Fintechs Need Strong Consumer Protections, Diversity, Inclusion Asserts Key Congressman

From tdoay’s Forbes Magazine:

Fintechs need to include strong consumer protections, diversity, and inclusion, Rep. Ed Perlmutter (D-CO), chair of the House Financial Services Committee’s panel on consumer protection and financial institutions said at a hearing on banking innovation today.

“Most banks and credit unions have been a source of strength in the pandemic in part because of the stringent capital, liquidity, and other regulatory requirements we place on these financial institutions,” he asserted.

The financial stability risks, consumer protection issues, market fairness questions, and potential benefits of unconventional banking charters needs to be explored, Perlmutter said.

Financial Services Committee Chairman Maxine Waters (D-CA) said she was alarmed the Office of the Comptroller of the Currency (OCC) overstepped its authority by creating a fintech charter and expressed concern it could lead to a regulatory race to the bottom.

The New York State Department of Financial Services has sued the agency, claiming it lacks the legal authority to issue that type of charter. In a memo prepared for the hearing, the Committee’s Democratic staff noted in recent years, OCC, and the Federal Deposit Insurance Corporation (FDIC) have taken steps to allow firms to engage in banking activities while being subject to less regulations and supervision compared to most other banks and credit unions.

At the same time Wyoming, which was mentioned frequently at the hearing, and other states have ventured into unconventional bank charters aimed at allowing cryptocurrency and blockchain to provide bank-like services.

Financial Services Committee lead Republican, Patrick McHenry of North Carolina, said regulators should be advancing advances in banking innovation and not hindering them.

Brian Brooks, who headed up the agency as Acting Comptroller of the Currency during the Trump administration praised the potential of fintechs to expand credit and economic opportunity with additionally providing better alternatives to payday lenders.

Read the complete article here.

FICO Plans Big Shift in Credit-Score Calculations, Potentially Boosting Millions of Borrowers

From today’s Wall Street Journal:

Credit scores for decades have been based mostly on borrowers’ payment histories. That is about to change.

Fair Isaac Corp. FICO -4.72% , creator of the widely used FICO credit score, plans to roll out a new scoring system in early 2019 that factors in how consumers manage the cash in their checking, savings and money-market accounts. It is among the biggest shifts for credit reporting and the FICO scoring system, the bedrock of most consumer-lending decisions in the U.S. since the 1990s.

The UltraFICO Score, as it is called, isn’t meant to weed out applicants. Rather, it is designed to boost the number of approvals for credit cards, personal loans and other debt by taking into account a borrower’s history of cash transactions, which could indicate how likely they are to repay.

The new score, in the works for years, is FICO’s latest answer to lenders who after years of mostly cautious lending are seeking ways to boost loan approvals.

This is occurring at the same time the consumer-credit market appears relatively healthy. Unemployment is low and consumer loan balances—including for credit cards, auto loans and personal loans—are at record highs, and lenders are looking for ways to keep expanding loan volume.

Borrowers currently have little control over what is in their credit reports, save for the ability to contest information they believe is inaccurate. Lenders, collections firms and other parties feed payment-history data to the major credit-reporting firms, Experian PLC,Equifax Inc. and TransUnion, and that information determines consumers’ FICO scores.

Read the complete article here.