The CFPB issued a Request for Quote (RFQ) to “acquire Alternative Credit Data and Associated Services for the…Bureau.” The Bureau’s materials associated with the RFQ note that the Office of Research, Markets, and Regulations (RMR) “has an interest in understanding the impact of the financial industry’s use of ‘alternative data’ on consumers, particularly consumers who have no credit bureau record and consumers who have a credit bureau record, but do not have a credit score.”
For the Statement of Work (SOW) under the RFQ,
the Bureau defines “alternative data” as information not found in traditional credit-record data (e.g., history of rent and utility payments, employment history, etc.). In recent years, companies developing financial technology (i.e., “fintechs”) have become more likely to use alternative data in making lending decisions to credit invisible and unscorable consumers. The use of alternative data may be one potential way to reduce the number of consumers who have difficulty accessing credit, including access to well-priced credit. However, alternative data may only be selectively available, which could create or exacerbate gaps in access to credit among minority or low-income populations. Thus, collecting alternative data could have the potential of creating disparate impacts on consumers.
Eric J. Ellman is Senior Vice President for Public Policy and Legal Affairs at the Consumer Data Industry Association (CDIA) in Washington, DC. He also served for eight months as Interim President and CEO of the Association. More