HousingWire writes in an article from February 17th that the CFPB is seeking public input on the benefits and risks of using alternative sources of credit data, such as rental payment history and mobile phone bills, to make lending decisions for consumers who lack traditional lending history. CFPB Director Richard Cordray stated that "we want to learn more about whether this kind of alternative data could open up greater access to credit for many Americans who are currently stranded outside the mainstream credit system. We also want to understand how market participants are, or could be, mitigating certain risks to consumers that may arise from these innovations."
In the announcement, the CFPB noted that they are seeking information on access to credit, complexity of the process, impact on costs and services, implications for privacy and security, and impact on specific groups. All public comments must be received by May 19, 2017.
SFIG supports principles of competition and fair play across industry sectors, and believes that the market functions best when participants are empowered to choose business processes that best serve them and their clients in accordance with industry standards. Nevertheless, SFIG recognizes the value of standardization and consistency associated with credit score modeling, which has historically enabled the aggregation of diverse information into easily digestible and consistent formats. The use of alternative data without taking into account a borrower’s credit score raises questions of reliability, consistency, and accuracy that must be addressed before such data is used to make lending decisions