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Financial Services Law Insights and Observations

Prepared Remarks of Richard Cordray at the LendIt USA Conference

Consumer Finance CFPB Cordray Credit Scores Project Catalyst

Consumer Finance

On March 6, CFPB Director Richard Cordray spoke at the LendIt USA Conference to outline three “areas of special interest” to the Bureau relating to innovations in consumer financial services. In his prepared remarks, Cordray highlighted the three areas as (i) the Project Catalyst initiative; (ii) issues regarding consumer control over personal financial data; and (iii) research concerning the benefits and risks of using unconventional data sources to underwrite loans as a means to open credit access for more consumers.

Project Catalyst, Cordray explained, is the Bureau’s major initiative which “operates on the principle that markets work best when they are wide open to competition from new ideas.” He further explained that the Bureau is trying to “learn about what does and does not work for consumers [as well as] potential challenges facing entrepreneurs and investors.” Project Catalyst hosts an “Office Hours” program to engage with startups, nonprofits, banks, and other financial companies, and conducts research pilot programs with companies of all sizes. It also works to devise new policies to foster innovations such as the “Trial Disclosure Waiver Policy,” which encourages the development of new technologies and approaches for designing and testing alternative consumer disclosures.

Cordray also spoke about the Bureau’s interest in understanding the ways consumers are exercising control over their personal financial data. Last November, the Bureau issued a Request for Information seeking input on the challenges consumers face when accessing, using, and securely sharing their financial records. Furthermore, Cordray emphasized at the conference that two pressing issues are (i) “how to satisfy the demands of the consumers without exposing the providers that maintain [the] data to undue costs and risks, and (ii) how to prevent consumers from subjecting themselves to undue risk, including [the misuse of their data].”

Finally, Cordray commented on the Bureau’s February Request for Information issued to better understand the potential consumer benefits and risks associated with using, applying, and analyzing “alternative data” to predict people’s creditworthiness. The request asked consumers for feedback about the difficulties they have encountered when accessing, using, and securely sharing their financial records.

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