Verifying an individual’s expenses is a core part of a lender’s affordability assessment.
Lenders have to comply with responsible lending laws, which require them to make reasonable enquiries about, and take steps to verify, a credit applicant’s expenses.
Neither the law nor the present regulatory guidance is prescriptive about the extent of enquiries or the steps taken to verify expenses.
Lenders are invited to join a series of pilots leveraging the Verifier Expense Verification Framework Initiative to focus on specific scalability contexts including:
A Consumer-Centric Approach Is Needed
Verifier established the Expense Verification Framework Initiative in late 2018 to support better approaches to expense verification to meet community expectations. The Initiative has tackled expense verification from a wholistic viewpoint from both a consumer and credit licensee perspective.
In solving for affordability assessment, there are a whole raft of consumer experience and data governance issues as well as operational and marketing questions. This is not to mention that the use of that data for credit risk and marketing (secondary purposes) and the fact that the data supplied – if via the Consumer Data Right – is opt-in and not an obligation.
The Expense Verification Framework delivers on five key goals:
Avoiding consumers falling into difficult circumstances
Promoting financial literacy and financial well-being
Avoiding invasion of privacy and the unintended consequences of reviewing bank transactional data
Promoting efficiency – to keep system costs and the costs to the community down
Avoidance of unintended macroeconomic consequences.
Leveraging the thought leadership of the Expense Verification Framework Initiative, lenders can join the Fast Track pilots that will kick off following the Industry Roundtable in December 2019.
The first two Fast Track pilots, with or without the addition of participation in the Safe Loan program, cover sophisticated borrowers and rapid refinance (with no extension of credit). The pilots will leverage both the Framework and Verifier’s Expense Verification analytics overlays, including research conducted by Verifier and Mogo on bank transactional data.
Participation in the Fast Track program includes guidance on the governance and continuous improvement frameworks that are documented in our Expense Verification Whitepapers.
There’s a lot more to come! Join us.