As the leading payroll API provider trusted by the largest fintechs in the world, it’s important for us to be at the forefront of the industry when it comes to protecting consumers and their data rights. Today, we’re excited to share that we are officially a Consumer Reporting Agency (CRA). This means we can provide consumer permissioned income and employment data to our clients while ensuring that consumers have full protections available under the Fair Credit Reporting Act (FCRA).
What is the FCRA and why does it matter?
The FCRA guarantees consumers certain rights regarding their personal data when it is used in making credit decisions and other “permissible purposes.” There has been significant public debate over whether aggregators are subject to the FCRA, and many, particularly in the payroll API space, continue to avoid the responsibility. However, industry experts have found that the key factor in determining whether a company is a CRA relates to how consumer data is used. The FCRA defines data used for credit decisioning as a consumer report, and the companies that assemble and provide consumer reports to third parties -- including Pinwheel -- as consumer reporting agencies. Data providers who avoid this responsibility are not acting in the best interest of their customers or the consumer.
Why is Pinwheel a CRA?
At Pinwheel, our mission is to help build a fairer financial future. We aim to empower consumers to take control of their data and to help financial institutions use that data to build the financial products of the future. The potential for innovation is particularly clear in the lending space -- the information stored in payroll platforms, like gross and net pay and length of employment can be used to build a more complete profile of the borrower. With that information, lenders can expand their pool of serviceable applicants while reducing risk, allowing them to offer lower-cost loans. However, these benefits can only be unlocked when lenders can actually apply this data in eligibility determination and underwriting.
“Breakthrough data analytics can be a path to better financial inclusion and healthier financial lives,” said Raj Date, Managing Partner of Fenway Summer and the former acting chief of the Consumer Financial Protection Bureau. “I am glad to see Pinwheel empowering those market breakthroughs, and doing so in a way that protects consumer interests.”
What does this mean for our customers and for consumers?
Our customers can now use consumer data sourced through Pinwheel for FCRA-permissible purposes, like offering and approving credit products. When a customer works with us as a CRA, they can leverage the insight that payroll data provides into a consumer’s financial data to make credit decisions, reducing potential credit risk, minimizing fraud, and more. The regulatory certainty provided by the FCRA helps our customers limit exposure to the legal risks of misusing non-FCRA compliant data. Being a CRA also helps us build a product that will be exponentially more valuable to our customers -- as a CRA, we can develop a product that actually enhances consumers data through additional calculations and translations (instead of simply acting as a “pass-through”).
Finally, we are now able to help empower the consumer to take control of their data, letting them request the reports shared with lenders and providing a means of recourse for anyone who believes their data is incorrect. Unlike other providers, instead of just suggesting FCRA compliance on our site we have implemented operational and legal processes to back these claims up, starting with our FCRA end user portal which helps consumers see their information and file disputes.
We will continue to contract via our standard entity to offer non-FCRA products (to be used for non-credit decisioning purposes,) and will work with customers to identify the best solution for their needs. For customers who want to use our data for FCRA-covered purposes (e.g., credit decisioning), they will work with our CRA entity.
We’re thrilled to take this next step in our journey and work with our customers and partners in building a fairer financial future. If you’re interested in working with us, utilizing our FCRA compliant service, or just learning more, reach out to firstname.lastname@example.org -- we can’t wait to hear from you!