Federal Reserve’s Consumer Compliance Outlook – Alternative Credit Data, M&A Compliance, and 2025 Violation Trends
The Federal Reserve recently released the 2026 Second Issue of its Consumer Compliance Outlook, the agency’s quarterly consumer compliance publication for member banks.
The lead article examines the growing use of “alternative data” in consumer credit underwriting and explains how nontraditional information, particularly “cash-flow” data drawn from deposit accounts, can expand credit access for roughly 32 million adults who lack a usable credit score. The article highlights consumers characterized as “invisible primes,” whose low scores understate their creditworthiness, and features “small dollar lending” as a promising application for consumers and lenders. Small dollar lending consists of short-term consumer loans, ranging from a few hundred to a couple thousand dollars, used to cover emergencies or short-term cash-flow shortfalls. The article, however, cautions that alternative-data models remain largely untested across a full economic cycle and raise transparency and data-quality concerns.
A second article examines an institution’s Community Reinvestment Act (CRA) record in the context of bank merger and acquisition applications. It also reminds member banks that the Federal Reserve weighs the applicant’s CRA record under the convenience-and-needs factor (how well the bank is meeting the credit needs of its entire community, including low- and moderate-income communities), and the applicant’s consumer compliance record under the managerial-resources factor (the bank’s record of complying with consumer protection laws). Banks rated satisfactory or better may qualify for expedited processing and application filing waivers, while less-than-satisfactory ratings trigger additional scrutiny.
Separately, the Fed’s 2025 aggregate supervisory data, drawn from 97 examinations and 630 cited violations, highlights Regulation C (HMDA) data-reporting errors as the most frequently cited violation, at 45.2% of all violations, followed by Regulation BB (CRA) data requirements, Regulation E error-resolution and statement provisions, and unfair-or-deceptive-practices citations under Section 5 of the FTC Act.
The edition also examines the Regulation BB data-collection violations that ranked among the most common in 2025, chiefly incorrect census tracts and revenue indicators for small business and small farm loans, and offers recommended practices to address each root cause.
Finally, the edition provides a regulatory calendar, tracking rules currently in effect, proposed, or under review (including the enjoined 2023 CRA final rule and numerous recently rescinded, withdrawn, or vacated CFPB rules), and a recap of recent Outlook Live webinars on fair lending, flood insurance, and adverse action notices.
