Back to Blog

Lenders are Looking to Phone Data to Check Consumer Creditworthiness – Does This Violate the FCRA?

Millions of people around the world use their cell phones to accomplish everything they would on a computer and more. From sending text messages, paying bills, sending emails, checking Facebook , and shop, just to name a few. Phone data contains traces of pretty much everything we do. Outside of the United States, some financial institutions are turning to consumer phone company data to evaluate a person’s creditworthiness with the goal of reaching consumers that may not have bank accounts.

How Can Cell Phone Data Determine Creditworthiness?

Financial institutions can evaluate calling and texting patterns and use that information in credit decisions. These financial institutions believe these consumer patterns can help predict a person’s credit risk. However, there is a concern that such data could be used to discriminate against a potential borrower. For example, if a potential borrower frequently communicates with a person or entity that has a track record of bad credit, the financial institution may show bias and choose to deny a person credit simply because of who that person communicates with.

This cell phone data “risk assessment” raises significant privacy concerns. While consent to release phone company information is required before such data can be shared, that does not safe guard against situations where a person is unaware that he or she provided consent for the release of this information.

Additionally, the sale of cell phone company data is a very lucrative business that could generate as much as $1 Billion each year, so there is certainly an incentive to use this type of credit assessment — at least for countries outside of the United States that are currently engaging in this practice.

Is This Allowed in the United States?

Currently, financial institutions in the United States are not using cell phone company data to determine the creditworthiness of consumers. As such, there are no guidelines under the Fair Credit Reporting Act (FCRA) to regulate such a practice. However, any financial institution that obtains and uses a consumer’s cell phone data to evaluate creditworthiness would be in violation of the FCRA.

The fact that financial institutions may be able to use cell phone data to evaluate a person’s credit risk may not sit well with some people, even if consent for the release of such information is required. Only time will tell whether or not this practice of obtaining cell phone company data will begin in the United States.

Contact The Kim Law Firm, LLC Today to Speak with a Consumer Protection Attorney

If you believe inaccurate information is listed on your credit report or you did not provide consent for your consumer information to be shared, it is important to seek the guidance of a skilled FCRA and Consumer Protection Attorney as soon as possible. To schedule a consultation to discuss your situation with one of our attorneys, contact The Kim Law Firm, LLC today by calling 855-996-6342.

Source: https://www.bloomberg.com/news/articles/2016-11-25/no-credit-history-no-problem-lenders-now-peering-at-phone-data