[miki123211]

If you think this is a "capitalists being evil" problem and not an "regulators over-regulating" problem, you should pay particular attention to fragments of the article:

> It’s not that hard to come up with a model for underwriting that is reasonably accurate; any bank with scale could probably do it. But FICO uses trade secrets, copyright, patents, or restrictive contracts to block anyone from doing so.

> First, the government guarantees most mortgages through Fannie Mae and Freddie Mac [...]. This complex process relies on a standard to price the loans, and that standard is FICO,

> A few years ago, the Federal Housing Finance Agency (FHFA), which runs most housing finance for the government through its control of secondary mortgage buyers Fannie Mae and Freddie Mac, decided that it might want to create some competition for FICO. So it turned to VantageScore. Only, it got backlash from Wall Street, which didn’t want to bother changing their models for mortgage backed securities. Instead of allowing mortgage lenders to pick either FICO or VantageScore, FHFA simply required that lenders use both.

In short, the federal government essentially requires everybody to use the services of one specific private company. This company can raise prices not because it's anticompetitive, but because the government doesn't allow it to have any competition.

Perhaps, instead of trying to pass even more regulation, that government should just relax its restrictions and allow other participants on the market to compete fairly?

[idiotsecant]

I don't think the solution is less regulation. When you let the banks play fast and loose with the rules, they will. See 2008.

The real answer is an open source credit model. We don't need a black box. Let private industry handle the credit line qctivity reporting part like they do now and just feed that info into an open source model. Done.

[wiltonn]

Agree with the open source credit model, and so do many governments. Open Banking is gaining traction, in Canada a new law called the Consumer Driven Banking Act was just enacted that aligns with UK Open Banking model. While the legislation does not explicitly call out open source credit model, the legislative frameworks are being setup that align with open source model. The government mandate is: "to establish a framework within which consumers, including small businesses, can direct that their data be shared among participating entities of their choice and to ensure that the sharing of data among participating entities is safe and secure." While the mandate does not call out the implementation method, this could be conceived as open source credit. Minimally it will chop down some of the legal roadblocks the incumbents use to maintain market power. I am surprised Matt doesn't mention Open Banking in the article, not sure if US lawmakers have been exploring this.

[chuckadams]

> a "capitalists being evil" problem and not an "regulators over-regulating" problem

¿Por que no los dos? A cartel enshrining itself into law is Regulatory Capture 101.

[lenerdenator]

The capitalists regularly lobby government to destroy their competition and make holes in regulations that would cause major disruptions to their business models. The light truck exemption to CAFE rules is a great example.

[miki123211]

And the proper response to this is to lobby government to repeal those regulations, and close those loopholes, not to add yet more regulations aimed at breaking monopolies.

[lenerdenator]

You realize, of course, that the regulations are there for a reason, and that it's probably best to reform them?

I don't want just any fly-by-night operation having the ability to judge my credit worthiness. If you don't tell people that's illegal and that they risk prison for it, they'll at least try it to make a buck. That's the problem, not government regulation. We're a country constantly at war against bad faith. And we're losing.