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CFPB Proposes Using Alternative Data for Credit-Poor Consumers

The nation’s top consumer credit watchdog agency wants to know how the public feels about credit agencies potentially gleaning information about their financial histories from past bill statements.

The Consumer Financial Protection Bureau [1] launched the effort [2] Wednesday on the premise that access to these documents could help millions of Americans considered invisible to credit agencies, or lacking in established credit histories.

The bill statements could range from those for rent and cell phones to receipts for electronic deposits and withdrawals from financial institutions.

The reason why? Consumers without established credit records usually resort to lenders with higher-priced loan offerings. The CFPB said the burden falls hardest on the young, minorities, and those from low-income backgrounds.

According to the agency, some 26 million Americans fit that description, and another 19 million have credit histories that have gone dry.

“Alternative data from unconventional sources may help consumers who are stuck outside the system build a credit history to access mainstream credit sources,” CFPB Director Richard Cordray said in a statement.

“We want to learn more about whether this non-traditional approach can offer opportunities to millions of Americans who are credit invisible and how to minimize any risks in how this information is used,” Cordray added.

The CFPB holds that accurate credit reporting could significantly improve lending services for these consumers and cut down on wrongful reports that lead to higher-priced loans down the line.

As is typical for these sorts of inquiries, the agency is seeking public feedback on its proposal. To view the CFPB's public request for information, click here [3].