When a diverse coalition, including big banks and a civil rights group, this summer called for speedier deployment of cash-flow data to widen Americans’ access to credit, it was a little-known startup research organization that brought them together.
FinRegLab is a new Washington research group led by two women with deep ties to the financial technology industry as well as to Capitol Hill. They are credited with drawing attention to fintech’s ability to improve Americans’ lives.
FinRegLab CEO Melissa Koide and deputy director Kelly Thompson Cochran “are respected by everyone,” former deputy comptroller of the currency and Senate Banking Committee staffer Jo Ann Barefoot told CQ Roll Call. “They are well known by everybody in the field.”
They put together the coalition of bankers and advocates that’s now calling for using data to achieve better credit access, which many consider a crippling impediment to economic growth. The group says better data analysis offers a solution, according to reports the coalition developed.
“It was Melissa’s credibility as a thought leader” that convinced the working group’s participants to convene regularly over a period of months to conduct the research and prepare the reports, said John Pitts, policy lead at Plaid, a financial technology company.
Prior to establishing FinRegLab, Koide spent four-and-a-half years in President Barack Obama’s administration as the Treasury Department’s assistant secretary for consumer policy. She helped spearhead the creation of Treasury’s “myRA” program, which was designed to help low- and middle-income earners begin saving for retirement. The Trump administration shut down the program in 2017, saying it was not cost-effective.
In 2016, as the Obama administration was drawing to a close, Koide, a Louisville, Ky., native, recalls lamenting the lack of an independent, nonpartisan organization that policymakers could turn to for answers to questions they had on the use of data in credit underwriting.
Accordingly, she and Barefoot came up with the idea for FinRegLab.
“Can we truly serve as this honest broker between the regulators, and the pressing questions they have and that they are seeking answers to, and the banks, nonbanks, technology sectors?” Koide remembers asking herself. “Can we successfully go out and engage industry in such a way they would share with us the level of information we need to build and engage independent research efforts?”
As with any startup, the first goal was to obtain funding. Developing a pitch, Koide met with Flourish, a venture fund backed by the founders of eBay, and The Milken Institute, a California-based economic think tank — both of which agreed to support FinRegLab. Koide also secured a grant from the Marin Community Foundation, a philanthropic organization in California.
Next, Koide rounded up an all-star cast to serve on FinRegLab’s board. Barefoot agreed to serve as chairwoman. Joining her were Marla Blow, CEO of FS Card, a startup credit card company; Amy Friend, a former chief counsel in the Office of the Comptroller of the Currency and Senate Banking Committee; Brian Brooks, chief legal officer of Coinbase, one of the largest digital currency platforms in the world; Chuck Muckenfuss, former senior deputy comptroller of the currency and former counsel to the chairman of the FDIC; and Alex Acree, managing director of Fenway Summer Ventures, a venture capital firm.
Koide found a deputy in Cochran, who had been the assistant director for regulations at the Consumer Financial Protection Bureau, where she oversaw rulemaking activities connected with the 2010 Dodd-Frank legislation and other financial consumer laws. Prior to her stint at the bureau, the Portland, Ore., native practiced law at WilmerHale, advising financial services firms on legal and regulatory issues.
Cochran said she was drawn to FinRegLab because of the void the group was filling. “There’s a real thirst from a lot of different stakeholders coming from different directions to engage in these issues,” she said.
Cochran says the financial and technology industries are particularly interested in exploring these issues “because many aspects of federal consumer financial law were developed for a somewhat different time and place.”
With a team in place and headquarters in downtown Washington, FinRegLab launched its first research project on cash-flow data — records of money coming in and out of a consumer’s deposit and credit card accounts — as an underwriting tool to broaden access to credit.
Koide and Cochran were on to something: Earlier this month, when discussing the future of banking, FDIC Chairwoman Jelena McWilliams said, “Data is the new capital.”
FinRegLab began assembling working groups made up of large banks, community banks, financial technology firms, consumer advocates, lawyers and academics to gather data from six nonbank financial services providers. They are Accion, Brigit, Kabbage, LendUp, Oportun and Petal, which have begun using cash-flow data and credit scores to increase the provision of credit to consumers and small businesses that have difficulty obtaining loans from traditional sources.
The FinRegLab working groups conducted a policy analysis to assess the benefits and risks of using cash-flow data in credit underwriting and the obstacles to wider adoption.
One of the groups working on credit access included representatives from JPMorgan Chase and Bank of America; the National Urban League, a civil rights group; Mayer Brown, an international law firm; and the Consumers Union advocacy group. Officials from the Federal Reserve, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation sat in as observers.
Ultimately, FinRegLab and the working groups produced two reports, with a third on the way, which concluded the data “holds substantial promise for improving credit risk prediction, expanding access to credit, and spurring market innovation and competition.”
The reports suggest stakeholders “should invest more resources into reducing the technological, competitive, and compliance challenges that are slowing adoption of beneficial practices and mitigation of risks in today’s markets.”
Meanwhile, FinRegLab continues working to bring influential experts, policymakers and stakeholders together. In November, it will co-host with the Federal Reserve Bank of San Francisco Fintech Team an invitation-only symposium to explore questions surrounding the ownership and accessibility of consumer data.