If your Facebook friends are deadbeats, it might be harder for you to get a credit card or mortgage, according to a recent report on the banking industry site, CreditCards.com.
That’s right: Some banks are turning to social media analytics firms to help enhance their credit-check procedures by looking at an applicant’s profile, behavior, and associations on sites like Facebook, Twitter Inc. , and MySpace . The theory is that people run with folks who share their values and behavior -- birds of a feather, and all that. You might even say "guilt by association," but that would be unkind.
In today’s banking climate, where executives think nothing of handing out giant bonuses while jacking up customer rates and foreclosing on properties left and right, it’s probably conventional wisdom that traditional credit-check procedures are not sufficiently opaque and intrusive. To really go the full Kafka, banks need to examine all those relationships and utterances that customers so foolishly made public on sites they assumed were for recreation or contact-management.
It’s possible that some larger banks are developing these capabilities in-house as part of their business intelligence practices, but the CreditCard.com story focuses on those that are outsourcing to specialized social media analytics firms such as San Francisco’s Rapleaf.
Rapleaf characterizes its social graphing service as "a unique way to improve customer experience by whitelisting customers based on their social circles and friend relationships." "Whitelisting" is a marketing term that means identifying promising customers. Most social media analytics firms, highly sensitive to charges of invading people’s privacy, prefer to emphasize the heuristic nature of data-mining rather than its unpleasant flipside.
Even the banks that admit to using social analytics try to make it sound like a marketing program rather than a risk-assessment tool. "We’re just trying to target our outreach and services better -- nothing to see here!"
And when banks run a credit check and find applicants who do not appear on the whitelist, or whose circle of friends do not appear on the whitelist, what conclusions might they draw?
That falls into the category of "risk assessment," something banks tend to take a bit more seriously these days than they did a few years ago, when infants and polar bears were being offered 0 percent credit cards. "Can you blame us for being careful, given the times we live in?" says the banker with a helpless shrug.
There is of course nothing illegal about what the banks and the social analytics firms are doing. Social networks like Facebook are commercial enterprises that openly broker user data for exactly these kinds of purposes. Information on the Internet is public. People’s online profiles are the accumulation of a series of deliberate choices and actions, presumably made in full knowledge that they become permanent parts of the public record.
I think this kind of data mining generates such uneasiness for two reasons. First, the stakes are high. This isn't about receiving unsolicited emails or intrusive pop-up ads when you surf the Web: It's about getting access to credit that might be necessary for your family or business.
Second, data mining gives the lenders insights into relationships that are unknown to -- and may be completely out of the control of -- the applicant. Maybe being a Facebook fan of NASCAR driver Tony Stewart says something in the aggregate about your socio-economic status and therefore your creditworthiness, according to some second-order derivative analysis of millions of data records.
What should an ordinary person do with knowledge like that, even if they had access to it? How can people possibly make behavior choices that do not appear to them to have any cause-and-effect relationship with their job prospects, their credit, their politics, or the way they are perceived by people trying to market to them, but are in fact an important factor in those processes?
The asymmetry in the relationship between data-driven marketers and consumers is structural and permanent. Institutions like banks (and, potentially, insurance companies, employers, and the government) will use it to gain an advantage, because that’s what they do. Stories like this cause a stir because they highlight how statistical determinism undermines the dignity of the individual.
At some point, the asymmetry will need to be redressed, and it’s hard to see any other way than through regulation.
Thanks for the link. Just to clarify, in my original post, I report that Rapleaf and the lenders using services like this will only admit to using it for marketing heuristics and whitelisting, not blacklisting. I take them at their word, and don't dispute the facts in the source, as far as they go.
To me, that raised a reasonable question: what's the opposite of a whitelist? What happens to people who don't show up on the "good prospects" roster? Do we really think that banks will ignore ANY information that helps them reduce their risk exposure?
On this site, I'm asked to express my point of view, and my point of view is that it's not bloodly likely that banks would have scruples about using whatever data they can to gain competitive advantage. It's what they do. Now that social media data is being made available, it's reasonable (to me) to raise these kinds of questions and draw out the implications.
When I read this I thought, "No way." So I checked up on Rapleaf -- your article is actually referencing another article that is factually incorrect.
