8 ms·

This is the first I'm hearing of it, but assessing credit risk based on social profiles is almost definitely illegal. Conclusions based on friends or location r

This is the first I'm hearing of it, but assessing credit risk based on social profiles is almost definitely illegal. Conclusions based on friends or location rather than actual history will have a disparate impact on minorities. http://en.wikipedia.org/wiki/Disparate_impact http://en.wikipedia.org/wiki/Disparate_impact

elmuchoprez 13y ago
That seems to have to do with employment practices. The article is talking about a private company using publicly available data as a factor in determining whether or not to extend a loan to you. I think it's kind of shitty, but I don't know that it's any different than say using gender as a factor.
- hawleyal 13y ago
  In the USA, that gender thing is illegal.
  - acheron 13y ago
    Tell that to car insurance companies.
    - jelled 13y ago
      lending laws != insurance laws.
      - JWLong 13y ago
        That may be true, but the principles are pretty much the same. Both parties would use gender to assess risk.
    - deleted 13y ago
      [deleted]
    - count 13y ago
      Interestingly, governments are doing exactly that: http://www.theactuary.com/news/2013/01/gender-directive-has-already-pushed-up-womens-car-insurance-prices/ http://www.theactuary.com/news/2013/01/gender-directive-has-... It's now illegal in some nations to discriminate pricing based on gender.
      - neilc 13y ago
        If gender is predictive of higher/lower risk for a particular policy, then banning its use seems bizarre. It makes even less sense if the the insurance company is allowed to consider other factors that are correlated with gender (e.g., age, profession).
        russellsprouts 13y ago
        If it were illegal for all companies, you could probably assume each company would have approximately an equal number of men and women. They could charge the men and women the same price - the average of the old men's and women's rates. The income would be the same.
        pessimizer 13y ago
        The case that can be made for banning such a practice is that gender doesn't determine higher/lower risk, it's just associated with it. There's nothing about gender in an of itself that makes you drive badly, even if 80% of women get together at a secret meeting and agree to drive badly. In that case, the 20% would be suffering discrimination purely because of their gender. >It makes even less sense if the the insurance company is allowed to consider other factors that are correlated with gender (e.g., age, profession). Agreed.
        Houshalter 13y ago
        >There's nothing about gender in an of itself that makes you drive badly, even if 80% of women get together at a secret meeting and agree to drive badly. In that case, the 20% would be suffering discrimination purely because of their gender. Look at it the other way around. By not taking it into account, 100% of men would be suffering because of the 80% of women. In any case, this isn't any different with all other factors. Age and profession for example. There are really good 16 year old drivers, why should they have to pay higher insurance? By your logic making any predictions is wrong if they aren't 100% accurate. Gender is just a subcase.
  - elmuchoprez 13y ago
    As has been pointed out, it's not illegal when it comes to insurance. I'm not sure it's illegal when it comes to lending. Honestly, I'm a little confused by some of these equality laws. I'm pretty sure that the law can't compel you to make a loan you don't want to make, whether there is a good reason on not. I think you just can't say the denial was for a racial reason or gender reason or whatever. But even if those things were at the heart of your decision, so long as you don't say it, is that even illegal? And in this case, I'm talking about private companies who don't have connection to US government. (ie: I think if you're government ensured or whatever, they have more power to compel specific behavior.)
    - ignostic 13y ago
      It is illegal when it comes to lending. See the section on disparate impact. http://www.occ.gov/topics/consumer-protection/fair-lending/index-fair-lending.html http://www.occ.gov/topics/consumer-protection/fair-lending/i...
      - deleted 13y ago
        [deleted]
    - markdown 13y ago
      > But even if those things were at the heart of your decision, so long as you don't say it, is that even illegal? Yes, absolutely. If you want the right to set up a business to serve the people of the nation, the people have decided that you can do so, so long as you serve them without regard to color, gender, etc. Our forefathers made these laws because they saw that given the opportunity, entities with a profit motive will pursue profit over all else, to the detriment of society as a whole. It was seen that when discrimination occurs, society as a whole suffers. I don't want my neighbor to go broke and let his house fall apart because he married a black woman from a hellhole in detroit.
