Results From Survey of Utilities and Telecoms

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Doing Well The Business Case for Reporting
Payment Data

• Results From Survey of Utilities and Telecoms
• By Alyssa Stewart Lee
• October 1, 2008

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Alternative Data Initiative

• Quantify the Impact
• 35-54 million Americans affected
• Identify Utility and Telecom data as most
  significant for broad coverage
• Move the Market
• Improves access to affordable credit
• Improves the credit system itself
• Make the Business Case
• Why should utilities furnish?

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What sorts of companies responded to the survey?
Other Services include Steam, VOIP, and various
internet services.
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Size of companies that responded
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Who is reporting payments? Who is using credit
reports?

• utilities currently report to a bureau
• (10 fully report) 18.5 PAID survey

have ever referred delinquencies to collections
agency (89 currently do) 70 PAID survey
use credit reports or 3rd party authorization
services to process new accounts
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When are accounts sent to collections agencies?
73 use collections agency report to a bureau
6 are unsure
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Perceived reasons to reportcompanies never
reported

• Of these companies,
• 79 Improvement in rate of aged receivables
• 69 Improvement in rate of write-offs
• 62 Improvement in rate of days sales
  outstanding
• 52 Build brand and competitive edge by helping
  your customers build credit
• 10 Other
• 3 Did not see any benefits

61 have considered reporting, companies who have
never reported
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Perceived reasons not to reportcompanies never
reported

• Of the 61 who have considered reporting
• 60 High recurring costs (costs stemming from
  disputes concerning payment reports, costs of
  furnisher obligations, e.g.)
• 50 High initial costs (need to restructure
  billing systems, e.g.)
• 37 Other (customer poaching, decided to report
  via collections agency, unsure how to report,
  OLDE inflexible in negotiating liability caps)
• 37 Consumer complaints
• 27 Unsure of legal status of reporting/legal
  prohibition
• 17 Did not see any benefits

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Full Reporting Incentivescompanies never reported

• 3.7 - Specific information from peer group case
  studies on whether, how much and how soon
  write-offs and delinquencies have declined with
  payment reporting
• 3.4 Modest costs and hurdles
• 3.2 - Tax incentives for upgrading your IT
  systems
• 3.2 - Evidence of customer benefit
• 3.0 - Clarification of the legal/regulatory
  environment
• 3.0 - The creation of best practices and
  guidelines
• 2.8 - Prominent advocacy organizations and
  minority interest groups support of the practice
  of reporting payment data to credit bureaus

Scale 1 none, 3moderate, 5 very strong
incentive
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Why report payment histories to credit
bureaus?companies that are reporting

• 100 - Reduce delinquencies
• 20 - Consumer reporting agencies asked us to
• 20 - Other (To help customers build credit)
• 10 - To build brand and a competitive edge by
  helping your customers build credit
• 0 - My company was consolidated with
  another company that does so

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How satisfied with reporting experience?companie
s that are reporting

• 22 - Very Satisfied
• 56 - Somewhat Satisfied
• 22 - Neutral/Mixed
• 0 - Somewhat Unsatisfied
• 0 - Very Unsatisfied

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Overall Costs, Benefits, companies that are
reporting

•  Benefits are
• more than 10 times greater than costs. 2
• between 5 and 10 times greater than costs 2
• between 2 and 5 times greater than costs 1
• between 1 and 2 times greater than costs 0
• equal to the costs 2
• No companies reported that costs were greater
  than benefits

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Changes since reporting
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DTEA Case Study

• Problem (April 2006)
• Increasing operating costs, decreasing customer
  satisfaction. 
• Solution
• Incentivize customers who paid on time the
  positive reporting of their timely payments.
• Cost 450,000 

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DTE A Case StudyResults
80,000 Fewer Accounts Behind Mitigated loss
33.6 million (benchmark at media storm)
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Difficulty in implementing reporting to a bureau
companies that are reporting

• 4.75 - Developing internal policy
• 4.5 - Educating consumers
• 4.0 - Restructuring IT systems
• 4.0 - Working with regulatory agency
• 3.8 - Meeting Fair Credit Reporting Act
  obligations
• 3.6 - Developing right team

Scale 1very easy (4moderate) 7very difficult
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Consumer Communicationscompanies that are
reporting

• Customers were notified the following ways
• 86 - Separate insert included with monthly
  bill
• 86 - Printed notice on monthly bill
• 71 - Notice on web page
• 43 - Customers given special notice when they
  first sign up
• 29 - Public service announcements on
  television and/or radio

90 of the companies had a consumer
communications program that notified consumers
that their payments would be reported.
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How frequently were/are consumers notified
companies that are reporting

• Monthly
• On regular bills or bi-monthly
• Every 6 months
• 3 - 4 months prior to rollout
• An initial campaign

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Systems Changes and Regulationcompanies that
are reporting

• 89 of companies did not need to restructure
  their billing systems to facilitate reporting
• 56 of companies sought regulatory approval to
  report
• 88 did not believe regulatory approval was
  necessary

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Benefits vs. Costs companies that are reporting

• All report the benefits of fully reporting to
  equal or exceed the costs
• Fixed IT costs to report fully less than 15 of
  IT budget
• Customer service costs are less than 15 of
  customer service budget

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A Road Map
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Alternative Data Initiative

• Business Case Support
• Consumer Outreach
• Regulatory Analysis
• New data elements

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Political Economic Research Council
100 Europa Drive, Suite 403 Chapel Hill, NC
27517 www.infopolicy.org Phone [phone]