© 2014 Fair Isaac Corporation. Confidential. This presentation is provided for the recipient only and cannot be reproduced or shared without Fair Isaac Corporation’s express consent. Customer Communications Bring Value and Clear the Regulatory Hurdles Bill Brown Director, Product Marketing FICO Vance Gudmundsen Regulatory Counsel FICO

© 2014 Fair Isaac Corporation. Confidential. This presentation is provided for the recipient only and cannot be reproduced or shared without Fair Isaac Corporation’s express consent. Our Speakers Vance Gudmundsen Vice President Government Affairs and Data Privacy, FICO He is a Vice President in the Legal Department, responsible for government affairs, regulatory compliance, and data privacy. In his career, Vance has advised several major financial institutions as in-house counsel, including Capital One Bank, Nationwide Insurance, Erie Insurance Group, and the Illinois Insurance Department. Bill Brown Director, Product Marketing/Compliance, FICO He has spent the past twenty five years defining and managing the customer experience for some of the largest companies in the world. His experience in card operations includes MBNA America and Providian Financial where his roles have taken him through the entire card and customer lifecycle. Since joining FICO, he has worked around the world and across multiple industry verticals to define client opportunities to engage and deliver a differentiated customer experience

© 2014 Fair Isaac Corporation. Confidential. Customer Communications At every stage of the customer lifecycle you will have opportunities to engage your customers, but you will need to anticipate regulatory hurdles. New technologies offer promising ways to communicate with your customers—but when you manage customer service, fraud prevention and detection, marketing, and debt collection and recoveries, there are numerous regulatory challenges. We will discuss strategies and best practices to take advantage of new ways to connect with customers and grow business, while avoiding the regulatory landmines. 3

© 2014 Fair Isaac Corporation. Confidential. ► The traditional approach was to use human call center; letters ► In the late 1990s, one-way messages: , SMS and voice blast, by channel and product ► 10 years ago, two-way messages: interaction in Automated Voice and SMS but still siloed ► 5 years ago, rules driven: communication by segment or event, sometimes a dialogue ► Today, multiple channels on a single platform: contacting the customer through the right channel at the right time Customer Communications Have Evolved 4

© 2014 Fair Isaac Corporation. Confidential. Monumental Shift Transforms Lender/Customer Landscape The Mobile Explosion 1.5 billion Smartphones worldwide by end of MM Tablets worldwide by MM Employees will be classified as Mobile Workers by

© 2014 Fair Isaac Corporation. Confidential. Generation M—Modern Urban Consumers Demand the Ability to Live Their Lives by Mobile 60% who switched banks: Mobile banking availability a significant factor USA Financial firms who think mobile banking is important to customers: 50% currently 71% by 2015 UK Mobile payments: $640 million in 2011 $2 billion in 2016 USA 1 billion smart phone users 11% plan to purchase tablet India Federal Reserve eMarketer FUJITSU 6

© 2014 Fair Isaac Corporation. Confidential. Multiple Channels and Robust Interactions Are Available Voice MobileDirect Online Social Media Text Contact the customer through the right channel at the right time… © 2014 Fair Isaac Corporation. Confidential.77

Financial Services Customer Expectations Infosys; FINsights 8

© 2014 Fair Isaac Corporation. Confidential. ► How is the communication made? ► Mail, , phone, text, mobile direct, social media, automatic dialer ► Where is the communication made to? ► Residence, mobile, social media, business ► Where did the contact information come from? ► Application, family member, external source ► What is the purpose of the communication? ► Service, advertising/marketing, collections ► Will the customer expect the communication? ► Customer Agreement, express consent, implied consent, “deemed” consent Not All Communications Are Alike 9

© 2014 Fair Isaac Corporation. Confidential. ► As , mobile apps, and automated communications channels are used more frequently, customers become more familiar and responsive ► The customer lifecycle can be divided into three segments: servicing, marketing, and collections Opportunities to Engage Your Customers Multiple lifecycle events require action …and benefit from interaction New Account Offer Application Complete Customer Income Retrieval Late Payment Notification Credit Line Increase OriginationsCard Received Verification Welcome Package Customer Service Updates Fraud/Risk Alerts New T&A Documents Transferred Request 2 nd Card 1 st Party Collections 3 rd Party Collections 10

© 2014 Fair Isaac Corporation. Confidential. ► Make sure your customer interaction strategy is built for all the interactions your business wants and not just one business line ► Discuss the types of communications that you want to deliver to customers and the channels that you want to use ► Consider the regulatory challenges your strategy will encounter Build an Integrated, Compliant Approach to Customer Communications 11

© 2014 Fair Isaac Corporation. Confidential. ► Consumer Financial Protection Act—“UDAAP” ► “abusive” means taking advantage of the consumer’s inability to protect himself, or his reliance on the lender to act in his best interest ► Fair Credit Reporting Act 605(h) and 615(e)—customer verification for address changes, second card requests (KYC and other red flags) ► Telephone Consumer Protection Act—automated and predictive dialers for phone and text ► Service vs. marketing (ABA petition to FCC to exempt fraud and data breach alerts) ► residential vs. mobile phone Compliance Considerations in Service 12

