Magazine article American Banker

Lawmakers Endorse Use of Alternate Credit Data

Magazine article American Banker

Lawmakers Endorse Use of Alternate Credit Data

Article excerpt

WASHINGTON -- Lawmakers urged the financial services industry to continue developing ways to evaluate loan applicants with limited credit records but said they were reluctant to weigh in with legislation at this time.

"The Congress is showing an interest in a subject matter that may affect 35 to 50 million people who may not have a full credit reporting history," Rep. Michael Castle, R-Del., said Thursday after a House Financial Services subcommittee hearing into expanding the sources of consumer credit information for lenders.

In a rare example of congressional unanimity, Republicans and Democrats used the hearing as a bully pulpit to endorse ongoing private-sector efforts to use nontraditional data -- such as information on rent and bill payments -- to assess the creditworthiness of the millions of people in the United States with little or no credit history.

"Hopefully it will have the benefit of having those who work in the credit and lending business understand all the things that are going on and make them understand that Congress is looking at this," Rep. Castle said.

Lawmakers and witnesses representing lenders, credit scoring agencies, and consumers agreed that both businesses and consumers generally would benefit from a standardized evaluation process for alternative credit information. Technological improvements are needed, too, they said.

"We need to find an easier way to allow for the reporting of alternative payment histories," Gwendolyn Garnett Thomas, a senior vice president for neighborhood lending at Bank of America Corp. …

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