Banks Poised to Use Cell Phone Metadata for Loan Determinations
As Americans, we’re just now coming to terms with the ways that our government peeks into our private lives through data streaming from our devices and Internet footprints. But some aren’t surprised to hear that in reality, this type of eavesdropping has gone far beyond the world of law enforcement.
One of the biggest revelations making waves today is that certain lenders have started to look at the cell phone metadata of potential borrowers, to determine whether or not they would be good risks. This practice, which is abhorrent to safety advocates, sets the stage for a “brave new data world” of scary proportions.
Research on Borrower Verification
A lot of what’s emerging on the Internet is based on certain research studies, such as a project at Brown University in Providence, Rhode Island. These types of studies support the idea that financial companies can acquire data from users’ cell phones and use algorithms and research to see more about their financial habits. Reports like this one from TechDirt reveal more about what Brown researchers have learned, and how it could affect our financial world.
How it Works
One example of using personal financial metadata is to look at the user’s bill payment history, which may show up in their call record. This goes against the grain of long established processes in the financial world, which strictly require notices signed by the prospective borrower before companies acquire these types of credit reports from legitimate sources such as credit agencies.
Companies can also take a look at whether or not people return missed calls, and even where they are calling from.
In general, there is a big cultural backlash against using different types of third-party information to figure out people’s credit worthiness. There’s the idea that certain things shouldn’t be held against you when you’re trying to get a loan. The idea of using cell phone data erodes some of these promises that we make to each other.
Then there’s the “opt out” problem. We’ve mentioned that banks and other institutions can use geolocational data in some of their algorithms. There are a number of dangerous things about this, but one of them is that secrecy just might shut customers out of lending agreements or other opportunities in the future.
The idea is that if banks can see whether you make calls from a remote or distant location, or if the user starts to opt out of certain tracking services, that could throw up red flags on a lender’s radar. But should these things really count against the borrower? And should companies actually have access to all of this in the first place? Consumers have few options, other than using VPNs or proxies to give out less of this data online. And even that can be tricky.
There’s the problem of a possible catch-22 where tomorrow’s citizens won’t be able to shield themselves from scrutiny, because by doing so, they’ll “lose points” with lenders, credit agencies and other parties. And this is something that we have to look at very carefully in order to stay vigilant against encroachments on our personal freedoms, and ways that new technologies can sometimes be used poorly, and not in service of the common good.
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