Consumer Privacy Should Be Top of Mind for FinTech Firms to Avoid Scrutiny

With many people underserved by traditional lending institutions, including the close to 45 million adults in the U.S. who the Consumer Financial Protection Bureau estimates are “credit invisible” or have had past credit challenges, emerging FinTech lenders and online lending platforms (FinTech firms) have established themselves as valuable lending resources for both investors and consumers. FinTech firms generally use non-traditional lending and underwriting models to assess the creditworthiness of loan applicants, including, in some instances, online data that cannot be gleaned from a consumer’s credit report or employment history.

Undoubtedly, the digital footprints (both active and passive) left by consumers online offer valuable insights about those consumers’ preferences and behaviors, which can be useful to FinTech firms in assessing whether to extend credit. But the use of the Internet, which provides unprecedented access to an extraordinary amount of consumer information (some of which might be obtained without a consumer’s consent or knowledge), has raised significant privacy questions that FinTech firms might have to confront in order to overcome inevitable regulatory scrutiny.

Originally published in the Bloomberg BNA; reprinted with permission.