Can You Be Denied a Loan Because You're Unpopular on Facebook?

It’s already well known that Facebook and other social media networks harvest user data and sell it to companies that use that info to peddle their products to consumers. But some lenders have begun to find a new use for this information, scrutinizing Facebook, Twitter, and LinkedIn data to determine the credit-worthiness of loan applicants. It’s an unprecedented practice that consumer advocates say can be unfair or discriminatory—and one that is poised to only become more prevalent in the years ahead.

Among the US-based online lenders that factor in social media to their lending decisions is San Francisco-based LendUp, which checks out the Facebook and Twitter profiles of potential borrowers to see how many friends they have and how often they interact; the company views an active social media life as an indicator of stability. The lender Neo, a Silicon Valley start-up, looks at the quality and quantity of an applicant’s LinkedIn contacts for clues to how quickly laid-off borrowers will be rehired. Moven, which is based in New York, also uses information from Twitter, Facebook, and other social networking sites in their loan underwriting process.

Several international lenders have been using similar tactics for a while. Lenddo, for example, which makes loans to folks in developing countries, denies credit to applicants who are Facebook friends with someone who was late repaying a Lenddo loan. Big banks have not yet jumped on board with this controversial credit-vetting method, but consumer advocates and financial industry experts say it’s probably only a matter of time.

Companies like Neo and LendUp seized an opening in the market to provide low-income borrowers, who may lack bank accounts or have bad credit, an alternative to payday loans. Though credit-worthiness is typically based on factors like employment, finances, and whether you make your credit card payments on time, these companies argue that they are able to serve borrowers that traditional banks deem risky because they are able to evaluate credit risk based on more subtle social media-based indicators.

The problem, consumer advocates say, is that because there are few regulations governing this new way of grading borrowers’ trustworthiness, applicants can be subject to unfair and discriminatory decisions by lenders.

More: http://www.motherjones.com/politics/2013…a-facebook