Borrowers Hit Social-Media Hurdles
Regulators Have Concerns About Lenders' Use of Facebook, Other Sites
WASHINGTON—More lending companies are mining Facebook, Twitter and other social-media data to help determine a borrower's creditworthiness or identity, a trend that is raising concerns among consumer groups and regulators.
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"There could come a time where certain social media could be predictive and we're looking at that, but it isn't yet," said Anthony Sprauve, senior consumer-credit specialist at FICO.
Companies pioneering the practice generally lend to borrowers with troubled credit histories or no bank accounts. They say the use of alternative scoring metrics helps make credit available to people who might otherwise be denied and that they are careful not to violate federal credit laws.
Consumer advocates say the trend increases the chance borrowers, including small businesses, will be unfairly denied credit or saddled with higher interest rates based purely on their social-media presence. They say federal laws haven't kept up with the trend, leaving borrowers exposed.
San Francisco startup Flurish Inc., better known as LendUp, uses a mix of private data including credit bureaus and information gleaned from social media to help gauge borrowers' risk and verify identities. Applicants voluntarily share Facebook, Twitter and other sites, which LendUp executives say provides a fuller picture of potential borrowers. The more data applicants provide, the better their chances of approval can be, although they aren't required to give permission to access social media, according to LendUp.
Regulators Have Concerns About Lenders' Use of Facebook, Other Sites
WASHINGTON—More lending companies are mining Facebook, Twitter and other social-media data to help determine a borrower's creditworthiness or identity, a trend that is raising concerns among consumer groups and regulators.
[clip]
"There could come a time where certain social media could be predictive and we're looking at that, but it isn't yet," said Anthony Sprauve, senior consumer-credit specialist at FICO.
Companies pioneering the practice generally lend to borrowers with troubled credit histories or no bank accounts. They say the use of alternative scoring metrics helps make credit available to people who might otherwise be denied and that they are careful not to violate federal credit laws.
Consumer advocates say the trend increases the chance borrowers, including small businesses, will be unfairly denied credit or saddled with higher interest rates based purely on their social-media presence. They say federal laws haven't kept up with the trend, leaving borrowers exposed.
San Francisco startup Flurish Inc., better known as LendUp, uses a mix of private data including credit bureaus and information gleaned from social media to help gauge borrowers' risk and verify identities. Applicants voluntarily share Facebook, Twitter and other sites, which LendUp executives say provides a fuller picture of potential borrowers. The more data applicants provide, the better their chances of approval can be, although they aren't required to give permission to access social media, according to LendUp.
