Any adverse information known or discovered about the borrower including that relating to anti-money laundering or financial crime.

6.1.2.           The borrower’s current income and expenditure

6.1.3.           The borrower’s likely profile of income and expenditure over the term of the product

6.1.4.           Any liabilities of the borrower which will become repayable during the term of the product

6.1.5.           Any redeemable assets of the borrower from which income will be obtained during the term of the product.

6.1.6.           The borrower’s historic record of repayments on credit agreements

LENDING DECISIONS

7.        The majority of lending decisions are programmed within the Firm’s lending software system and no decision to lend must be made unless the borrower meets the criteria or a manual decision to lend has been made by a nominated individual.

8.        The nominated individual is a nominated underwriter.

9.        As members of the Consumer Credit Trade Association, we will allow customers to appeal any decision to refuse credit if the customer believes that refusal to be unreasonable. We will ensure that customers are informed of this right on our website and when the decision to decline is communicated to them.

RECORD KEEPING

10.     A record of all information used in the making of the lending decision must be retained by the Firm for a duration of six years after the repayment of the product.

PUBLIC INFORMATION

11.     The Firm’s website will contain the following information about its Responsible Lending Policy:

Here at WageDayCash we take our responsibility towards you seriously. This means providing you with all the information you need so that you can decide whether the loan is suitable for you before you decide to complete the application. Our loans are designed to assist you with short term financial needs and that they can become expensive over the longer term. That’s why there are warnings on our website and information about gaining access to free forms of money advice. At the bottom of this section, we include other options for you to consider if you are in financial difficulties.

It also means that we will conduct extensive checks on your creditworthiness and ability to repay your loan on time without causing you significant financial difficulties. These checks will be based on information you provide us within the application process and extra information we take from other sources such as credit reference agencies, fraud prevention agencies etc. You can see our Privacy Policy for more information on the type of information we collect, how we collect it and who we share it with.

As members of the CCTA, we also have specific responsibilities towards you. Please click here to read more information about the CCTA and what it means to you that we are members.

Our commitments to you:

·         We will provide you with adequate information for you to assess whether the loan is suitable for you;

·         We will assess your application fairly based on information provided by you and from other sources;

·         We will communicate our decision to you in writing as soon as it has been made; and

·         We will allow you to appeal any decision to refuse you credit to a senior risk manager if you believe it to be unreasonable.

When making our assessments as to creditworthiness and affordability we consider a large amount of information which will include:

·         How much you want to borrow and for how long;

·         Your income and expenditure information’

·         Your credit history, for example whether you have been meeting your bills as they fall due;

·         Any existing financial commitments you tell us of or we can see via a credit report; and

·         Any information which might indicate whether you are in financial difficulty or are vulnerable.

Please find below a list of organisations you can contact if you are in financial difficulty:

·         Money Advice Service: For free, unbiased and easy-to-access money tools, information and advice, visit www.moneyadviceservice.org.uk or phone 0300 500 5000 to speak to a Money Advisor.

·         Advice UK: Member centres offer debt advice including specialist advice for minority communities and people with disabilities – www.adviceuk.org.uk or phone 0300 777 0107.

·         Christians against Poverty (CAP): For free debt advice in your home, check post code coverage at www.capuk.org then call 0800 328 0006.

·         Citizens Advice: For advice and information on debt and other topics, visit your local Citizens Advice Bureau (address in the phone book) or go to www.adviceguide.org.uk.

·         National Debtline: If you live in England, Wales or Scotland phone 0808 808 4000 or visit www.nationaldebtline.org for debt advice and information.

·         StepChange Debt Charity: For debt advice throughout the UK Phone 0800 138 1111 or visit www.stepchange.org

6.        This information will be reviewed every six months and/or updated as necessary.

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Call Credit Scoring

Overview

As part of Callcredit’s standard data return, a generic credit risk score called Gauge is displayed. All bureaus have a score of this nature – it’s typically what people mean when they think of their credit score. Scores like Gauge are generally built using a ‘twelve-month outcome’, meaning the score is intended to predict which potential customers will have missed multiple payments in a year’s time.

In short-term lending, money is loaned to a customer for a much shorter amount of time, and as a result of this, traditional credit risk scores are not successful in predicting which customers will and won’t repay. This has created the need for an alternative method of deciding which applicants to accept.

To enable our clients in short-term lending to make informed decisions that use the full depth of our data, our consultancy team has created a score. Unlike Gauge, this score is specifically designed to be used in short-term lending and has been built using only single-payment loans of approximately one month in length.

