In my first blog, we addressed the definition of auto decision and financial institution Culture. The second blog looked at data analysis. We will round out discussion with some additional guidance and the creation of your strategies.
Auto Decision Is For a Limited Dollar and Product Set.
- No financial institution uses auto decision for every loan type and dollar amount. If they tell you that, they are most likely manually reviewing each loan approval and decline. And, as noted in my first blog, that is not auto decision. That is manual underwriting.
- Traditionally, we recommend a bank or credit union begin auto decisioning at $50,000 or less in total exposure with a limited product set (credit cards, overdraft lines, small lines of credit). The dollar threshold should be one where the financial institution can be comfortable with the system making the decision. If credit administration feels each credit still needs a human touch, then the dollar threshold is too high or you are not ready to auto decision.
Auto decision is a great way to gain efficiency and speed in your underwriting process. But it must be done in a way that reflects your manual underwriting processes AND is compliant with the various regulations, like disparate treatment and score card validations.
In my next blog, we will talk about how auto decisioning requires a long-term commitment.
