Are Social Media Sites Being Used to Screen Borrowers?

There was a time, not all that long ago, when Facebook was a haven for college students. It was a place where they could occupy a little world of their own; trading comments and links and existing, for all intents and purposes, a world away from parents, bosses, teachers and marketers.

The daydream is over. It’s now common practice for employers to use social media accounts to screen job applicants for any undesirable traits or opinions. If the First Amendment was designed to protect individuals from overzealous corporations instead of from the government, we may well be dancing in human rights territory. Like it or not, though, our online personas are held to the same standards as our physical persons.

Maybe it’s for the best; however, employers are not the only ones screening their applicants using social media.

Lending Companies Take to Facebook

Consumer groups and regulators have been expressing concern lately about an increasingly common trend that has bankers and financial institutions using social media accounts to help appraise a borrower’s identity and creditworthiness.

Factors under investigation can include whether or not the prospective borrower has listed the same employment information across all of their social accounts, such as LinkedIn or Facebook. Of course, with so many social accounts for the average person to keep track of, simple oversight may well be more frequently at fault than willful omission. Suppose you leave your job in hydroponic crop production to work in a rubber duck factory and forget to update your resume; should that simple mistake stand in the way of your getting the financial aid you’re applying for? Consumer watchdog groups are saying “no.”

How Common Is This?

For the time being, this practice seems to be limited to smaller financial institutions that provide smaller loans and operate with a larger degree of risk. Even so, it’s expected that the use of social media accounts by lenders will gain popularity. For example: Fair Isaac Corp, a company that plays a role in something like 90% of lending decisions, has indicated that it’s looking into using social media data to help them make better-informed choices.

It would seem that one of the factors holding them back is the inherent shortcomings in using social data as part of a predictive algorithm. Whether or not the technology catches up with lenders’ ambitions remains to be seen.

A Matter of Ethics?

The main argument being made by consumer advocate groups is the notion that borrowers, including individuals and small business owners, could be targeted with higher interest rates or denied credit entirely based on the state of their social media accounts. For now, there are no federal laws in place to govern this practice or to protect borrowers from unfair scrutiny.

The issue is definitely a complicated one. One of the main questions in play seems to be whether or not the individual portrayed (for lack of a better word) on a social site constitutes a human being, with all of their complexities. In light of this trend, it would seem that quite a few bankers are keen to use social accounts as surrogates for flesh-and-blood customers, instead of keeping their decisions rooted in the realm of numbers, where arguably they should remain.

That said, all of the information on social sites was freely provided by the users of those sites. This story is just one more reminder not to post anything contradictory, untrue or embarrassing. It turns out there could be a lot more at stake than just your dignity.

 About The Author:

Scott Huntington is a writer, reporter, blogger, and social media marketer for CJ Pony Parts. Follow Scott at @SMHuntington