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Researcher warns of risks with using alternative data in lending:
Traditional credit scoring is based on a person's demonstrated ability to take on debt and pay it off. But with the dawn of larger data pools and access to more sophisticated modeling programs, lenders and credit agencies are taking more nonfinancial factors into rating creditworthiness, particularly those without an extensive credit history. This group tends to include vulnerable populations who are often more susceptible to predatory lending practices.
The problem is the systems developing these alternative scores can be like a black box, according to University of Georgia financial regulation researcher Lindsay Sain Jones. With the pool of personal data available growing, Jones argues that it's time to take a second look at how the American credit scoring system works and is regulated.
[...] In their recent paper, Jones and her co-author argue further regulation of financial reporting entities — both large credit bureaus and new data collectors — is needed in the same way gas, electric and water providers regulated their services. They argue participation in the credit system has become as necessary as having a phone or electricity.
[...] Jones and her co-author are also concerned that much of the lifestyle-related data points lenders correlate with creditworthiness can connect to race, gender, age, socioeconomic status, a person's ZIP code or where they attended college. Successfully challenging this kind of disparate impact under the ECOA [Ed: Equal Credit Opportunity Act] is nearly impossible.
One agency pulled information on how often people pay for gas at the pump versus paying inside the store. People who paid at the pump were deemed more creditworthy.
"There are all kinds of factors that can be correlated with creditworthiness, but that doesn't mean they should be used," Jones said.
When they factor in the web sites that people visit, do you suppose SN would be an asset or liability towards creditworthiness?
[ed note: See also Black Mirror, Season 3 Episode 1, "Nosedive". - fnord]
Journal Reference:
Janine S. Hiller and Lindsay Sain Jones, Who's Keeping Score?: Oversight of Changing Consumer Credit Infrastructure [open], Am. Bus. Law J., 2022
DOI: 10.1111/ablj.12199
(Score: 1, Insightful) by Anonymous Coward on Thursday May 19 2022, @02:52PM (6 children)
The 18 year old Buffalo shooter was able to get a debit card and used it (in part) to arm and armor himself...although a story this morning claims that many of his financial transactions were made in silver (I guess he didn't trust USD?)
Could "social media credit scoring" or related have made it more difficult for him to obtain weapons?
I realize that this could generate many, many false positives and be a real inconvenience for people that have legitimate reasons for using credit/debit.
(Score: 1, Funny) by Anonymous Coward on Thursday May 19 2022, @03:00PM (1 child)
People who paid at the pump were deemed more creditworthy.
Or have bigger bladders.
(Score: 4, Funny) by janrinok on Thursday May 19 2022, @03:04PM
You too will one day grow old.
I am not interested in knowing who people are or where they live. My interest starts and stops at our servers.
(Score: 2) by DeathMonkey on Thursday May 19 2022, @04:44PM
Possibly, but only if the algorithm flagged as a high suicide risk and they were worried he wouldn't be able to pay the bill!
(Score: -1, Flamebait) by Anonymous Coward on Thursday May 19 2022, @06:26PM (1 child)
stfu, bitch. Those Niggers were probably up there spending Whitey's money to buy food to grow more Niggers anyways. Call it a fucking wake up call for the homo-erectus.
(Score: 2, Touché) by Anonymous Coward on Thursday May 19 2022, @09:06PM
If "white replacement theory" is real and it winds up replacing ass-hats like this guy, I will welcome or new black, brown and yellow masters.
(Score: 2) by Freeman on Friday May 20 2022, @02:17PM
That sounds too much like the whole Social Credit thing going on with China. We don't want that. At least those of us that are sane and value our privacy.
Joshua 1:9 "Be strong and of a good courage; be not afraid, neither be thou dismayed: for the Lord thy God is with thee"