Zoot identifies significant savings opportunities associated with upcoming Red Flag regulationsMortgagePress.comZoot, red flags, mortgage fraud, FACT Act
Zoot, a provider of advanced instant credit decisioning and loan
origination solutions, has identified significant savings
opportunities associated with fraud reduction and recovered credit
applications during the development of its Red Flag solution suite.
Section 315 and Section 114(B) of the FACT Act mandate financial
institutions manage and reduce the risk of identity theft fraud for
customers and require compliance with these Red Flag regulations by
Nov. 1, 2008.
Credit applications are commonly declined due to an address
mismatch or other red flags highlighted in the upcoming Red Flag
regulations. In addition to mitigating the risk for fraud and
identity theft, clearing these flags and recovering the application
results in a significantly higher number of approved
applications.
During the process of establishing best practices and evaluating
return-on-investment (ROI) metrics for its Red Flag solution suite,
Zoot uncovered the following statistics from top financial
institutions:
• 20 percent of approved credit card applications, based
on industry averages, contain an address mismatch that must be
handled before granting credit;
• $567,000 in revenue can be recovered from a pool of
100,000 prescreen applications (assuming a 30 percent acceptance
rate);
• 22.5 percent increase in revenue provided by recovering
applications;
• 9,450 percent return on investment for implementing an
automated solution (based on 6,000 recovered applications from a
pool of 100,000);
• $54,000 of savings per 100,000 applications were
realized through automated review for consumer initiated
applications;
• 50 percent reduction in fraud losses from that same
application pool is a savings of $2 million.
"Aside from meeting governmental regulations, financial
institutions have a lot to gain through compliance with Red Flag
rules," stated Dennis Dixon, president of Zoot Enterprises. "The
ability to automate applications that normally require manual
review decreases the cost per booked account. By reducing fraud
losses and clearing address mismatch applications a significant
return on investment can be achieved."
For more information, visit www.zootweb.com.
