Former Office of Thrift Supervision official calls for fair competition in credit scoring

Date: June 23, 2020

In an op-ed published earlier this month, John Bowman, former acting director of the Office of Thrift Supervision, wrote that no one credit score model developer should have an unfair advantage in the consumer credit market, and that regulators should eliminate any brand bias when making rules for market participants.

Bowman pointed to concentration risk and safety and soundness concerns as reasons a single model developer should not be overly relied upon by lenders:

“The fact that there exists a single dominant entity responsible for the provision of credit scores necessary for the safe and sound operation of financial institutions and the lending they do on its face presents an operational risk to the institution. Should this single entity withhold or be unable to provide the necessary information to lenders, those lenders would be unable to satisfy the relevant laws and regulations, subjecting the lender to compliance and legal risk.”

Bowman also specifically cited the “QM Rule,” promulgated earlier this year by the Consumer Financial Protection Bureau and scheduled to go into effect January 10, 2014, as potentially granting an unintentional brand endorsement:

“… the Consumer Financial Protection Bureau’s “ability to repay” or qualified mortgage regulation contains a safe harbor provision stating that certain loans will be eligible for safe harbor if they meet the GSEs’ underwriting requirements. Once again, that limits the eligibility to loans based on credit scores from the legacy provider.”

The full article can be viewed on American Banker’s website.