Which basketball tournaments just ended?

If you’re like most people, you answered the NCAA Championships. That’s not a slight against others like the National Invitational Tournament, College Basketball Invitational, and College Basketball Crown. But when it comes to college basketball and March sports in general, there’s the Big Dance and then there’s everyone else.

This step-function contrast – an established leader, heads and shoulders above a field of also-rans – made the connection for me between sports and business, and I knew right away I had my next blog post.

When you’re looking for a cash flow analytics partner, there are top-tier vendors – the NCAA D1 contenders, if you will –alongside an increasingly crowded field of lookalikes that don’t have all the pieces in place. And one of the most important differentiators is whether they’re a consumer reporting agency (CRA).

The CRA roster

CRAs are statutorily defined as organizations that assemble and/or evaluate information about consumers then share that information with a third party for decision-making purposes. In short, CRAs create reports that are usually about credit but sometimes about other things like screening for employment, housing rental, checking account opening, and more.

When you hear the term “consumer report”, the three national credit bureaus – Experian, Equifax, and Transunion – usually come to mind. Those three are indeed CRA s, but there are dozens of other companies collecting information about consumers then providing that information to decision-makers in the form of consumer reports.

Lenders, creditors, and other consumer risk decision-maker scan not only rely on the accuracy of information in consumer reports but also utilize consumer reports as the basis for “adverse actions” (meaning denial of credit, employment, or similarly unfavorable decisions enumerated in the Fair Credit Reporting Act).

Because consumer reports can play such a pivotal role in peoples’ lives, CRAs must disclose the information in a consumer report upon request from any consumer who receives a notice of adverse action from a risk decision-maker. In turn, consumers have the right to dispute any discrepancies in the information maintained and reported by CRAs.

And it turns out that these rights and processes prescribed in regulation have tremendous value for all stakeholders in creating an open, level playing field.

Why draft a CRA into your starting lineup?

This transparency and fairness are two of main reasons why it’s advantageous to work with a data and analytics partner that’s also a CRA. Let’s briefly unpack each:

• Transparency: In adverse actions and approvals alike, a well-documented basis for decisions is essential for both compliance and positive consumer relations. Working with a CRA means your decisions are backstopped with a readily available report that regulators and consumers can review.

• Fairness: “Fair” is the first word in the legislation that birthed CRAs in the U.S. and for good reason – among the Act’s stated purposes are ensuring that CRAs operate with fairness and impartiality to maintain public confidence in the banking system. Giving consumers a voice to dispute inaccuracies in their file and requiring CRAs to correct or delete such discrepancies assures all participants in the credit system that consumers are accurately represented.

Importantly, all the above is a step function beyond a data or analytics provider simply being “FCRA compliant”. When you hear that, there’s at least a measure of comfort the vendor isn’t knowingly building attributes and models on any protected status. Unfortunately, asserting compliance is a far cry from the proactive commitment undertaken by each CRA to guarantee consumers certain rights regarding their data.

In fact, most CRAs have voluntarily established the controls and processes necessary to furnish consumer reports and subjected themselves to greater regulatory scrutiny from a number of federal and state agencies. This is what EDGE did when we announced we’d become a CRA.

We wouldn’t have taken that step if it wasn’t in our customers’ and consumers’ best interests.

As adoption of cash flow underwriting methods grows, its promise of greater financial inclusion rings hollow without a commitment to curate data with the same standards of care that have long applied to traditional credit reports and scores. When insights can affect people’s lives, they should be based on accurate and impartial data used only for its intended purpose.

The Open Banking Alley-Oop

In the open banking universe where EDGE orbits, it’s even more crucial to partner with a CRA for data and analytics. The cashflow data utilized by all open banking providers is obtained with clear, explicit consumer permission.

Ironically, very few providers will then share with that same consumer what he or she consented to share. Put simply, if you “show them yours” with all manner of financial and personal information, most so-called “open” banking participants are unwilling and unable to reveal what they’ve extracted and concluded from your data.

That doesn’t seem very open to us here at EDGE. As a CRA, we share Justice Brandeis’ view that sunlight is the best disinfectant and gladly disclose our files to the very consumers whose data powers EDGE’s analytics and who we’re committed to empowering with better insights based on better data.

We’re a CRA because we believe that’s the level of integrity and responsibility imperative for our industry to deliver on open banking’s promise to overcome historical biases inherent in traditional credit reports and scores. There’s tremendous potential to move beyond recursive, backward-looking data and rebuild the credit bureau model around an applicant’s ability to pay, but that change is best accomplished within the established regulatory framework that governs CRAs.

Much like the national credit bureaus, EDGE’s customers entrust us with applicant data along with the performance and outcomes of the loans they’ve extended based on our risk insights. The same applicants trust both EDGE and our customers to safeguard their financial and personal information shared through open banking. Over the past several years, we’ve seen millions of consumers and billions of bank transactions – which adds up to a lot of trust and a lot of responsibility.

So we’re not just ready for The Big Dance here at EDGE. We’re playing every point and every minute like it’s the most important because it is the most important thing in the world right now for the consumer whose file that you or another lender are evaluating. And it’s as a CRA – and only as a CRA – that EDGE or any other partner can provide that consumer and your business with commensurate assurances and safeguards.