Consultancy firm Deloitte has profiled
a new customer segment that banks should be targeting – the
First Time Defaulter (FTD).

A survey by the New York-based Deloitte
Center for Financial Service researching the future of consumer
lending has found that the FTD is proving a new challenge for
banks.

The survey found
that 11% of the
5,142 bank customers surveyed had had a
negative credit experience for the first time in their lives in the
last two years.

But more than a fifth of those surveyed, 22%,
said that they had experienced a serious negative credit situation
since the peak of the financial crisis in September 2008; including delinquency,
foreclosure, bankruptcy and charge-offs.

A total of 58% said that they had been
contacted by a collection agency, while 43% said that they had
fallen behind with their payments of medical bills.

On a positive note, 65% say that they have the
same level of satisfaction relative to two years ago with their
bank, while  16% said they have seen higher fees associated
with loans and credit.

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A third believed the Dodd-Frank Act and other
new regulations would have immediate benefits for consumers.

The executive director of the Deloitte Center
for Financial Services, Andrew Freeman,
said that these findings proved a “significant” new customer
segment
that banks should be aware of.

“We have entered a new phase in retail banking
evolution, with consumers facing fundamental changes in the
relationships they have with their financial services providers,”
said Freeman.

“Banks should consider re-evaluating their
consumer lending business models, starting with how they originate
loans and working all their way through the process to how they
manage collections from customers who are either impaired or are in
default.”

He added: “Our research shows just how
sizeable the first-time defaulter group has become.”

He added that the survey revealed costly risks
for banks, as poor interactions with customers and their unmet
expectations may cause the first-time defaulters to switch
banks.

Freeman said that banks need to initiate fresh
and creative cross-selling efforts to keep their customers.

Of those surveyed, 63% said that they were not
“at all likely” to borrow from their current bank in the future
because they were not happy with the institutions actions in
helping the customer solve their problems.

Deloitte said it will release further findings
and analysis in the next year, titled The Next Chapter in Consumer
Lending.