“cash-flow data – such as records of transactions in and out of consumers’ deposit and card accounts – can improve risk prediction because it evidences how applicants manage their finances.”

“Many companies report to credit bureaus in batches, she says, and accounts that are 30 days delinquent typically get reported about a month after the bills were due. That means that many payments missed in the early phases of the COVID-19 crisis are likely to hit the credit agencies very soon.”

The CFPB issued a no-action letter template to the Bank Policy Institute recognizing terms for a standardized, small-dollar credit product, including those designed to function as “guardrails.” The template is intended to ease approval of plans by individual regulated entities to offer a product based on these standardized terms, subject to submission and approval of further information specific to each lender. Underwriting based on the applicant’s cash-flow data is specified among the essential terms set forth for the standardized product.

U.S. prudential regulators recognize the roles that both innovative technologies and data sources such as deposit account activity can play in providing responsible small- dollar loans to consumers and small businesses who do not meet supervised institutions’ traditional underwriting standards.

Resolving data transfer issues could facilitate use of cash-flow data, with particular opportunity to expand access to credit for millions of underserved consumers and small businesses

“A shift in people’s creditworthiness ranking has been happening all over the world. We need to make sure the change’s innovative impact is a financially inclusive and anti-discriminatory one.”

“Regulators are trying to send an important signal that they are aware that there are certain data that can be quite useful, especially in assessing credit risk for an underserved population.”

“U.S. federal banking regulators issued an interagency statement supporting the evaluation of alternative data when assessing consumers’ creditworthiness.

“A shift in people’s creditworthiness ranking has been happening all over the world. We need to make sure the change’s innovative impact is a financially inclusive and anti-discriminatory one.”

“Using Income and spending data can open up access to credit, a September FinRegLab study indicated. The study analyzed information from FinTechs like LendUp Global and Petal Card that extend loans based on alternative data.