Managing Consumer Credit Delinquency in the US Economy: A Multi-Billion Dollar Management Science Application

William M. Makuch, Jeffrey L. Dodge, Joseph G. Ecker, Donna C. Granfors and Gerald J. Hahn
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William M. Makuch: Corporate Research and Development, General Electric Company, Schenectady, New York 12301
Jeffrey L. Dodge: General Electric Capital, 1600 Summer Street, Stamford, Connecticut 06905
Joseph G. Ecker: Rensselaer Polytechnic Institute, Troy, New York 12180
Donna C. Granfors: General Electric Capital, 1221 Post Road East, West Port, Connecticut 06880
Gerald J. Hahn: Corporate Research and Development, General Electric Company, Schenectady, New York 12301

Interfaces, 1992, vol. 22, issue 1, 90-109

Abstract: GE Capital provides credit card services for a consumer credit business exceeding $12 billion in total outstanding dollars. Its objective is to optimally manage delinquency by improving the allocation of limited collection resources to maximize net collections over multiple billing periods. We developed a probabilistic account flow model and statistically designed programs to provide accurate data on collection resource performance. A linear programming formulation produces optimal resource allocations that have been implemented across the business. The PAYMENT system has permanently changed the way GE Capital manages delinquent consumer credit, reduced annual losses by approximately $37 million, and improved customer goodwill.

Keywords: finance; management; programming: linear applications (search for similar items in EconPapers)
Date: 1992
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Persistent link: https://EconPapers.repec.org/RePEc:inm:orinte:v:22:y:1992:i:1:p:90-109

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