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Will a “Social Credit Score” Determine Credit Worthiness?

Thanks to Rob Chrisman and Thomas Michel for bringing this article to my attention. I’m posting this in the hopes that you will stop this discussion in your company before it starts! 

Facebook has updated a patent on a technology that has several use cases. One of those use cases is to allow a service provider or lender to access a metric which will examine the credit ratings of those in your social network. Based on your “collective social credit score” (my words not theirs) a lender can set a minimum threshold for approval or denial. 

This is wrong on so many levels, but let’s begin with the basics: 

1. Why would a lender need to look at the credit scores of your social network and use that as a metric for your credit worthiness? I thought we were supposed to evaluate a person’s credit based on their own credit behavior. Have I missed something, or do my Facebook friends subliminally tell me whether or not I should pay my bills? 

2. I don’t have enough space to write the words about how this will affect your Fair Lending results. Bottom line is that this will really mess up your stats so stay away from it when evaluating a client’s creditworthiness. Your company has enough to worry about with our new diverse lending regulations, and this will just muddy your equation even more! 

Think about this, a business justification on your lead acquisition policy through the major aggregators is enough to give most risk managers a headache. Imagine having to build a business justification for a social score based on a client’s social network, and the denials or risk overlay that go along with that. Even my Brainiac Math friends would have a hard time with that one! 

3. I’m really hoping that since Facebook bought this patent from Friendster 15 years ago that they intend to never offer this use case as a metric to the lending community; because I fear that there are some lenders that may pick up on it. However, since they updated the patent, I would have to assume that they have plans to follow this path. Otherwise they would not have updated that use case. 

It’s a slippery slope, that I hope all of my readers are smart enough to stay away from! 

What are your thoughts? 

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Tammy Butler, Master CMB

Author Tammy Butler, Master CMB

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