If you google "Rapleaf", you'll find this latest Smartmoney article that shows that social media is not being used to impact credit scores -- it's only used to help banks decide whether or not to mail a banking promotion to someone.
Also, banks are highly regulated entities -- I doubt that they'd use a misspelled tweet to lower your credit score. Honestly? Next they'll link your tweets to your DNA and your future children. now THAT would be creepy.
Here's the updated article for more clarification.
It really is a shame as to how these various entities are destroying lives without a second thought of whether the credit report is accurate or not and whether the person on the other end of that report is also a victim of a wrong doing by someone else. Bottom line is, they don't care.
I finally have reported my problem to the state AG. There was some dirty dealing done and I got to the point where I had had it with the collection company and their sneaky lies. (And when I would catch them in those lies, they would start swearing at me.) I hope that I won't continue to get screwed, but I am having a bad feeling of retaliation on the part of the company I reported, regardless of the outcome. (The collection company bullying and lying to me does not like being reported.....) I did express this in my complaint as well, just in case.
Don't forget the insurance penalty. My father died. Since we had the same name, and he'd been living with me for years, the resulting collections agencies began tacking his uncollectable debt on my credit report, something I've been fighting several times a year since. When it came time to renew my insurance, it went up more than 40% because of the destroyed credit.
Couldn't agree more regarding the complete lack of logic. Facebook, and all other social networking sites, and their corresponding data, is such an incomplete picture.
Most people on FB have "friends" that they've never met in real life. Most have "friends" that are "friends" simply because they're friends of a family member or real life friend. These two facts alone are enough to skew the numbers horribly. Add in the fact that for the average person the number of real life friends and aquaintances who are on and use FB is just a fraction, and the numbers get even more skewed.
I know and associate with senators, congress critters, judges, mayors, business leaders, religious leaders, etc... Very few of these people are reflected in my "friends" list for a variety of reasons, not the least of which is the fact that a fair number of them don't do FB. More skewing. And, a rather large contingent of the "friends" on my FB account are people that have no more meaning to my life than to say we work together somewhere within the same 55+ acre company. Even more skewing.
And, what about the people who use their FB account for school or business purposes? If their only "friends" are clients/customer or professors/fellow students, the numbers are absolutely meaningless.
Legal is NOT the same thing as right. Or, moral. Or, ethical.
Yes, I do suspect that bank whitelisting of the "best" credit risks, or those with the "top rated" social contacts my be a trend in the future. On the other hand I don't think "blacklisting" will catch on, as there may be PR risks and legal liabilities attached to denying credit to someone who's friends may not be top notch.
I worry though, more about government agencies tracking my social contacts and putting me on a list for who knows what reason...and how long would I stay on that secret list?
Could that lead to employers denying or even terminating employment when they find I have internet contacts that are not politically correct. Could my leanings toward friends on vegetarian diets lead to insurance companies putting me on a secret list that may either give me great health care premiums or conversely deny me coverage at all?
A bit scary I'd say, relying on social contacts for any meaningful predictions of future outcomes.
Rob, at first glance it makes sense. Banks behave the same way the employers do- searching social networks’ profile before hire something. On the other hand, I think it will be useless as soon as people realize their Facebook activity influences their creditability. Let’s say, I can have a nice account as Maria Pipenko, whose Facebook friends are mostly educated and employed people, where I upload nice proper pictures. The same time I may have an account of crazy Mashka, whose friends are crazy musicians, artists or whoever, with pictures of crazy parties, that proves my incapacity to pay credit- and let’s say, the last one reflects my personality much better than the first one. So, I think, bank analytics can’t be objective by analyzing my creditability –so it won’t be helpful in a while
Rob, at first glance it makes sense. Banks behave the same way the employers do- searching social networks’ profile before hire something. On the other hand, I think it will be useless as soon as people realize their Facebook activity influences their creditability. Let’s say, I can have a nice account as Maria Pipenko, whose Facebook friends are mostly educated and employed people, where I upload nice proper pictures. The same time I may have an account of crazy Mashka, whose friends are crazy musicians, artists or whoever, with pictures of crazy parties, that proves my incapacity to pay credit- and let’s say, the last one reflects my personality much better than the first one. So, I think, bank analytics can’t be objective by analyzing my creditability –so it won’t be helpful in a while
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