Financial technology start-ups and online lenders should provide their borrowers and their investors with more transparency into how they arrive at proprietary credit scores, according to a report Tuesday from the Treasury Department.
It said that computer programs the companies use can make the process run faster and cut costs, but they also can distort credit scores and carry "the potential for fair lending violations."
"Applicants do not have the opportunity to check and correct data potentially being used in underwriting decisions," the report said.
Fintech lenders including SoFi have originated billions in online loans in part thanks to proprietary algorithms they use to grade borrowers.
The report also revealed plans for a standing working group for the lenders, through "interagency coordination," which suggests that fintech companies may face a rising tide of regulation.