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Fair Lending and Big Data are having a huge impact on our policy and practices; and that my friends is an understatement!

Anyone that is a regular reader of our content knows that one of my favorite peeps is David Skanderson, PHD who is Vice President of Financial Economics practices for Charles River Associates in Washington DC.  David has a strong command of fair lending statistical analysis and how trends affect fair lending practices.  As nerdy as this may sound, I love our discussions and highly value his opinions.

David and his colleague Dr. Marsha Courchane just released an article in ABA Bank Compliance magazine which I believe to be a “must read” for anyone in fair lending.  The article addresses how the use of big data and alternative credit models should be considered when evaluating any the of those products.  While we are generally accustomed to credit score models, the world is evolving to reach more clients that fall outside of the barriers that credit score models built.  Also, predictive analysis models and artificial intelligence are being created to predict borrower repayment.  One of the reasons our practice works heavily with FinTech developers is that they are building the future models of our business methods and many of these companies want to make sure they meet the market needs and the regulatory requirements.

Compliance folks, you should be called in to evaluate the new models to ensure that the methodology can be defended and that justifications for decisioning are developed.  You also need to develop monitoring practices for how newer technologies are impacting your fair lending outcomes.  This is even more important as the new HMDA data rolls out because this will reveal more about your practices then you probably realize.  I hope that each of you takes a few minutes and read David and Marsha’s view on Big Data and Fair Lending and we would love to hear your comments about it!

Please Click Here Big Data Fair Lending_skanderson-courchane-ABAto Read the Article.

Tammy Butler, Master CMB

Author Tammy Butler, Master CMB

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