Nothing ever happens in a vacuum. It's always a combination of a number of factors. What I do see is that less stable lenders who are having their own severe financial problems (i.e., Synchrony and Comenity) and have some level of disorganization as well, seem more likely to implement policies in which they approve someone one minute and shut them down the next.
There really is no other explanation for Comenity canceling people's cards and then issuing them the same exact card three weeks later.
Or for Synchrony issuing several cards to someone in a two-day period, only to shut them down a week later. The lender should have internal controls to prevent such situations.
The same is true for large CLI's. If Sycnhrony does not want someone to get a large CLI on multiple cards, the internal system controls should prevent that. Instead, the system allows a large CLI and the consumer gets shut down for something that the company allowed.
Internal disorganization and two different departments that are not communicating (department that issues cards and department that takes them away) are poor business practice. While the consumer may be engaging in behavior that attracts the lender's attention, it makes the lender look unprofessional and disorganized to conduct some of the actions they do as well, in addition to the manner in which it is handled.
I've never had a problem with either lender but I don't think well of them because of their high interest rates, poor customer practices that go well beyond AA of some people, inconsistency in business practice, and the way they have handled some long time customers who simply get caught up in an algorithm.
An example - I recall two people in the Comenity snafu last fall who each had ONE Comenity card. It was closed down in both situations without warning. Those two people had only two or three inquiries in the past year and no negatives on report, but low AAoA.
Now I realize there is often more to the story than we are hearing or than people are telling us, but the fact remains that the way these lenders have gone about doing what they are doing is poor and unprofessional. And that's independent of the borrower.
Sharing customers' personal financial data with LexisNexis and blocking people out of their accounts is another example. Regardless of whether it happens to only a small number of borrowers, it's not the best business practice.
Again, there are always multiple factors on each side that contribute to the outcome. Do a number of borrowers engage in risky behavior that invites trouble? Certainly.
A consumer's profile may also change from the time of approval, and that is within the company's right to take action. I'm not referring to those completely understandable situations.
I just have a concern about a lender operating solely on an alogorithm alone. I understand that they are data-driven organizations and have little else to work with. Large financial institutions also do not always have the resources or manpower to have each situation manually reviewed.
What could ideally happen is that once an algorithm picks up people, those borrowers should be up for independent, manual review of the larger picture. We see that this does not happen much with lenders like Barclay - when the algorithm picks certain people up, they automatically get CLD's via the computer system - yet very often, when they call in to explain the situation and review it with a live human being, the credit limit with Barclay is restored.
When we lose the human element, things have a tendency to get messed up.
I'm not a financial analyst nor a bank expert and I don't know all the answers nor solutions to these situations. I only know what I see - and that is that Synchrony and Comenity have shown poor business practices independent of the things some of their borrowers are doing.
We can and should be aware regarding the impact that our own behavior has on lending decisions; however, being aware of certain lending institutions and their proclivities is helpful too.
