Credit Scoring: Will Our Digital Identity Replace the Real Person?

Abstract

When last summer in Germany the news spread that the most important credit agency¹ (Schufa) was cooperating with the renowned Hasso Plattner Institute, researching on social networks and their relevance for creditworthiness, there was a public uproar. The then Federal Minister for Consumer Protection, Ms. Aigner, warned that Schufa should not become the consumers’ economic Big Brother. Correlating the data of a credit agency with those of social networks seemed to be quite a delicate matter. Within days the cooperation was ended. Schufa defended the cooperation by claiming that other companies were already using such data available in the internet. The German economic magazine Handelsblatt named a couple of foreign companies that used data from social networks like facebook or twitter to predict creditworthiness. Other companies use data from GPS services or social graphs (likes, friends, posts), the time spent on a particular web site or app or the general smartphone usage to score consumers. In Norway credit scoring also relies on taxable income and tax returns. An American start-up, headed by a former Google chief information officer, which promises to predict consumer behaviour, makes use of Big Data and utilizes 70,000 indicators. Scoring than becomes more and more a specific kind of data mining. It seems that Schufa’s intention for further research is by far not the most problematic aspect of the question and that the use of internet data for consumer scoring is not limited to Germany. Apart from the United States, which has a specific legislation on scoring, there seems to be a certain lack of clarity in international consumer protection with regard to it. The proposed EU regulation on data protection?², although intended to tackle new technological and international developments, does not deal in specific with scoring. In Germany scoring still is a very sensitive issue for consumer protection. During the Conference of the German Countries (regional) Ministers for Consumer Protection therefore there has been a demand for more legislation, more supervision and more scientific research. The German National Ministry for Consumer Protection in autumn 2013 contracted a study on the latest developments in scoring and the need for further consumer protection legislation.

Deputy Director General for Consumer Protection in Germany

¹ Hans Micklitz was not only the Head of the Scientific Advisiory Board of the German Federal Ministry for Consumer Protection for many years but also is a long time member of the Schufa (credit agency) Consumer Protection Committee.

² Proposal for a Regulation on the protection of individuals with regard to the processing of personal data and on the free movement of such data (General Data Protection Regulation), COM(2012) 11 final.