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Some companies take more proactive approach to tackle customer credit issues

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In today’s digital-driven world the old axiom that life’s not fair can prove especially true.

With formulaic calculations and almost instant, computer-generated outcomes impacting everything from insurance rates to bank loans, factors like age and income frequently leave consumers at a disadvantage. That is particularly true in major urban cities where low-income neighborhoods tend to emerge and often little is done to aid those with poor credit.

Many seek solutions as marginalization of patrons, who struggle financially or who are too new to consumer markets to have developed solid credit, remains a reality. In major Michigan cities some corporations have extended efforts to include a more diverse base of customers.

“(Borrowers) take our ‘yes’ and get comfortable with our ‘yes,’ and run with it,” says Byna Elliott, referring to loan and credit approvals. “But (borrowers) don’t realize that ‘yes’ can be harmful in the long run.”

As senior vice president of Fifth Third Bank in Detroit, Elliott cautions those with low credit scores against accepting lending terms at excessive interest rates. Fifth Third supports financial literacy and credit improvement programs through Operation Hope centers around Detroit.

T-Mobile, the cellular phone service provider with about 100 corporate-owned retail stores in Michigan, has its own initiatives to support consumers with poor credit. The “Simple Choice No Credit Check” plan lets any customer walk into any T-Mobile location and sign up for unlimited talk, text and data accounts for as little as $50 monthly. Another offering rewards T-Mobile customers who make monthly payments on time for a year by requiring no down payment on new phone plans at the end of 12 months.

“It’s a program that helps customers, who pay their bills regularly, improve their credit,” says Scott Goldberg, T-Mobile senior communications manager.

Director of Sales Operations Asad Irfan (center), Vice President Martin Pisciotti (left) and Director David Mutinda say Detroit is a major T-Mobile customer support base

Director of Sales Operations Asad Irfan (center), Vice President Martin Pisciotti (left) and Director David Mutinda say Detroit is a major T-Mobile customer support base

The plan appeals to cellular users who need phone access, but might not qualify for affordable packages based on past payment records.

T-Mobile prides itself on turning residents of underserved neighborhoods, like those where pre-paid phone cards are heavily promoted, into loyal network customers, Goldberg says.

But underserved consumers aren’t characterized by income alone. Not even millennials, regarded as the pride and backbone of the future in many communities, are immune to credit challenges.

One recent study of 12,000 respondents between ages 18 and 39 showed the majority experience financial problems that prevent them from owning homes. Most millennial homebuyers don’t meet the median credit score to secure loans backed by a major mortgage provider in the industry, according to the survey.

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Inexperience as car purchasers, or even as department store credit card owners, isn’t odd among young and financially disadvantaged consumers. Lack of buying and owning experience can impact payment history required to build credit.

Michigan has been a battleground among advocates for the credit-challenged as state lawmakers, government officials and insurance companies have debated for years whether insurance coverage and rates should be decided according to credit scores. Gov. Jennifer Granholm’s administration tried to eliminate the use of credit reports in determining rates out of concerns about discrimination, but the Michigan Supreme Court ruled credit-score-based insuring is lawful.

Increasing the consumer market, including efforts that boost credit and better prepare Michigan residents to invest, helps the economy, financial experts say.

Both Elliott and Goldberg agree customers should be comfortable when they hear the word “yes.”

– Editor’s note: We recently did a related story about One Detroit Credit Union’s Auto Bailout Program, which is refinancing program aimed at borrowers with extraordinarily high interest rates. It has helped nearly 600 people reduce their auto loan rates by at least half since the program launched in 2012.

– Photos: Paul Engstrom

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