Are credit agencies and financial institutions taking big data too far?
Imagine applying for a loan and the credit agency or financial institution requires your Facebook, Google+, Twitter, LinkedIn, WindowsLive or other social media account details to evaluate your application. It may seem unthinkable that your financial clout would be based on the credit worthiness of your friends, your social media behavior or even potentially your profile picture.
Big data has big implications and the deluge of social media information that you’ve been voluntarily feeding online to Facebook, Twitter, Google+, LinkedIn, among others, is also feeding big data initiatives for credit and lending agencies to evaluate your credit worthiness.
For Real, This is Happening
In December 2011, the New York Observer’s BetaBeat.com posted a troubling story about credit agencies and banks using social media information and content — taken from Facebook and Twitter accounts — to determine credit scores. The article, "As Banks Start Nosing Around Facebook and Twitter, the Wrong Friends Might Just Sink Your Credit" by Adrianne Jeffries was picked up five days later by PCWorld and Huffington Post Canada. The news sparked social outrage and disdain from consumers but this has done little to change the course of big data usage — and there are now many more disturbing examples from around the world.
United States: Lenddo
Jeffries' article in December covered how Lenddo, a Hong Kong-based microlending startup incubated in New York at FinTech Innovation Lab, called itself “the first credit scoring service that uses online social network to assess credit.” What makes this even creepier is that Lenddo was incubated in New York, is based in Hong Kong and provides loans in the Philippines and Columbia.
Here’s the exact text from the Lenddo website,
|How does Lenddo determine if I am worthy of credit? |
We look at many different data points to provide the Lenddo score, from how many social media accounts you have linked to Lenddo to how long your social media accounts have been active. We also consider how many friends or followers you have on your social networks and the number and diversity of members of your Lenddo Trusted Network and their Lenddo scores.
While Lenddo writes that they “value privacy and will safeguard your personal data,” this excludes your loan details and payments records:
|What information is shared with my Trusted Network? |
You authorize that your Trusted Network can be made aware of the details of your loan application - when you applied for the loan, how much you applied for and your payment history.
Here is the original FAQ answer from December 2011 on Failing to Repay a Lenddo Loan:
|“Failure to repay will negatively impact your Lenddo score, as well as the score of your Lenddo friends. Lenddo MAINTAINS THE RIGHT TO NOTIFY YOUR FRIENDS, FAMILY AND COMMUNITY if the borrower fails to repay, however, this is only done after several notifications to the borrower and an attempt to work out a payment plan.” [yes, the capital letters were in the original].|
At the time of writing this article, the answer has been edited to state,
|Contact Lenddo immediately at firstname.lastname@example.org. The more we know about the situation, the more we can do to work with you to find a solution. We understand that there may be circumstances that prevent repayment even if you would like to pay us back, so we are willing to work with you to find a solution that works for you and works for us.|
Big data has taken an ugly turn in other parts of the world as well.