FinRegLab’s forthcoming research will help to inform the extent to which current laws and regulations are able to be satisfied in light of the emergence of more complex underwriting models, how well tools to develop and monitor those models perform in identifying effective ways to pursue greater inclusion and fairness, and considerations for policy and market developments that can support the safe, inclusive, and nondiscriminatory adoption of machine learning.

The Consumer Financial Protection Bureau has issued an advisory opinion concerning the establishment of special purpose credit programs to meet the needs of underserved groups consistent with the Equal Credit Opportunity Act. It is the Bureau’s first action following on a Request for Information about ECOA issues earlier in 2020.

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.

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.

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. regulatory agencies recognize alternative data – and in particular cash flow data – can expand access to credit and produce benefits for consumers