“For decades, numerous academics, consumer advocates, and legislators have pointed out the importance of consumer credit scores on individuals’ ability not only to obtain credit, but also on housing and loan affordability.”

“The New York fintech startup Harvest began offering a new credit score Thursday that uses artificial intelligence to take into account cash flow, spending habits and financial discipline alongside traditional scoring data to help lenders determine if a potential borrower is creditworthy.”

“How should financial regulators shape their response to the COVID-19 pandemic in overseeing microfinance institutions (MFIs)? What factors should they consider to help poor people and micro- and small enterprises survive the crisis?”

In many smaller American towns banks and credit unions are finding usual sources of loan demand dwindling — and that was before the COVID-19 recession. Community banking institutions may find trouble if they market their credit services further afield. The solution may be to dig deeper for loans in the communities they already know, marketing loans to be evaluated with new alternative data sources (like some fintechs do).

“New York, long the hub of the financial world and an early epicenter of the COVID-19 outbreak, is looking to innovative financial technologies as one source to help its pandemic-battered economy.”

“A federal stimulus program to combat the recent economic downturn is pushing more community banks to embrace financial technology partnerships.”

The CFPB issued a blog post noting the potential inclusion benefits of using AI and machine learning models for credit underwriting, as well as risks and compliance challenges with respect to the delivery of “adverse action” disclosures. The agency emphasized the “built-in flexibility” in the regulatory framework and recognized emerging work by lenders and technology companies to enhance the explainability of AI underwriting models.

“Cash flow data can predict the credit risk that individual borrowers pose without discriminating against protected groups, according to recent research.”

“Roughly a fifth of U.S. consumers lack credit history data, she says, which focuses on certain types of credit and expenses. The data is also a lagging indicator since it’s focused on the customer’s financial history.”

The CFPB has issued FAQs on implementation of CARES Act requirements concerning pandemic-related credit reporting, as well as the use of special comment codes for disaster effects and forbearances.