US Banking Agencies Issue Statement on Alternative Date in Credit Underwriting
On December 3, the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), the Consumer Financial Protection Bureau (CFPB) and the National Credit Union Administration (the Banking Agencies) released interagency guidance related to the use of alternative data for purposes of underwriting credit (the Guidance).
The Guidance acknowledges that alternative data may “improve the speed and accuracy of credit decisions,” especially in cases where consumer credit applicants have “thin files” because they are generally outside the mainstream credit system. In order to comply with applicable federal laws and regulations when using such alterative data, including those related to unfair, deceptive, or abusive acts or practices, the Banking Agencies advise that lenders should responsibly use such information. Furthermore, the Guidance reminds lenders of the importance of an appropriate compliance management program that comports with the requirements of applicable consumer protection laws and regulations.
As a final recommendation, the Banking Agencies suggest that lenders consult with appropriate regulators when planning to use alternative data to underwrite credit.
The Guidance is available here.