      - elmuchoprez 13y ago
        "Our forefathers made these laws because they saw that given the opportunity, entities with a profit motive will pursue profit over all else, to the detriment of society as a whole." Half of our "forefathers" built fortunes on the backs of slaves. They got plenty of other things right, but many of them missed the mark on racial and gender equality.
- ignostic 13y ago
  It seems to read that way, but the doctrine has been applied to the Fair Housing Act and more. http://www.propublica.org/article/disparate-impact-and-fair-housing-seven-cases-you-should-know http://www.propublica.org/article/disparate-impact-and-fair-...
kybernetyk 13y ago
> This is the first I'm hearing of it Here in Germany it's pretty common. I'm living in an apartment building where it is impossible to get a credit card. It's not only me - all neighbors I asked have the same problem. Looks like one of our neighbors has a catastrophic credit rating and is pulling down the rest of us. I heard similar stories from friends who were able to get a loan only after moving.
- simoncion 13y ago
  That is insane. How is that rationalized by the credit card companies?
  - kybernetyk 13y ago
    I guess statistically ;) They take average paying morale in a neighborhood into account. But I guess one very bad seed can spoil pull down a otherwise good/average neighborhood.
    - bougiefever 13y ago
      All the more reason to open a private mailbox and conceal your real address from banks, employers, and when making purchases. Also, since I live outside of the city, shipping is cheaper too. I doubt the UPS store has a bad credit rating.
      - wyclif 13y ago
        For many consumers, their bank already knows their physical address since they have their home loan through the same bank.
        bougiefever 13y ago
        The original post sounded like they were renting, so yea, your mortgage holder knows the address of the house you bought, but your bank does not need to know the address where you are renting. A personal mailbox is not going to shield your private address from every entity, but it can help with many. Also, the mortgage holder does not know if you are still living in that house, especially if you list a different address.
pasbesoin 13y ago
In my opinion, in the U.S. such practice represents a clear commercial intrusion upon the First Amendment right of free association. And I hope that any and all companies that practice it are sued into oblivion. I have zero tolerance for such behaviour. Our society does better when we communicate with each other. As in, "united we stand, divided we fall". If we are not to turn entirely into a perpetual exercise in "pecking order", there have to be some limits upon what can be "punished" -- commercially or otherwise. So, take your "social network credit risk" and shove it.
- benmanns 13y ago
  The Constitution and its amendments are designed to protect citizens from the government, not from private corporations. There may be other laws preventing this sort of credit reporting, but the Constitution does not.
  - jbail 13y ago
    I don't think that's totally correct. "...in Pembina Consolidated Silver Mining Co. v. Pennsylvania - 125 U.S. 181 (1888), the Court clearly affirmed the doctrine, holding, "Under the designation of 'person' there is no doubt that a private corporation is included [in the Fourteenth Amendment]" http://en.wikipedia.org/wiki/Corporate_personhood http://en.wikipedia.org/wiki/Corporate_personhood
    - tedunangst 13y ago
      huh? All that says is that corporations enjoy the same protections from government that people do. It doesn't say anything about protecting people from corporations.
- Sven7 13y ago
  What happens if Bill Gates friends me?
- Houshalter 13y ago
  What is wrong with using data to make more accurate predictions? Why does it matter where the data came from? That's their job, to make accurate predictions about how likely people are to pay back a loan. This benefits everyone. Interest rates will be lower and more accurately reflect the risk. If I had a time machine and could go to the future and see who would pay back their loans and who wouldn't, that would be ideal. But we don't have that, we can only make predictions by looking at data that happened to correlate with that in the past.
mhurron 13y ago
> assessing credit risk based on social profiles is almost definitely illegal I doubt it, do you have a citation for that?
- svachalek 13y ago
  IANAL but I think you could argue it's a violation of http://en.wikipedia.org/wiki/Community_Reinvestment_Act http://en.wikipedia.org/wiki/Community_Reinvestment_Act
- ignostic 13y ago
  http://www.occ.gov/topics/consumer-protection/fair-lending/index-fair-lending.html http://www.occ.gov/topics/consumer-protection/fair-lending/i...

