In May 2015, the CFPB issued a report, “Data Point: Credit Invisibles,” that documented the results of a research project undertaken by the CFPB to better understand the demographic characteristics of consumers without traditional credit reports or credit scores. The report concluded that the current credit reporting system is precluding certain populations from accessing credit and taking advantage of other economic opportunities. Although the CFPB did not use the term “disparate impact,” the report had fair lending implications for both providers and users of credit reports and credit scores.
Earlier this week, the CFPB published a blog post, to announce that it has released a brief, “Who are the credit invisibles?,” that describes the May 2015 report’s “most significant findings” and a checklist of action items for consumers “who are new to credit or looking to rebuild.” Among the report’s findings highlighted in the new brief are that consumers in low-income neighborhoods are more likely to have no credit history with one of the nationwide consumer reporting agencies or an unscorable credit file and that Black and Hispanic consumers are more likely to have no credit history with one of the nationwide consumer reporting agencies and have unscored credit records than White or Asian consumers. The brief also includes a section describing actions consumers can take to build a credit history.
The brief could portend action by the CFPB regarding the use of alternative credit reports and credit scores. However, as we commented when the May 2015 report was issued, the CFPB should be cautious about taking any regulatory actions that undermine existing industry efforts to serve populations not currently being served by traditional credit reports or credit scores. In addition, if the CFPB is suggesting a need for additional sources of alternative credit reports and credit scores, these new products and services would have to be developed carefully to ensure their reliability for use in making credit or other decisions; otherwise, the potential harm could be felt across all relevant stakeholders, from businesses that make decisions with inaccurate information and consumers that are impacted by those decisions.