As technology has advanced, various tools have been created to help people with lower credit scores or limited credit history get credit. These tools, often called “fintech,” have been scrutinized by congressional Democrats and regulatory agencies such as the Consumer Financial Protection Bureau (CFPB) and the Federal Communications Commission (FCC).
Comparison-shopping tools, such as Credit Karma, NerdWallet, WalletHub and LendingTree, can give people a better chance of getting approved for a loan or credit card.
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Credit agencies, like Experian, also offer similar choices, including what they call a “no-ding decline” option. Customers can apply, and there is no impact on their credit score unless the application is approved.
Democrats such as retiring Sen. Dick Durbin, D-Ill., and Sen. Elizabeth Warren, D-Mass., claim they use deceptive tactics and other measures to steer consumers to more “predatory” lending options. The CFPB attempted to implement regulations to eliminate practices deemed abusive or predatory despite platforms like Credit Karma and others disclosing how compensation from advertisers may influence the order of product offerings.
However, new research from the Southwest Public Policy Institute (SPPI) found that comparison-shopping tools and lead generators allow consumers to make more informed choices. The report determined that government intervention could be detrimental to those who have difficulty obtaining credit.
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Entitled “Swipe Right: How Comparison Shopping Tools and Lead Generators Revolutionize Consumer Access to Products and Services,” the report details the efforts of SPPI’s founder and president, Patrick Brenner, to obtain credit following his divorce.
The report details how Brenner applied directly for seven credit cards through various websites such as Wells Fargo, Capital One, Discover and others. All efforts were time-consuming and often confusing, and ultimately, all failed. However, when he used the tools supplied by Credit Karma, he was matched with an offer from Merrick Bank for a credit card with a $500 limit that would double to $1,000 after making on-time payments for seven months.
The CFPB created a tool for people to search for possible credit cards. However, unlike comparison-shopping tools that one can use on their mobile phone, the CFPB website only provides disclosures about fees and rates. Anyone who wants to apply for a card must navigate to the bank or credit union and apply directly. There is no indication of the chance of approval.
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SPPI says such efforts are pointless. The report says, “Imagine the inefficiency: government agencies need help with bloated processes, outdated technology, and lackluster user experiences. If they were to develop a comparison tool, they would directly compete with highly sophisticated systems that have refined their algorithms and user interfaces over decades. Government programs do not have the resources or capacity to match the technological prowess of these tech behemoths.”
The report concludes with a warning about possible over-regulation and oversight.
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“Policymakers must recognize that these platforms provide vital alternatives to traditional banking, especially for those who lack access through conventional means. The focus should be on preserving a dynamic marketplace where consumers have the freedom to choose and the tools to make informed decisions.”
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