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posted by janrinok on Thursday May 19, @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: 5, Funny) by bzipitidoo on Thursday May 19, @03:40PM (2 children)

    by bzipitidoo (4388) on Thursday May 19, @03:40PM (#1246287) Journal

    I have a Facebook account. Once worked for an employer who required all employees to get on FB.

    I rarely post there. Too dangerous. There, I am connected to my S. O. who through extreme anxiety will read the damnedest things into the most innocent of communications. Merely mentioning someone is enough to be accused of wanting to cheat with that someone. Posts here, however, are seen as "arguing with strangers" and a total waste of time. Besides which, the S. O. thinks the tech orientation of SN is nerdy and dull. Can't look at the site for 10 seconds without becoming nauseated with boredom. I'd catch hell for this post if it ever came to the S. O.'s attention, but those eyes that are so sharp to spot that my eyes are wandering don't last a minute on SN without glazing over.

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  • (Score: 2) by JoeMerchant on Thursday May 19, @06:12PM

    by JoeMerchant (3937) Subscriber Badge on Thursday May 19, @06:12PM (#1246332)

    >those eyes that are so sharp to spot that my eyes are wandering don't last a minute on SN

    Genetically programmed - cheating gazes have been a feature of the mammalian genome for tens of millions of years.

    The stuff on SN has barely been in existence for one generation - hard to link it to propagation of genetic codes, yet.

    --
    Україна досі не є частиною Росії.
  • (Score: 2) by Spamalope on Friday May 20, @02:07AM

    by Spamalope (5233) on Friday May 20, @02:07AM (#1246466) Homepage

    That sounds like my cluster B ex. Irrational jealousy was one of the amazing features of that relationship...
    So very glad I moved on!