CFPB Insights On Alternative Data Use In Credit Scoring

The growing utilization of alternative data in credit decisions and scoring models continues to attract the attention of regulators. Although clear and practical guidance from regulators remains elusive, regulator pronouncements provide some clues and takeaways for market participants. Recently, for example, the Consumer Financial Protection Bureau issued a request for information (RFI) regarding the use of alternative data and modeling techniques in the consumer credit marketplace. [1]

The RFI describes "alternative data" as encompassing an array of nontraditional sources lenders might consider when assessing consumers. The CFPB seeks not only to understand the potential benefits and risks of alternative data and modeling techniques, but "also to begin to consider future activity to encourage their responsible use and lower unnecessary barriers, including any unnecessary regulatory burden or uncertainty that impedes such use."[2] While expanded access to