© 2014 Fair Isaac Corporation. Confidential. ► Telemarketing Sales Rule: phone ► Telephone Consumer Protection Act: phone and text; DNC list ► CAN-SPAM: transactional vs. promotion; opt-out database ► ROSCA: Internet based sales (“free trial” and “negative option”) ► E-SIGN: electronic signatures require disclosures; access to paper copy; record retention ► Gramm-Leach-Bliley/FCRA: privacy notices; opt-out databases for affiliate and 3 rd party marketing Compliance Considerations in Marketing 13

© 2014 Fair Isaac Corporation. Confidential. ► Fair Debt Collection Practices Act ► CFPB will apply FDCPA to 1st party collections (UDAAP authority) ► Mini-Miranda warnings; G-notices; prohibited hours of collections ► Some courts won’t permit default judgments without documentation ► TCPA and CTIA—rules for automated or predictive dialers ► Does dialer have the “capacity” to be automatic? ► What is “deemed” consent? ► Who is the “called party” ► CTIA/Verizon: no text messages for debt collection ► Texas requires registration of automatic dialers Compliance Considerations in Collections and Recoveries 14

© 2014 Fair Isaac Corporation. Confidential. ► Explain what servicing activities your customer should expect ► Credit line increases; fraud alerts; product enhancements (e.g., overdraft protection) and other offers ► Keep record of opt-in consent and establish an opt-out database ► Use Net Number Lookup to determine possibility of channel use ► If you want to use SMS, confirm handset ► Add contact card to capture address, toll free #s, address for mobile application, define short code used for SMS; ask about preferred channels Set the Customer Expectations Early—Welcome Package 15

© 2014 Fair Isaac Corporation. Confidential. ► Confirm customer activity: address change; large account use; payment received; authorized user; new credit cards; new product requests ► Transaction alerts: fraud and post authorization confirmations ► Transaction dispute (complaint) processing ► Customer defined “Tell Me When Alerts” Reinforce Customer Expectations 16

© 2014 Fair Isaac Corporation. Confidential. ► Income can be used for over-limit and overdraft fee avoidance ► Income can be used for “ability to pay” calculations ► Query: does it matter whether the lender or the customer initiates CLI? ► Define activity as servicing (implied consent): Account Management: Income Retrieval “...to better service and manage your account(s) we would like to confirm your annual income. Please respond, as follows...” 17

© 2014 Fair Isaac Corporation. Confidential. ► Use automated communications ► Automate delivery of the customer agreement ► Automate customer reminders, updates, and disclosures ► Marketing options can promote customer loyalty, if expected ► Promotional pricing ► Add-on products ► Third party offers Marketing: New Products and Promotional Pricing © 2014 Fair Isaac Corporation. Confidential.18

© 2014 Fair Isaac Corporation. Confidential. ► Gain channel acceptance; get prior express consent to contact the customer before default ► Automated channels should be encouraged, but Verizon is preventing collections SMS volume on their technology ► Don’t automate the collection process if customer objects Collections: Anticipate Hurdles 19

© 2014 Fair Isaac Corporation. Confidential. Mobile Phone and Mobile Payment Users Will engage if You Encourage Them Mobile Phone Opportunities ► With the customer at all times ► Increased right party contacts ► Encourages faster response “in the moment” ► Promised payment kept rate ► For live agents 77% ► For Automation 85–90% Engage the customer from day one to provide channels the customer will rely on 20

© 2014 Fair Isaac Corporation. Confidential. ► Consider the customer lifecycle holistically ► Build trust early in the customer life cycle and treating the customer fairly throughout ► Don’t define success by reducing expenses in a single business line ► Define your compliance standards early ► Define your channels and interactions to understand what is required to be compliant ► Consider the legal hurdles you may have to overcome ► Be flexible: treat your customer individually; adapt to new compliance hurdles Conclusions Multiple lifecycle events require action …and benefit from interaction New Account Offer Application Complete Customer Income Retrieval Late Payment Notification Credit Line Increase OriginationsCard Received Verification Welcome Package Customer Service Updates Fraud/Risk Alerts New T&A Documents Transferred Request 2 nd Card 1 st Party Collections 3 rd Party Collections 21

© 2014 Fair Isaac Corporation. Confidential. This presentation is provided for the recipient only and cannot be reproduced or shared without Fair Isaac Corporation’s express consent. Thank You! Bill Brown Vance Gudmundsen

© 2014 Fair Isaac Corporation. Confidential. Learn More at FICO World Related Sessions ► How Customer Centricity Is Driving Fraud Management Strategies ► A Revolution in Customer Engagement: The Analytics Lifecycle Has Never Been Easier, Faster or More Cost-Effective Products in Solution Center ► Product Showcase: Multichannel Communication Solutions for insurance Experts at FICO World ► Kate Winterflood, Product Management ► Adam Barrett, Product Management White Papers Online ► Can Your Collections Team Support Your New Compliance Framework? Blogs ► 23

© 2014 Fair Isaac Corporation. Confidential. Please rate this session online! 24 Bill Brown Vance Gudmundsen