Removing Barriers Blog

Comment Submitted for CFPB’s RFI re: Alternative Data
Posted May 18,2017 by vgawali

Earlier today, CUNA’s Senior Director of Advocacy and Counsel, Leah Dempsey, submitted a comment letter in response to the CFPB’s Request for Information concerning the use of alternative data in the credit process.   The CFPB is seeking information as to whether lenders are interested in using alternative data like rent, utility payments, etc. to determine credit worthiness. These types of payments, which are not usually included in credit bureau calculations could help credit invisible individuals obtain mortgages and other credit.  

The key points of the letter include:    

  • Credit unions are already highly regulated regarding their lending practices, CUNA urges the CFPB not to require any additional mandatory reporting of data. 

  • Expressed appreciation to the CFPB for recognizing the importance of serving consumers, who may have low credit scores or other financial challenges, and their stated willingness to encourage innovation to meet those needs. 

  • Noting that credit unions are already playing an important role in meeting the needs of financially distressed consumers.  

  • Cautioned the CFPB that regulatory burdens, prescriptive requirements, or complex processes for using alternative data could be counter-productive to the stated goal of increasing access to credit for more consumers. Adding unnecessary or overly complicated compliance burdens to the process of underwriting credit has proven to be damaging to credit unions’ ability to provide safe and affordable credit. 

  • If the CFPB moves forward with any policymaking in this area, CUNA urges it to consider how credit unions already are working with their member-owners to find ways to provide credit to consumers with low credit scores or who are facing other financial challenges. Examples of credit unions successfully doing this in the small dollar lending market were also provided.

  • The CFPB should also recognize that the NCUA has already acknowledged that Low-Income Credit Unions (LICUs) and Community Development Credit Unions (CDCUs) may need more flexibility to underwrite loans and provide credit.  

  • Urging them to consult with the NCUA concerning whether any new reporting requirements could impact the safety and soundness of credit unions. 

As discussed at the CFPB’s Credit Union Advisory Council meeting at the end of March, credit unions have long supported finding creative ways to meet the needs of members in distressed financial situations, as well as all members.  They support the use of alternative data to find solutions to meet these needs, particularly for low-income and credit-invisible consumers.  However, credit unions need more flexibility under current statutes, not less, and CUNA cautions against overly complex, new reporting requirements regarding the use of alternative data.