By Natalie DeCoste

Some of the biggest banks in the U.S. are planning to start sharing data on customers’ deposit accounts to loosen consumer lending standards, making it easier for people with no credit score to secure loans.

Institutions such as JP Morgan, Wells Fargo, and U.S. Bancorp are some of the ten banks participating in the program.

The move is part of a government-backed initiative to extend credit to people who have traditionally lacked opportunities to borrow.

Through this pilot program, expected to launch later this year, these institutions will factor in information from applicants’ checking or savings accounts at other financial institutions to increase their chances of being approved for credit cards.

The program is part of Project REACh, which stands for Roundtable for Economic Access and Change, announced by the Office of the Comptroller of the Currency in July of 2020.

“The recent civil unrest across our country emphasizes that too many people have been left out of our nation’s economy. While we applaud others, who have made large financial contributions to address immediate needs, Project REACh will focus on policy and structural changes that can help more people participate in our economy and prosper in the same way so many others have,” said Brian P. Brooks, Acting Comptroller of the Currency at the time.

Brooks noted in the announcement that there were 50 million Americans without a credit score at that time, and he felt that this lack of credit score did not necessarily make these people unworthy of getting a line of credit.

“Its mission—to remove barriers for minorities and underserved people to fully and fairly participate in the nation’s economy—is critically important, especially now,” said Michael Hsu, who is now the acting comptroller about the project.

Now, the banks that are part of the pilot program will look at people’s financial history over time, including bank balances and overdraft histories, to determine eligibility. 

Should the program prove to be a success, it would mark a significant change in the underwriting tactics of big banks. For decades, these institutions have enshrined credit scores and credit reports as the main tools to determine who gets a loan.

To help facilitate the necessary data-sharing, the banks are reportedly discussing the use of credit reporting firms like Equifax, Experian, and TransUnion. The banks are also considering working with other data providers and aggregators, such as Plaid Inc. and Finicity, to consider other parts of an applicant’s history like paying rent and utility bills. The banks chose to start with bank deposit data because such information is more readily available.

“It’s not a Hail Mary,” said Marianne Lake, chief executive of consumer lending at JPMorgan. “It’s something that we know works.”

The program may raise questions surrounding data privacy and transparency. Typically, the fine print on a credit card application gives a bank permission to access a person’s credit history. Now, it will also have to cover bank-account data.