CFPB looks to increase lending to “credit invisible” borrowers
The CFPB will be joining a growing number of groups that are trying to increase debt access for people who don’t have enough loan history to get the credit score they need for borrowing what they need.
The Consumer Financial Protection Bureau is joining the growing chorus of groups trying to expand debt access for consumers who lack enough loan history to obtain a credit score.
This untapped market is also known as the credit invisible.
The CFPB said it is officially is seeking public feedback on the benefits and risks of tapping alternative data sources, such as bills for mobile phones and rent payments, to make lending decisions about consumers whose lack of credit history might otherwise block opportunities.
During a field hearing in Charleston, West Virginia on Thursday, CFPB Director Richard Cordray explained that the bureau’s sole mission is to protect consumers in the financial marketplace, which includes ensuring that consumers can gain access to financial products and services that are fair, transparent and competitive.
As a result, he said the CFPB is announcing a request for information about unconventional sources of information, new ways to analyze this data, and how new technologies can help in assessing people’s creditworthiness.
The CFPB seeks information about whether using alternative data to create or augment a credit score could increase access to credit by helping lenders better assess consumer creditworthiness.
2. Complexity of the process:
The CFPB is looking at whether the use of this information could make credit decisions more complex for both consumers and industry. This process includes lenders who must notify consumers about credit decisions and financial educators helping consumers grasp their credit standing. The bureau is examining whether the added complexity makes it harder for consumers to understand and take control of their financial lives.
3. Impact on costs and service:
The CFPB is looking into the impact of the use of alternative data, new ways to analyze it, and new technologies on costs and services in credit decisions. The bureau is studying if this may help produce a faster application process, lower operating costs for lenders, and lower loan costs for borrowers. read more… housingwire.com