Loans could be determined by Facebook friends’ credit ratings

Facebook has patented a new technology which will allow commercial lenders to determine loan access based on those you are connected to on social networking sites. The technology itself is described as, according to Venture Beat, “a technology that tracks the way users are connected in a network”, with its primary purpose being to prevent “members of a network from sending spam to other members with who they’re not directly or legitimately connected”.

How this technology could be both legally and practically used, however, remains uncertain

However, most striking is the description of the fourth embodiment of the technology, which the patent outlines as such:

“In a fourth embodiment of the invention, the service provider is a lender. When an individual applies for a loan, the lender examines the credit ratings of members of the individual’s social network who are connected to the individual through authorised nodes. If the average credit rating of these members is at least a minimum credit score, the lender continues to process the loan application. Otherwise, the loan application is rejected.”

What this means is that the loan risk of a customer will be determined by the credit history of his or her friends on social media. Using someone’s association with people on social networking sites leaves lenders using this as a metric open to charges of discrimination.

How this technology could be both legally and practically used, however, remains uncertain. The Equal Credit Opportunity Act lays out stringent rules for what information can and cannot be used to determine loan risks, while it is unclear how all necessary information needed from a prospective lenders social network group could adequately be gathered.

Whether its wearable fitness devices utilising exercise and lifestyle data to determine insurance premiums, or e-commerce firms such as Amazon determining patterns from browsing habits to target certain adverts, activities once thought of as seemingly inconsequential everyday activities and habits are increasingly being turned into data by businesses for commercial purposes. Now, who someone is friends with online with may be used in such a way.