elmuchoprez 13y ago

That seems to have to do with employment practices. The article is talking about a private company using publicly available data as a factor in determining whether or not to extend a loan to you. I think it's kind of shitty, but I don't know that it's any different than say using gender as a factor.

hawleyal 13y ago
In the USA, that gender thing is illegal.
- acheron 13y ago
  Tell that to car insurance companies.
  - jelled 13y ago
    lending laws != insurance laws.
    - JWLong 13y ago
      That may be true, but the principles are pretty much the same. Both parties would use gender to assess risk.
  - deleted 13y ago
    [deleted]
  - count 13y ago
    Interestingly, governments are doing exactly that: http://www.theactuary.com/news/2013/01/gender-directive-has-already-pushed-up-womens-car-insurance-prices/ http://www.theactuary.com/news/2013/01/gender-directive-has-... It's now illegal in some nations to discriminate pricing based on gender.
    - neilc 13y ago
      If gender is predictive of higher/lower risk for a particular policy, then banning its use seems bizarre. It makes even less sense if the the insurance company is allowed to consider other factors that are correlated with gender (e.g., age, profession).
      - russellsprouts 13y ago
        If it were illegal for all companies, you could probably assume each company would have approximately an equal number of men and women. They could charge the men and women the same price - the average of the old men's and women's rates. The income would be the same.
      - pessimizer 13y ago
        The case that can be made for banning such a practice is that gender doesn't determine higher/lower risk, it's just associated with it. There's nothing about gender in an of itself that makes you drive badly, even if 80% of women get together at a secret meeting and agree to drive badly. In that case, the 20% would be suffering discrimination purely because of their gender. >It makes even less sense if the the insurance company is allowed to consider other factors that are correlated with gender (e.g., age, profession). Agreed.
        Houshalter 13y ago
        >There's nothing about gender in an of itself that makes you drive badly, even if 80% of women get together at a secret meeting and agree to drive badly. In that case, the 20% would be suffering discrimination purely because of their gender. Look at it the other way around. By not taking it into account, 100% of men would be suffering because of the 80% of women. In any case, this isn't any different with all other factors. Age and profession for example. There are really good 16 year old drivers, why should they have to pay higher insurance? By your logic making any predictions is wrong if they aren't 100% accurate. Gender is just a subcase.
- elmuchoprez 13y ago
  As has been pointed out, it's not illegal when it comes to insurance. I'm not sure it's illegal when it comes to lending. Honestly, I'm a little confused by some of these equality laws. I'm pretty sure that the law can't compel you to make a loan you don't want to make, whether there is a good reason on not. I think you just can't say the denial was for a racial reason or gender reason or whatever. But even if those things were at the heart of your decision, so long as you don't say it, is that even illegal? And in this case, I'm talking about private companies who don't have connection to US government. (ie: I think if you're government ensured or whatever, they have more power to compel specific behavior.)
  - ignostic 13y ago
    It is illegal when it comes to lending. See the section on disparate impact. http://www.occ.gov/topics/consumer-protection/fair-lending/index-fair-lending.html http://www.occ.gov/topics/consumer-protection/fair-lending/i...
    - deleted 13y ago
      [deleted]
  - markdown 13y ago
    > But even if those things were at the heart of your decision, so long as you don't say it, is that even illegal? Yes, absolutely. If you want the right to set up a business to serve the people of the nation, the people have decided that you can do so, so long as you serve them without regard to color, gender, etc. Our forefathers made these laws because they saw that given the opportunity, entities with a profit motive will pursue profit over all else, to the detriment of society as a whole. It was seen that when discrimination occurs, society as a whole suffers. I don't want my neighbor to go broke and let his house fall apart because he married a black woman from a hellhole in detroit.
    - elmuchoprez 13y ago
      "Our forefathers made these laws because they saw that given the opportunity, entities with a profit motive will pursue profit over all else, to the detriment of society as a whole." Half of our "forefathers" built fortunes on the backs of slaves. They got plenty of other things right, but many of them missed the mark on racial and gender equality.
ignostic 13y ago
It seems to read that way, but the doctrine has been applied to the Fair Housing Act and more. http://www.propublica.org/article/disparate-impact-and-fair-housing-seven-cases-you-should-know http://www.propublica.org/article/disparate-impact-and-fair-...

