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We already know that social media missteps can, say, bury our chances for getting hired or get us arrested if we brag on Facebook or Twitter about what bad-ass burglars we are.
Hang tight: there’s actually a whole new world of d’oh! opening up.
As the Wall Street Journal reports, our Facebook friends, our Twitter musings, our eBay or PayPal accounts, our cookies, our browser behavior, and/or our smartphone use are increasingly being used by financial services outfits that are using our online selves to figure out whether they should loan us money or extend our existing credit lines.
The WSJ’s Stephanie Armour writes that the horrifically embarrassing things some of us stumble into posting include financial details that could get our credit applications denied, such as whether the job information we put on our loan applications match what we posted on LinkedIn, or whether we posted about our employers firing us.
Small businesses, for their part, may well be turned down for more credit if they get lousy reviews on eBay, lending companies told the WSJ.
At this point, it seems that many such institutions are giving customers the social-media once-over on an opt-in basis, often using the information as one more way to get credit to borrowers who might otherwise have difficulty getting a loan, though banking experts predict that it’s likely to become more pervasive and less opt-in than that.
For example, at one such business, the mobile-only bank Moven, customers can opt to link up their Facebook, LinkedIn, and/or Twitter accounts to learn about their own financial behavior and make payments to friends.
Moven is planning to offer loans, and customers’ activity on social media will be one factor in making those underwriting decisions, the bank’s president, Alex Sion, told the WSJ, noting that you can get a much better read on creditworthiness that way:
The data we have on customers via social networks says more about them than their FICO [credit-score rating]. … You can make credit decisions based not on a faceless score, but on who you know.
That “who you know” is quite literal, as in, the information provided by your social networks.
Sasha Orloff, the co-founder and chief executive at another startup, Flurish Inc. (better known as LendUp), says that analysis of a loan applicant’s ties to his or her community can be quite illuminating:
It's one of the tools we use to do underwriting. … Do you have 4,000 friends but none are that close, or do you have 30 people but they're very close? There are ways to measure how engaged and how strong your community ties are.
Beyond what your network of friends says about you, though, some financial services firms are even assessing what type of phone you’re using.
One example the WSJ highlighted: Kreditech, a microloan provider based in Germany, which has been using such data to assess creditworthiness in the 250,000 loan applications it’s processed since it launched in 2012.
Spokesman Laurent Schuller, as quoted by the newspaper:
Is someone using an expensive mobile phone like an iPhone or logging in from a Web cafe? Is their network on Facebook just drinking buddies from a bar? All of that can be important information.
Small businesses are also being put under the online microscope when they look for loans. Kabbage customers are required to link at least one of their Amazon, eBay, Xero and other e-commerce or accounting sites to assess creditworthiness.
When making loan decisions, Kabbage takes under consideration small businesses’ Facebook and Twitter presences, picking up on the dirt customers dish out about the borrower’s business and the quality of its customer service.
Victoria Treyger, Kabbage’s chief marketing officer, told the newspaper that “likes” say a lot:
We look at whether you get a lot of 'likes,' are you responding to customers.
Financial regulatory agencies are mulling regulation, as are privacy groups.
Privacy comes into the picture particularly given that companies that use social media to make lending decisions don’t have to verify the information, given that they don’t have to provide it to third parties, as do the reporting agencies Experian or Equifax.
That’s why the Center for Digital Democracy, a US privacy group, is seeking regulation of the trend.
Jeffrey Chester, executive director, told the WSJ that decisions based on social media are just too opaque:
There are privacy concerns. People don't understand the implications or why they may be considered undesirable [for credit].
What do you think? Do you not mind if it means your chances of getting a loan increase because of your Facebook posts or LinkedIn recommendations, or would you rather that financial institutions keep their noses out of your social media business?
Please share your thoughts in the comments section below.
Image of piggy bank courtesy of Shutterstock.
I don’t have any social media accounts on the services that financial institutions are likely to check, but I have a common name that has a lot of matches to other people on those services. I wonder what the creditors will think of that.
I figure if it becomes that important, people will start gaming the system by creating accounts with lots of fake but very rich friends. The people who promise to deliver you thousands of pretend Twitter followers for a price will probably get into this business as well.
So what about users who have strict privacy settings? And what about thousands who don’t open an account in their name? I am sorry but this is just plain dumb of banks to do this. I never have an account on social media in my name, except for LinkedIn, and even there I have very strict privacy settings.
I concur. I strongly control all information that is released into the public eye (and by public I mean on the internet, regardless of “privacy settings”). Banks, employers or whoever would not be able to find much on me. And of course, how can they verify that a piece of information is true or not? Or that it is even about the person they are looking for?
I understand that it does have a certain value as supplementary or secondary data, but I hope for everyone’s sake that it is not being relied upon as a primary data source.
After being with the same house and vehicle insurance company for 28 years, in which I paid on time and had NO claims, the company dropped me without any warning. They claim it was because my roof was in bad shape. I and my local agent knew it need to be re-shingled and had plans to do that the following Spring, but that didn’t matter.
I did get one traffic ticket during that period, for ‘improper backing.’
I use my own name on my blog and usually when I leave comments elsewhere, but have modified that policy since the insurance hatchet job.
Maybe I’m being paranoid, but I think not.
I don’t believe the government’s lame explanation for what happened on 9/11 and haven’t been afraid to speak out against those lies, so maybe I’m being punished?
P.S. Was able to find another policy thru an independent agency, and they had no problem insuring my house.
You’re weird.
The argument is the same as HR departments getting information from Social Media. They assume the information is valid, up to date, and complete. It will most probably be none of these: it may well have as much bearing on the actual person as Doctor Who has to Matt Smith. I’m amazed these people are so credulous; and horrified that they are affecting our lives through their credulity!
Ironic that the group wanting the government to limit the use of social media calls itself ‘Center for Digital Democracy’.
Old style banking loans were based on local community, and you would be known in the local community which meant if your character was honourable then you could still get a loan. This however all went out of the window with global banking. It does not surprise me that banks would like to get to know about the person to whom they are lending. It does however, concern me in two aspects. Firstly that of the equivalent to “cyber bullying”, not everything recorded on the internet is true, I have recently experienced this with a very vindictive ex-wife who posted a mixture of truth and fabrication onto a supposedly reputable web site. Lawyers were involved and it came down. However, had someone seen it while up and many did in one week was shared on Facebook over 1000 times I would have been destroyed. The fact is the lies made it sensational and the bit of truth made it acceptable, was it right no, but anyone viewing it does not know that. So I could have been prejudiced by that, as could anyone else. Secondly, web and likes and shares etc do not prove character which is more what they need, and so it actually defeats the purpose.
My ‘tuppence for what it is worth.
Sounds like this is going to run amuck of age discrimination laws among others: I am of an age where I don’t have social media accounts. So if I get denied based on the lack is that not effectively age discrimination. And as one poster mentioned: there are at least 4 other individuals in my my metropolitan statistical area; at least one with a less then stellar background. If I get denied or cancelled as a result of that person is that not an actionable tort? These companies better be very careful or they are going to end up in no end of legal (civil and criminal) trouble. Let the buyer beware, but also the seller in these cases.
What about those of us who prefer a few real friends over hundreds/thousands of fleeting imaginary ‘friends’ on social media – will those outfits scanning social media to determine credit-worthiness consider us undesirable ?
With a common last name like mine, good luck to them accurately discovering my social networking accounts. That could be problematic for someone like me who has good credit. Doing a vanity Google search on my name proper is depressing because there are so many notables with my name, I get drowned out by the others. Hopefully they pick one of the accomplished ones rather than one of the ones who continually shows up in the police reports.