Protecting Consumer Choice in Alternative Credit Data Sharing

If Cambridge Analytica has taught us anything, it’s that consumers should have the right to determine who has access to their data. However, the issue of data sharing is not all cut and dried, especially when it comes to situations that ultimately benefit consumers. With data for alternative credit scoring, credit bureaus have the opportunity to expand credit access to millions more consumers, as long as consumers retain the choice of whether to share their alternative credit data.

Alternative Credit Data Can Benefit Consumers

According to Experian’s first State of Alternative Credit Data report, more than 50 percent of consumers believe that sharing their utility or mobile phone payment history with a credit bureau would improve their credit scores. Lenders are even more optimistic; 78 percent say that factoring in alternative credit data will improve financial inclusion.

More than 50 percent of consumers believe that sharing their utility or mobile phone payment history with a credit bureau would improve their credit scores.

In a statement, Experian president of Consumer Information Services Alex Lintner said: “We believe everyone deserves access to quality credit. When you give lenders the opportunity to layer on additional sources of data — like trended data, attributes, rent and utility payment history, and short-term loans — suddenly a much more comprehensive picture of the consumer emerges.”

Data Sharing and Consumers Choice

That being said, consumers have varying opinions around data sharing when it takes place without their knowledge or consent. The Senate is currently debating the Credit Access and Inclusion Act, which would amend the Fair Credit Reporting Act (FCRA). Under current FCRA requirements, in many states, utility and telecommunications companies cannot share payment history data with credit bureaus without explicit permission from the consumer.  

Although the act seems like it would benefit most consumers, that impact is by no means guaranteed. A 2017 report by the Pennsylvania Public Utility Commission found that more than 25 percent of low-income electric customers had late payments on their record. If denied the choice of whether to report their own data to credit bureaus, alternative credit data could end up negatively impacting consumer credit scores.

Putting Consumers in the Driver’s Seat

Hence, protection of consumer consent is paramount. Alternative credit data has promising potential to expand financial inclusion, but it should be the consumer’s choice whether their data is shared. Implementing a data sharing process wherein consumers opt in to share their utility and telecom payment history will ensure that the millions of unbanked and underbanked have the chance to build their credit without risking damage.

Learn how to close the lending gap with user-permissioned utility and telecom data here.

You may also like:

• Understanding the Credit Scoring Landscape
• Survey: Consumers Are Ready to Use Alternative Data for Credit Scoring
• eCredable Redefines Credit Reporting with Utility & Telecom Payment Data

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