kybernetyk 13y ago

> This is the first I'm hearing of it Here in Germany it's pretty common. I'm living in an apartment building where it is impossible to get a credit card. It's not only me - all neighbors I asked have the same problem. Looks like one of our neighbors has a catastrophic credit rating and is pulling down the rest of us. I heard similar stories from friends who were able to get a loan only after moving.

simoncion 13y ago
That is insane. How is that rationalized by the credit card companies?
- kybernetyk 13y ago
  I guess statistically ;) They take average paying morale in a neighborhood into account. But I guess one very bad seed can spoil pull down a otherwise good/average neighborhood.
  - bougiefever 13y ago
    All the more reason to open a private mailbox and conceal your real address from banks, employers, and when making purchases. Also, since I live outside of the city, shipping is cheaper too. I doubt the UPS store has a bad credit rating.
    - wyclif 13y ago
      For many consumers, their bank already knows their physical address since they have their home loan through the same bank.
      - bougiefever 13y ago
        The original post sounded like they were renting, so yea, your mortgage holder knows the address of the house you bought, but your bank does not need to know the address where you are renting. A personal mailbox is not going to shield your private address from every entity, but it can help with many. Also, the mortgage holder does not know if you are still living in that house, especially if you list a different address.

pasbesoin 13y ago

In my opinion, in the U.S. such practice represents a clear commercial intrusion upon the First Amendment right of free association. And I hope that any and all companies that practice it are sued into oblivion. I have zero tolerance for such behaviour. Our society does better when we communicate with each other. As in, "united we stand, divided we fall". If we are not to turn entirely into a perpetual exercise in "pecking order", there have to be some limits upon what can be "punished" -- commercially or otherwise. So, take your "social network credit risk" and shove it.

benmanns 13y ago
The Constitution and its amendments are designed to protect citizens from the government, not from private corporations. There may be other laws preventing this sort of credit reporting, but the Constitution does not.
- jbail 13y ago
  I don't think that's totally correct. "...in Pembina Consolidated Silver Mining Co. v. Pennsylvania - 125 U.S. 181 (1888), the Court clearly affirmed the doctrine, holding, "Under the designation of 'person' there is no doubt that a private corporation is included [in the Fourteenth Amendment]" http://en.wikipedia.org/wiki/Corporate_personhood http://en.wikipedia.org/wiki/Corporate_personhood
  - tedunangst 13y ago
    huh? All that says is that corporations enjoy the same protections from government that people do. It doesn't say anything about protecting people from corporations.
Sven7 13y ago
What happens if Bill Gates friends me?
Houshalter 13y ago
What is wrong with using data to make more accurate predictions? Why does it matter where the data came from? That's their job, to make accurate predictions about how likely people are to pay back a loan. This benefits everyone. Interest rates will be lower and more accurately reflect the risk. If I had a time machine and could go to the future and see who would pay back their loans and who wouldn't, that would be ideal. But we don't have that, we can only make predictions by looking at data that happened to correlate with that in the past.

mhurron 13y ago

> assessing credit risk based on social profiles is almost definitely illegal I doubt it, do you have a citation for that?

svachalek 13y ago
IANAL but I think you could argue it's a violation of http://en.wikipedia.org/wiki/Community_Reinvestment_Act http://en.wikipedia.org/wiki/Community_Reinvestment_Act
ignostic 13y ago
http://www.occ.gov/topics/consumer-protection/fair-lending/index-fair-lending.html http://www.occ.gov/topics/consumer-protection/fair-lending/i...