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posted by janrinok on Thursday May 19 2022, @02:39PM   Printer-friendly
from the nobody's-business-but-my-own dept.

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

Original Submission

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  • (Score: 1, Insightful) by Anonymous Coward on Thursday May 19 2022, @03:16PM (3 children)

    by Anonymous Coward on Thursday May 19 2022, @03:16PM (#1246278)

    Parent said:
    By the way many of the US constitutional freedoms are not protected on private property. But ironically most US people are against Big Government. If the Government officially owned Facebook or Twitter then it would be harder for them to restrict speech...

    Totalitarian states (such as the former USSR) had antidiscrimination and other such freedoms in their constitution. Guess how that got enforced. Hint: it's just words on paper. I would say many people tend to fear Big Government over business because business can't throw you in prison to rot or command you to give away all that you have.

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  • (Score: 2) by DeathMonkey on Thursday May 19 2022, @04:59PM (2 children)

    by DeathMonkey (1380) on Thursday May 19 2022, @04:59PM (#1246321) Journal

    He's not wrong though....

    If the government did run some kind of digital "public square" they would be held to Constitutional standards not required of private businesses.

    Whether or not it's a good idea is a whole other kettle of fish though!

    • (Score: 1, Interesting) by Anonymous Coward on Thursday May 19 2022, @06:49PM

      by Anonymous Coward on Thursday May 19 2022, @06:49PM (#1246354)

      Too many people obsess about the size of government and not about the quality. The quality matters more than the size.

      A weak corrupt small government being even more subservient to large corporations could be worse especially if the big corrupt government still pretends to "uphold" some of the constitution stuff.

      If for example most of the USA became privately owned and controlled by large corporations, stuff like free speech and the right to bear arms would in practice no longer depend on the constitution but on the corporations.

      The last I checked the US voters voted and their President was replaced, good or bad the US voters had a hand in it. How many US voters got to vote to change the management or CEO of Twitter or Facebook?

      See also countries with weak corrupt small governments that are dominated by large corporations.

    • (Score: 0) by Anonymous Coward on Friday May 20 2022, @04:07AM

      by Anonymous Coward on Friday May 20 2022, @04:07AM (#1246491)

      Regarding the other person's comment about the USSR etc, if the big government was still a government elected by the people then the voters were just getting a government they voted for.

      The claim that businesses can't throw people in prison or rob people is just laughably naive. One of the main reasons corporations don't do that is because governments punish them if they do.

      The British and other colonial powers had large corporations with their own military forces and they were going around doing far more and worse than robbing people and throwing them into prison: [] [] []