The score build

A sample of 625,155 short term loans was sourced, using Good/Bad outcomes supplied by clients.

The following exclusions were applied to the file:

Exclusion	Removed records
Applicants not found on Callcredit's database	4,026
Applicants currently restricted	96
Applicants with a CCJ in last 12 months	23,307
Remaining population	597,725

The remaining 597,725 records had a bad rate of 13.4%:

Outcome	Records
Bad	80,018
Good	517,707
Total	597,725

These records were then divided up into a Build and Holdout samples of 75% and 25% respectively. The score build took place on the Build sample, and was later validated against the Holdout sample.

This build population then entered our score-building process, which involves analysing each concept in isolation to evaluate how predictive they are, before passing through coarse classing, variable clustering, and logistic regression. A presentation describing this process in more detail is available upon request.

Concepts in the scorecard

Here is a list of the concepts contained within the scorecard. With the exception of Age, all of these are sourced from Callcredit’s BSB data:

Age - Age of customer at Application (this is derived from the application form)

• BCC - Number of months since most recent 1+ cycle excluding historic defaults

• BN - Total limits now as a % of total limits 12 months ago

• IZB - Value of Cash Advances in the Current Month as a % of Total Credit Card Repayment Amount in the current month

• JIC - Worst Payment Status On A Pay Day Loan Last 3 Months

• ND - Months since last CCJ

• PN - Total monthly repayments on any fixed term accounts which are settled

• RT - Number of defaults with a balance of >£100 but <£250

• SAC - Age of most recent active Home Credit account

• SEB - Number of all credit application searches in last 12 month

• YGC - Number of all credit application searches in last month

• VM - Total balances now as a % of total balances 3 months ago

• VR - Number of accounts defaulted in the last 12 months

• XHC - Number of Short Term Loan accounts 

Understanding the scorecard

Each concept in the scorecard contributes points to the score. The amount of points contributed per concept varies depending on the result returned for that concept.

These points are added to the intercept (the base figure), which is 383. Therefore the minimum possible score is 383, and the maximum achievable (by scoring top marks on each concept) is 661. In practice, the vast majority of scores will sit somewhere between 475 and 575.

Here are some pointers on how to interpret and code the scorecard:

Example Concept

                                                                 Age of customer

Class	Min		Max	Score
9	18		21	0
8	22		22	2
7	23		26	7
6	27		34	8
5	35		36	13
4	37		38	15
3	39		42	23
2	43		50	26
1	51+			34

• Customers aged between 18 and 21 score 0 points
• Customers who are 22 years old score 2 points
• Customers who are aged 51 or over score 34 points
• Therefore, in terms of credit risk, the older the applicant the better 

{ND} = “Not derivable” – this occurs if it is not possible to calculate a value for the individual on the concept in question. For example, concept BN compares limits now to twelve months ago. If the customer has not had any credit limits in this period, this cannot be calculated and {ND} will be returned.

{OB} = “Out of bounds” – this means that a number too big to fit in the field has been returned. For example, concept XHC (Number of short term loans) has a length of two digits. If a customer has had more than 100 short term loans, {OB} will be returned.

Consultancy

A generic scorecard is a great way of quickly setting up a robust strategy using an “out-of-the-box” solution.

Over time, as your volumes increase, you may wish to create a strategy that is more bespoke to your customer base. Our consultancy team is able to use your historic good, bad, and declined customers to create a scorecard specific to you. This ensures that the scorecard you are using contains the concepts most appropriate to your data, and that it is as predictive as possible for the applicants you are attracting.

We are also capable of working with you on other projects that may be of interest, for example:

• Rejects analysis - Examine what happens to your rejected applicants in the weeks after you decline them. Are they able to take out credit elsewhere, and if so, how do they perform on that account? This insight can be useful in helping to tweak your acceptance criteria.

• Process optimisation - We can conduct analysis to ensure that you are conducting your checks in the most cost-effective manner. If this turns out to not be the case, we can tell you the optimal order and the estimated savings.

• New products - A lot of lenders in alternative finance are starting to explore different product offerings. Traditionally this can be quite a slow process, involving a soft rollout while the lender works on their strategy as they go. We can expedite this transition by allowing you access to bureau data and performance history for accounts opened in the sector you are entering. This allows you to set up policy rules and scores in advance, enabling you to quickly launch a new product with a strategy already in place.

To discuss any of these offerings, or for any further questions you might have regarding this scorecard, please get in touch with our Consultancy team.