I understand FCRA and ECOA very well and it is very unlikely we are going to get a different interpretation of these regs just because Facebook wants to get into the loan origination game. I see a number of issues:

1. Reason Codes: FCRA reason codes that the lender has to generate will be a PR nightmare if they decline the loan application based on Facebook data -- imagine a consumer getting a rejection reason as 'Your fiends have poor credit rating so we don't want to give you credit'.

2. Discrimination / Disparate impact: Most people who are poor also have poor friends and this type of analysis will lead to disparate impact that the article talks about and there is no way around it -- even if they get a slightly different interpretation of FCRA they are not going to solve disparity easily.

3. CRA Regulation around data quality: Credit Reporting Agencies (CRA) has specific mandates around providing accurate information about the the borrower. If a borrower thinks it is wrong, they can request the CRA to fix it through a dispute process -- this is a very time-intensive, expensive process for a CRA. I doubt Facebook would want to build a process for disputes and the disputes are going to be worse -- before I will say, I paid my credit card on time and you got it wrong to the credit bureau. Now I may say, I don't think my friend's rating is low and Facebook has to due diligence before they can claim it is correct.

I can see a few ways they might go about this:

1. Second shot at approval as opposed to decline: A lender may reject an application and may choose to use Facebook data to give the borrower a second chance. This is better for the borrower and the regulators may be ok with this type of approach. Although they need to be careful with banks not suddenly changing their FICO Score cut off to something very high so they can fall back on this.

2. Only make it available internationally: not all countries have such strong protections around consumer credit data. Also, many countries don't have a robust credit bureau and this may actually help consumers.

3. Focus on alternative payday lending: CFPB is keen on opening up newer sources of data for certain segments that do not get any credit today. They may be open to this approach if fb can show that it will allow lenders to provide credit to people who they wouldn't have before.

I have strong views about FCRA / ECOA and I feel most of the provisions in there are actually beneficial to the consumers. Even though my startup SimplyCredit is in the fintech space and would greatly benefit from relaxed regulation, I do think it is good to have strong consumer protection and that's why we don't use anything outside of what will be considered as 'payment behavior / financial management'.

I cringe every time a new fintech company claims they monitor how fast you can type or analyze your github profile to give you credit -- either they say these things for marketing but really using it for underwriting or actually using it and breaking many provisions of FCRA. The last thing I want to do is decline a person with disability for typing slowly -- especially when the focus is to really help consumers and not to showoff your power to analyze such realtime data!

Instead of data sources like Facebook, I would welcome a cleaner source of data with verified income and employment.