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CLD and Auto-payment Correlation

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TheFIGuy
Established Contributor

CLD and Auto-payment Correlation

Curious, if anyone who has had a CLD also had auto-payments set up with the bank. I have a friend who firmly believes that having auto-payments set up curbs CLD's. She has no factual evidence but will not drop the topic, so here I am to get general DP's.

 

I do believe someone who has auto-payments set up can as quickly default on an account vs. someone who pays their bill monthly on-time without issues. But, she does bring up a good point about a false sense of security for the banks with auto-payments setup. They "sorta" know that it's going to be pulled and may be returned vs. will the person pay us this month.

 

There are a crap ton of other variables that could play into a CLD, but just for good measure, if anyone has recently had a CLD, did you have auto-payments set up?

 

Her top argument: If you loan person (a) and (b) 1k and person (a) sets up auto-payments and person (b) just pays the balance monthly on-time without issues then a pandemic hits she feels more comfortable in person (a) paying her than the person (b). This scenario excludes all other data points about both person (a) and (b) just payment history at the moment.

 

Thanks, myFICO peeps!

Message 1 of 7
6 REPLIES 6
K-in-Boston
Epic Contributor

Re: CLD and Auto-payment Correlation

Having auto-payment set up would have no real affect on the risk of a cardholder to be able to make a future payment.  A card issuer is more likely to CLD or close an account after a returned auto-payment than after a single missed payment.

Message 2 of 7
Kforce
Valued Contributor

Re: CLD and Auto-payment Correlation

I think 100 other things are more likely to be a factor than if auto-pay is on or not.

Message 3 of 7
TheFIGuy
Established Contributor

Re: CLD and Auto-payment Correlation


@K-in-Boston wrote:

Having auto-payment set up would have no real affect on the risk of a cardholder to be able to make a future payment.  A card issuer is more likely to CLD or close an account after a returned auto-payment than after a single missed payment.


It sounds like AMEX AA to me! Thank you for the reply and points!

Message 4 of 7
Anonymous
Not applicable

Re: CLD and Auto-payment Correlation


@TheFIGuy wrote:

Curious, if anyone who has had a CLD also had auto-payments set up with the bank. I have a friend who firmly believes that having auto-payments set up curbs CLD's. She has no factual evidence but will not drop the topic, so here I am to get general DP's.

 

I do believe someone who has auto-payments set up can as quickly default on an account vs. someone who pays their bill monthly on-time without issues. But, she does bring up a good point about a false sense of security for the banks with auto-payments setup. They "sorta" know that it's going to be pulled and may be returned vs. will the person pay us this month.

 

There are a crap ton of other variables that could play into a CLD, but just for good measure, if anyone has recently had a CLD, did you have auto-payments set up?

 

Her top argument: If you loan person (a) and (b) 1k and person (a) sets up auto-payments and person (b) just pays the balance monthly on-time without issues then a pandemic hits she feels more comfortable in person (a) paying her than the person (b). This scenario excludes all other data points about both person (a) and (b) just payment history at the moment.

 

Thanks, myFICO peeps!


There is _NO_ false sense of security from the bank's side with auto payment.  Everything banks do is calculated risk, and their risk of default changes none with auto payment.  After all, an auto payment is usually for the MINIMUM, and making MINIMUM PAYMENTS is VERY RISKY behavior for a bank.  

 

Auto-pay is a convenience for the borrower, and a convenience for the staff, so they don't have tons of "oops I missed my payment please credit my late fee" calls.  It is good customer service to have auto payments.  Auto payments for the minimum, which are what *MOST* people have give the banks NO sense of security.  

Message 5 of 7
TheFIGuy
Established Contributor

Re: CLD and Auto-payment Correlation


@Anonymous wrote:

@TheFIGuy wrote:

Curious, if anyone who has had a CLD also had auto-payments set up with the bank. I have a friend who firmly believes that having auto-payments set up curbs CLD's. She has no factual evidence but will not drop the topic, so here I am to get general DP's.

 

I do believe someone who has auto-payments set up can as quickly default on an account vs. someone who pays their bill monthly on-time without issues. But, she does bring up a good point about a false sense of security for the banks with auto-payments setup. They "sorta" know that it's going to be pulled and may be returned vs. will the person pay us this month.

 

There are a crap ton of other variables that could play into a CLD, but just for good measure, if anyone has recently had a CLD, did you have auto-payments set up?

 

Her top argument: If you loan person (a) and (b) 1k and person (a) sets up auto-payments and person (b) just pays the balance monthly on-time without issues then a pandemic hits she feels more comfortable in person (a) paying her than the person (b). This scenario excludes all other data points about both person (a) and (b) just payment history at the moment.

 

Thanks, myFICO peeps!


There is _NO_ false sense of security from the bank's side with auto payment.  Everything banks do is calculated risk, and their risk of default changes none with auto payment.  After all, an auto payment is usually for the MINIMUM, and making MINIMUM PAYMENTS is VERY RISKY behavior for a bank.  

 

Auto-pay is a convenience for the borrower, and a convenience for the staff, so they don't have tons of "oops I missed my payment please credit my late fee" calls.  It is good customer service to have auto payments.  Auto payments for the minimum, which are what *MOST* people have give the banks NO sense of security.  


High points in general!

 

I always have to remember she and I are both the 1% I guess who budget—YNAB and have auto-payments set up for "total balance" every month.

Message 6 of 7
Anonymous
Not applicable

Re: CLD and Auto-payment Correlation

Many of the CLD's I've seen recently have been a result of lack of use as opposed to a late or missed payment. 

 

Don't really see how auto-pay on a $0 balance for an extended period of time would be any different than not having it set up. Lack of use is lack of use.

 

I'm more of a hands-on type of guy. Don't have it set up on any of my cards as I trust myself a whole lot more than I trust the banks. An "oops" on their part, through no fault of my own, would impact me significantly more than them. If I make the mistake, then it's on me. 

 

But I've got a system that has served me well for years. No auto-pay, no lates and ultimately, no CLD's. All cards get use.

Message 7 of 7
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