Is your social media presence credit-worthy?
It’s widely known that social media platforms like Facebook sell user data to companies in order to enhance product development and understand consumer interests. Some companies have taken it a step further: specifically, lending companies who evaluate the credit-worthiness of loan applicants. U.S.-based online lenders are beginning to stalk your Facebook, Twitter, and LinkedIn profiles to assess who you interact with and how often during their loan underwriting process. According to a recent study by Mother Jones, certain lenders view an active social media life as an indicator of stability.
There is an upside to the process. The report shows that Silicon Valley lending companies like LendUp and Neo provide loans to low-income individuals who may have poor credit scores, but use their social media accounts regularly. Unlike traditional lending companies and banks that use indicators such as employment and finances in evaluating credit-worthiness, these startups find social media blueprints accurate and effective.
Is it really fair to use social media as an indicator? These companies are going so far as to evaluating the user's friends circles. Is "Liking" a Facebook fan page back in 2009 going to affect your chances of getting a loan?
Both the Fair Credit Reporting Act and the Equal Credit Opportunity Act should protect consumers from lending practices deemed unfair, but there are no specific rules on how lending companies can use social media activity and profile details to make their decisions. And companies shouldn't judge a person's credit-worthiness by their social media presence.
Privacy Rights Clearinghouse policy director Paul Stephens tells Take Part, "We just don't know how this information is being used." He further adds, "It will likely require legislative activity to do something about it."
It is unreasonable for lending companies to use social media as a measure of credit-worthiness. Can we trust the same companies that once decided pets were credit-worthy as they were in the prime of the credit card era?