Lender Tracking of Customers’ Social Media Use Raises Concerns

Consumer regulators are reviewing the practice of basing loan decisions, in part, on use of sites such as Facebook and Twitter.

Lending companies are increasingly using social media sites for information about borrowers’ credit eligibility and their identity, a practice that is concerning for consumer groups and regulators, TheWall Street Journal recently reported.

While the trend is mostly occurring among startup businesses that issue smaller loans, it could spread to other companies.

Some of the small businesses reviewing customers’ social media activity ask them to voluntarily share their Facebook or Twitter sites before they are issued a loan. Some companies encourage customers to link their social media sites to their loan or bank accounts.

The trend is on the radar of regulators, including the Consumer Financial Protection Bureau, to decide whether use of creditors’ online data when they apply for a loan should be monitored.

Consumer advocates argue that federal laws need to be updated to match this trend. They say borrowers’ loan applications could be unjustly denied or they could receive high interest rates in response to activity on their social media sites.

However companies that do review customers’ online profiles say they are careful not to violate federal laws and the information is an alternative way to help provide financing to people with a poor credit history or no bank account.

The Fair Credit Reporting Act currently does not require companies that use social media in lending decisions to verify that the information is accurate since they do not provide it to third parties, Maneesha Mithal, the associate director of the FTC’s division of privacy and identity protection, discussed in the Journal article.

The Federal Trade Commission is hosting a series of consumer privacy seminars in the spring.

Source: ACA