Credit Grantors Offered Ultimate Tool To Manage Risk Of Bankruptcies

ATLANTA, October 30, 1996 -- Equifax Inc. today unveiled the most comprehensive package of automated tools ever developed to assist banks, credit unions and retailers in managing the risk of customer bankruptcies.

The package, known as the Bankruptcy Navigator(sm), was introduced during a national tele-press conference before the start of a nine-city seminar tour that will span the nation over the next two weeks. The Navigator is expected to improve significantly the ability of any credit grantor to monitor and forecast payment problems with existing customers as well as to predict the future consumer environment -- not just nationally but geographically across 231 statistical areas.

"Everyone with an interest in the consumer economy, from bankers to retailers to government agencies, is expressing concern about the rise in personal bankruptcies," noted Thomas F. Chapman, Equifax executive vice president. "And it's true the number of families filing for bankruptcy is at an all-time high. But we're saying the expertise and technology now is available from Equifax to get a grip on the problem."

Over the past three months, most of the news coverage of the rise in bankruptcy and delinquency rates has focused on the numbers of individuals declaring bankruptcy. What is lost in such coverage is the fact that bankruptcy declarations will cost American businesses tens of billions of dollars this year.

Banks and other credit grantors long have used various models and formulas to manage their credit card accounts, looking for signs that might suggest it's time to limit or reduce an individual's credit limit or to extend different payment terms. Today, however, the old models don't work; individuals without any history of missing a payment are declaring bankruptcy without warning.

Thus Equifax's Bankruptcy Navigator consists of several distinct but related components designed to help a banker or retailer answer three questions: Where do I stand now? Where am I going? And what do I need to do to manage any problems?

The backbone of the system is the Bankruptcy Navigator Index(sm), an innovative set of risk and bankruptcy models that segment customers according to signs of risk, then overlays a geographical index reflecting the current environment and forecasted performance for 231 statistical areas.

The Index is used to answer the first two questions of assessing current risk and forecasting future performance. The process begins with a "benchmark situation analysis and forecast" that provides the credit grantor with an understanding of the existing portfolio and a picture of what the portfolio will look like in 18 months, broken down by the individual geographies where the credit grantor does business.

In order to identify management actions, an immediate "alert list" of accounts at risk is generated with monthly follow-ups and quarterly portfolio reviews. Through a consulting service, performance trends are noted and recommendations for strategy adjustments are provided. Moreover, the Index can be integrated into the credit grantor's pre-screening and application processing systems to aid in the approval of new customers.

To better understand the pitfalls ahead, the Index's ability to "see" geographic performance differences allows a business to adjust marketing strategies right from the start, deciding in advance, for example, where to concentrate new account solicitation. Economic activity in any given region clearly can vary significantly, whether because of population shifts, severe weather, different mixes of industries or numerous other reasons. Accordingly, differences in how residents of one particular area make timely payments compared to another clearly exist and can be quantified.

Finally, the Bankruptcy Navigator also offers services -- on behalf of the business -- of helping consumers discuss payment options as an alternative to filing bankruptcy, and notifying businesses if a consumer does declare bankruptcy.

"Bankruptcy losses ultimately are passed on to all consumers," said Chapman. "We're saying that businesses can reduce their losses by using advanced technology to more intelligently manage their credit portfolios. This is a knowledge-based decision solution service, something that directly tackles and manages a serious business problem."

Equifax Inc., through its Financial Services Group, is the world's leading provider of information solutions that help grant credit and authorize and process credit card and check transactions. Established in 1899 in Atlanta, Equifax posted revenues for the 12 months ended September 30, 1996, exceeding $1.7 billion.