The National Credit Union Administration this week said CUs must accept alternative, non-traditional credit reports at a member's request when deciding on the borrower's creditworthiness. (In credit union parlance, customers of an institution are referred to as 'members.')
In a new legal opinion, NCUA said Reg B, the Equal Credit Opportunity Act, requires creditors to consider any information an applicant may present that could indicate the credit history being considered does not accurately reflect his/her creditworthiness.
So, if a member asks a credit union to consider information not gathered on a traditional report issued by the three credit bureaus, such as payment of utility bills, the credit union must comply.
The legal opinion was requested by Trycera Credit Services, an Irvine, Calif., provider of alternative credit reports. Trycera offers MyFullCredit Service, which uses alternative credit references, such as regular bill payments, with any application requiring a credit check.
Generally, Reg B allows creditors to "restrict the kinds of credit history and credit references they will consider in making a determination of creditworthiness as long as the restrictions are applied to all applicants without regard to any prohibited basis, such as race, sex, or marital status," according to NCUA. "Upon an applicant's request, however, Reg B requires creditors, in evaluating the creditworthiness of an applicant, to consider any information an applicant may present tending to indicate the credit history being considered does not accurately reflect the applicant's creditworthiness."
The regulatory agency adds that, "Creditors, at an applicant's request, must consider credit information not reported through a credit bureau when the information relates to the same types of credit references and history the creditor would consider if reported through a credit bureau."
