FinRegLab partnered with the Financial Health Network, Flourish Ventures, and Mitchell Sandler to provide a working paper summarizing the current U.S. federal legal framework governing consumer financial data with the goal of laying a foundation for future policy analyses and discussions.

This update catalogues recent initiatives involving the use of non-traditional credit data, including cash-flow information. It considers how dramatic shifts in economic conditions due to the Covid-19 pandemic and mass movements for racial justice have increased incentives to adopt new data sources and models, but also created new market and policy challenges.

This report provides a detailed snapshot of the use of cash-flow data in U.S. consumer lending and the development of the system for transferring data between firms, in addition to analyzing policy and regulatory issues raised by cash-flow underwriting in both consumer and small business credit markets.

This overview highlights key themes from our longer market context and policy analysis, including outlining options for action by industry, regulators, and Congress.

This report details the evolution of the use of cash-flow data in small business lending. It explains the reasons why electronic cash-flow data may be particularly useful in the small business context, presents evidence of its increasing use by a diverse range of incumbents and new entrants, and notes market and policy issues that may affect the nature and pace of further expansion.

We conducted an independent analysis of data from six firms that use cash-flow metrics to assess consumer and small business applicants. Using loan level performance data, we evaluated the information’s implications for predictiveness, inclusion, and fairness.

Records from consumers’ deposit and card accounts and from small businesses’ accounting software can provide a relatively detailed and comprehensive picture of how applicants manage their finances on an ongoing basis. FinRegLab conducted an empirical assessment of the data’s benefits and risks, as well as market and policy analyses of the challenges to its wider adoption.