How Your Facebook Friends Can Sink Your Future Finances
You might want to think twice before you click “accept” when your next friendship request rolls in. Facebook has been linked to all sorts of dastardly deeds, like manipulating your feed to see if it affects your mood, and now the social media giant is getting into your personal finances. Earlier this year, they rolled out the ability to send money to your friends, but soon, your friend list could determine whether you qualify for a loan or not.
Facebook will Judge You by the Company You Keep
It’s always been said that you can tell a lot about a person by the company he keeps, but Facebook is taking it to a whole new level. They recently patented technology that will assess the credit ratings of your friends, and determine the risk of lending to you, based on those findings. The service can be marketed to potential lenders, who will connect with Facebook for instant results. After the request for data rolls in, Facebook will process the credit ratings of a person’s inner circle, and generate a list for the lender. If a specific threshold for minimum credit scores is met, the lender can continue processing the loan application. If not, the process comes to a screeching halt.
Facebook isn’t the Only Company Analyzing You Online
Creating a financial composite of an individual with data gathered online is nothing new. Most of us are familiar with Internet cookies, and how companies use them to track what we do online. They’re the reason why we might look at an item for sale online, and then will continue to see ads promoting that item for months afterwards. Companies also use this information to create a financial profile, though it’s used most-often to determine the credit-worthiness of an individual who has not yet established credit. A report from The National Consumer Law Center (NCLC) indicates that 20% of traditional credit reports contain errors, many of which can reduce a person’s ability to secure a loan or may increase the interest rate of loans that are offered. The NCLC says that data gathered online can be even more problematic and error-riddled. In one study, 7 in 15 reports contained errors in estimated income, while 11 in 15 had the individual’s level of education incorrect. Moreover, the companies that collect the information, called data brokers, should be considered credit reporting agencies, the NCLC argues, but so far they’re not.
Experts Report there’s No Cause for Concern Just Yet
In CNN’s coverage of this story, they’re quick to note that there are laws which dictate what criteria lenders can use when deciding if someone is worthy of a loan. Those who may be affected by it in the future are those who have no credit or borderline credit. The patent also covers several other concepts, mostly related to supplying consumers with information that’s tailored to their tastes, so this one aspect of it is only a small portion of what Facebook was trying to protect with the patent. Additionally, this particular patent was one of a grouping of patents that Facebook bought from Friendster several years ago, for $40 million. The application for the patent was filed back in 2012, and there’s a good chance the social media company has no intent to implement the technology. It’s entirely possible they only filed it to protect the other technology associated with it, or to prevent other companies from using the technology. All of this is just speculation, though. Facebook has declined to comment so far.
According to CBC News, there’s already at least one company in South Africa that uses cell phone data to determine if an individual qualifies for a loan. There’s also a company that operates in Colombia Mexico, and the Philippines, which analyzes data from sites like Facebook, LinkedIn and Twitter to determine credit-worthiness. Whether Facebook decides to run with their new patent seems mildly irrelevant, considering this kind of monitoring already exists, though, thankfully consumers are generally made aware of it during the loan application process. Moreover, before credit score were created, loans were given based on a lender’s personal opinion, rather than data. It led to discrimination, with people being disqualified for things like religion, gender, or sexual preference. At the very least, these models add extra assurance that this type of discrimination remains a thing of the past.