Banking Specific - Data Quality Issues for Charge Off Loans

Justin Hauck

Banking Specific - Data Quality Issues for Charge Off Loans

I have a question for my banking colleagues out there. With CECL coming about for financial institutions in 2020, or 2021 depending on your structure, I wonder how people are addressing the issues of correcting charge off loans. We are new to the Data Governance world as we really started about a year ago down this path after talking about doing it and sticking our toes in the pool to find it's just too cold for a couple years prior to that. I came on board right as we were kicking off Data Governance. We have worked through business definitions and business rules to develop Data Quality testing for our Critical Data Elements (CDEs), but one issue that we are unable to get past is how we want to handle correcting issues for charge off loans.

We have established a draft job aid that walks the data users through what needs to be corrected, what needs to be presented for review, what should be consulted with Accounting prior to fixing, etc. The issue that we are having is that when it comes to charge off loans, management isn't sure if we should make these corrections or not.

For CECL, charge off loans will tell you everything that you want to know about your model and how to apply that model to your portfolio. My main concern is that management chose to focus on CECL data elements in order to ensure that we have quality, trusted data from point A going forward, but how can we say that if we aren't making corrections to the most important data that we have for the CECL model? Perhaps I'm exacerbating a minor issue, but I just wanted to get others perspective on the issue at hand or if there are others that have experienced this same issue.

Also happy to chat to explain a little more about the situation. My office is (406) 548-6992 or my email is [login to unmask email] if someone would like more clarification before posting.

Sorry for the lengthy post. Thanks for your time and consideration.

Walter Howard

RE: Banking Specific - Data Quality Issues for Charge Off Loans
(in response to Justin Hauck)

I'm not aware of any regulatory requirement preventing the updating of loan information regardless of status.  From a collections perspective, you absolutely want current information for charged off loans, e.g. Total Due Amount, Total Delinquent Amount, Late Fee Amount, Days Delinquent Count.  These amounts change every month a loan is delinquent.