Risk & Compliance

Risks in automated approval processes of credit providers

Date:December 15, 2023

The Financial Markets Authority (AFM) has identified an increase in errors in automated credit underwriting processes. This occurs in both mortgages and consumer credit. The regulator comes to this conclusion based on mandatory incident reports the AFM has received from credit providers.


The AFM notes that increasing automation of processes also increases the likelihood of errors. The question is whether automation leads to more errors, but in any case, an error in automated processes has a major impact on the credit provider and the consumer, and in any case leads to a greater number of wrong outcomes.

Incorrect use of source data and poor data quality are some of the errors mentioned that lead to adverse consequences for consumers. The regulator recognises the benefits of source data, such as access to transaction data, for an efficient underwriting process. At the same time, errors in misinterpretation of calculation rules, for example, easily become systematic. If not detected quickly, these can have major consequences. A robust change management process with a sound testing policy can prevent problems.

Revisions are vulnerable

Every year, consumer and mortgage lending standards are revised. This year, the changes are quite impactful for mortgage providers because of differentiation by sustainability. These new lending standards will apply from 1 January 2024. It will not be entirely coincidental that the AFM’s notice is published now.


What is interesting in the AFM’s publication is that the legal obligation to report incidents is a key source of information. This is not the first time attention has been drawn to the incident policy. A recent publication by the AFM showed that a number of financial service providers did not have an incident policy and incident register. In this publicatioin, the regulator calls on market participants to report incidents immediately and not first finalise the results of an investigation.

Testing and awareness

It is therefore important to properly test adjustments in the acceptance policy and the use of source data and check whether outcomes are correct and complete. Important to establish is that sufficient testing capacity is available in case of changes and feedback is processed and retested in a timely manner.

To ensure that incidents are timely reported to the AFM, it is important that the lender pays ongoing attention to the incident policy. Is everyone aware of the policy and procedure in place? Is the policy and procedure still up to date? Do incidents reach the right place in the organisation in a timely manner? Has the incident been reported?


In 2024, the AFM will investigate measures taken by providers to prevent errors in IT systems. It is therefore wise to check now whether the IT change management process is adequately set up and provides sufficient safeguards to prevent errors.

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