The Fifth Column---Neither a Borrower Nor a Lender be or the Bank Shot Revisited

The subject of this essay is a problem that a particular banking chain had had the highest level of defaults on car loans in state history during the previous year. They were, naturally, concerned with knowing exactly what had caused this exorbitant loss to make jolly sure that it was not repeated. This sticky problem was shortly thereafter handed to the OR/MS grüppe , and subsequently to the lady asking the question about it. What was clearly needed was some kind of a model that would better accomplish the screening necessary for auto loans than the one they had now . Unfortunately, for a better model you need better data as to why the defaulters defaulted. However, the state legislature, in its infinite wisdom, had recently passed a law that treated such questions from a lending agency to a deadbeat as harassment . To say that this law was enforced with vigor was putting it mildly. Rapidly, banks informed their loan departments that no conversation could be initiated between a bank employee and a defaulter without express approval of a bank officer.The questioner summed up the difficulty very nicely when she stated the problem as follows: “The only way we can come up with a better loan-granting model is to know the reasons why the defaulters defaulted. The only way we can get the necessary information is to ask the defaulters; and the state has, in effect, forbidden us to ask them for it.”