What Is a Straight-Roller?
A straight-roller is an industry term for a credit card or loan account that moves directly into default without the borrower making any effort to make payments as the account transitions from current, to 30, 60, and 90, days late, to past due.
- Straight-roller accounts are delinquent credit card or loan accounts that move directly into default without the borrower making any effort to make payments.
- Financial institutions generally categorize straight-roller accounts as charge-offs.
- These accounts may also signal credit card fraud, such as bust-out fraud.
- Straight-roller accounts cannot, however be used in predictive models to assess risk of default.
Straight-roller accounts get their name because they roll past standard delinquency dates at 30, 60, and 90 days without stopping. This movement distinguishes them from other loan accounts in danger of default where borrowers make enough payments to move in and out of overdue status.
The path taken by a straight roller marks the quickest route an account can take from current to default, presenting difficulty for lenders using predictive models to estimate the potential for troubled debts. When lenders detect borrowers with difficulties making timely repayments, they can adjust their assessment of risk accordingly. Lenders have much more difficulty predicting future default patterns among borrowers with clean credit histories.
Financial institutions maintain policies regarding how long an account must be delinquent before they consider it to be uncollectible and issue a charge-off. For example, Experian generally converts straight-roller accounts into charge-offs after a delinquency of 180 days.
At that point, finance companies may write the debt off or sell it to a third-party collections agency. In either case, the borrower still legally owes the debt, which means the lender or collections agency has legal means at their disposal to continue to try to collect after charging off the account.
Bust-Out and Never-Pay Fraud
Depending on the disposition of an account prior to default, lenders may categorize the behavior of a straight-roller account as one of two types of fraud. Never-pay fraud takes place when a borrower opens a credit card or loan account and never bothers to make a payment. Credit cards that cultivate an excellent credit history before straight-rolling into default can represent a more difficult target for lenders. Lenders call this pattern of behavior bust-out fraud.
Bust-out accounts establish normal patterns of borrowing and repayment before making a large transaction. Perpetrators of bust-out fraud may also open a number of accounts with different lenders over a period of time before maxing them all out and refusing to make any further payments.
Because straight-roller accounts become dangerous so quickly, lenders use a variety of tools to qualify borrowers and monitor account usage patterns in an attempt to identify potential problems quickly and limit losses to the extent possible.
For example, unusually large transactions that appear to occur outside of a normal credit card user's patterns often trigger anti-fraud protection responses. While the suspension of a card for these patterns may help to reduce transactions made with a stolen card, such moves could also limit the damage from a cardholder perpetrating bust-out fraud.