Electronic disclosure of adverse action virtual tech sprint
On October 5-9, 2020, the CFPB will host its Adverse Action virtual Tech Sprint.
The Bureau seeks sprint participants to develop innovative electronic ways to notify consumers of, and inform them about, adverse credit actions. Innovations may concern any aspect, or potential aspect, of adverse action communication, including its development or use. Participants may—but do not have to—address adverse actions based on the use of machine learning algorithms or data not found in traditional credit reports.
Under federal law, applicants for credit are generally entitled to receive the reasons why creditors take adverse action and, when creditors use a credit score, the key factors adversely affecting that score. These adverse action notice requirements of the Equal Credit Opportunity Act (ECOA) and the Fair Credit Reporting Act (FCRA) are intended to serve multiple consumer protection purposes:
- Notifying consumers about potential inaccuracies in the information used to take adverse action
- Preventing and helping reveal discrimination on a prohibited basis
- Educating consumers about how they might improve their chances of being approved for credit in the future
Sprint-developed innovations should offer some improvement over existing adverse action notices. A sprint innovation can count as an improvement in several ways:
- The innovation might realize one or more of the above three legislative purposes more effectively than existing disclosure methods.
- The innovation might realize those purposes as effectively as current methods while adding other value to consumers as well.
- The innovation might help achieve the three purposes in contexts where there is currently some obstacle to, or uncertainty about, their effective realization.
So long as they represent such improvement, sprint-developed innovations do not need to conform to existing rules, sample forms, or official interpretations. Participants may assume that consumers have consented to the receipt of electronic disclosures.
Given this framework, the Bureau anticipates that improvements offered in the sprint may involve one or more of the following areas:
- Providing additional information or educational content that makes the notice more actionable or otherwise of greater utility and value to the consumer;
- Using dynamic, interactive or other functionality that makes the notice more actionable or otherwise of greater utility and value to the consumer;
- Refining methods for translating model factors into reasons for adverse action, focusing on, for example:
- The specificity and accuracy of the reason language;
- The number of reasons given;
- The mapping of multiple model variables to single reasons; or
- How potential interactions between model variables are explained;
- Giving consumers useful information about how their principal reasons for adverse action were identified by the creditor;
- Proposing or comparing methodologies for identifying principal reasons for adverse action when algorithms—including, potentially, algorithms that make some use of machine learning—are used to take such action; or
- Exploring how adverse action reasons can be used to identify common barriers to access to credit or other trends.
While the Bureau believes that approaches offered by teams in the sprint likely will have some of the above features, this list of innovation areas should not be considered binding or exhaustive. The Bureau acknowledges that other solutions might deliver improvement in ways that it has not yet anticipated. If so, the sprint can usefully serve to demonstrate such innovation.
The Bureau is conducting the sprint as it continues to consider a range of possible policy actions with respect to adverse action notices and also to electronic disclosure more generally. Disclosure approaches explored in the sprint will help inform the Bureau’s evaluation of whether particular statements of policy, rulemaking, or other actions in these areas may be appropriate.
How to participate
To develop your improvements, you are allowed—but not required—to use information (including data and models) of the kind you typically work with (or are considering working with) to generate notices for adverse credit actions. To the extent that a participant uses non-public, proprietary data, models or other information as inputs in the sprint, these inputs will remain the intellectual property of the participant.
Alternatively, you can use a publicly-available data set and/or a publicly-available credit decisioning algorithm to demonstrate your improvements. Teams that want to use a defined set of principal reasons for adverse action that are not in fact derived from the use of an actual underwriting model will be able to obtain that input from the Bureau before the sprint begins. To use as a reference, all participants will receive background materials, including copies of sample notification forms provided in Appendix C to Regulation B.
Each sprint team that the Bureau approves to participate should be prepared to demonstrate their proposed innovation on October 9, 2020, which is the final day of Tech Sprint Week. Demonstrations will be made to select Bureau leaders and outside experts. There is no prescribed format for these demonstrations, but the Bureau expects them to provide a clear depiction of how the innovation represents an improvement, as described above. The Bureau expects to make these demonstrations publicly available and anticipates the issuance of one or more reports that describe and analyze sprint proceedings.
Each sprint team will maintain control over any intellectual property it creates in the course of the Tech Sprint that it does not otherwise share with the public. A sprint team that wishes to enter into a non-disclosure agreement (NDA) among its members covering the intellectual property developed during the sprint may do so, and the Bureau may make available a model NDA that may be used by sprint teams. Depending on the solutions to the problem statement they develop, teams may also consider making all or a part of any intellectual property they develop during the sprint available to the public through open source code or other means.
There are two application options. You may either:
- Apply to participate on a team, assembled with support from the Bureau, to include a range of legal, policy, and technological expertise
- Apply to participate as a team that you and others have already formed. We expect teams, whether Bureau-formed or formed on your own, to have around five members
Both forms of application will be available from September 1, 2020. Applicants will be asked to provide some indication of the kind of innovation they intend to demonstrate at the end of the Sprint. Participants will be selected based on expertise and, potentially, on the type of solution they intend to work on.
After the application period closes on Friday, September 11, 2020, at 11:59 p.m. ET, the Bureau will review applications and expects to notify successful applicants of next steps, via email, no later than September 16, 2020.
Successful applicants will have the opportunity to review pre-sprint materials and share ideas via a collaboration platform provided by the CFPB, the week of September 21-25, 2020.
The week of October 5-9, 2020, we will sprint! The sprint will be conducted remotely via a CFPB-provided video and collaboration platform. (If a team or certain individuals were to request it, the Bureau can potentially provide some meeting space at the Bureau’s offices in Washington, D.C.)
During Tech Sprint Week, the Bureau expects to provide teams with the opportunity to interact with one or more members of a panel of experts including CFPB staff, who can provide feedback on ideas as they are developed. The Bureau will also provide each team with a scrummaster to help facilitate technology and scrum ceremonies, as needed.
If they wish, after the sprint concludes, participants may consider applying to the Bureau’s Trial Disclosure Policy (TDP) using the results from the sprint to field test their innovations. Participants can take part in the sprint even if they have no intent of using the TDP or field testing. Absent approval under the TDP, entities should not deploy disclosure approaches in-market that do not conform to all statutory and regulatory requirements, even if such approaches were developed for or otherwise considered during the sprint.
Each participant in the sprint grants the CFPB permission to use his/her/its name, likeness, photograph, voice, statements, or innovation demonstration presentation on its website and for promotional purposes in any form of media, worldwide, including the CFPB’s website, print materials, outreach materials, and social media without further permission, payment, or consideration.