E.T. Phone Loan

I've said in the past that phone metadata used by corporations was always a much larger day-to-day issue than the government using it (although to be fair, that was before Trump gets a hold of the NSA in January.)  But even if you don't know what the government is doing with your cell phone location and calling data, consumer credit ratings agencies will be happily buying that metadata from mobile carriers and using it to make credit decisions about you.

Financial institutions, overcoming some initial trepidation about privacy, are increasingly gauging consumers’ creditworthiness by using phone-company data on mobile calling patterns and locations.

The practice is tantalizing for lenders because it could help them reach some of the 2 billion people who don’t have bank accounts. On the other hand, some of the phone data could open up the risk of being used to discriminate against potential borrowers.

Phone carriers and banks have gained confidence in using mobile data for lending after seeing startups show preliminary success with the method in the past few years. Selling such data could become a more than $1 billion-a-year business for U.S. phone companies over the next decade, according to Crone Consulting LLC.

Fair Isaac Corp., whose FICO scores are the world’s most-used credit ratings, partnered up last month with startups Lenddo and EFL Global Ltd. to use mobile-phone information to help facilitate loans for small businesses and individuals in India and Russia. Last week, startup Juvo announced it’s working with Liberty Global Plc’s Cable & Wireless Communications to help with credit scoring using cellphone data in 15 Caribbean markets.

And Equifax Inc., the credit-score company, has started using utility and telecommunications data in Latin America over the past two years. The number of calls and text messages a potential borrower in Latin America receives can help predict a consumer’s credit risk, said Robin Moriarty, chief marketing officer at Equifax Latin America.

“It turns out, the more economically active you are, the more people want to call you,” Moriarty said. “That level of activity, that level of usage is what’s really most predictive.”

Did you catch that?  This is being used in Latin America and India so far, but what about the US?

In most cases, consumers must grant permission for their telecommunications records to be accessed as part of their risk assessment. One reason it’s taken the credit-risk industry some time to work out agreements with phone carriers or their representatives is because of negotiations over how to best protect client privacy.

Companies are also concerned about making sure they don’t make themselves susceptible to claims of bias. By checking phone records to see if a credit applicant associates with people with a poor track record of repaying loans, for example, lenders risk practicing discrimination on people living in disadvantaged neighborhoods. In addition, to comply with the Fair Credit Reporting Act in the U.S., a data provider must have a process in place for investigating and resolving consumer disputes in a timely manner -- something that telecommunications carriers abroad may not offer.

Several large phone companies contacted by Bloomberg declined to comment about whether they share data with financial institutions, and few of the startups or financial companies were willing to disclose their telecommunications partners.

So nobody's on record as doing this in the US yet.   Who wants to bet that this isn't already being shared with credit agencies in America yet?  How about with the incoming administration?

Yeah, if somehow your cell phone company isn't selling this information already to credit agencies, they will once Trump gets a hold of the FCC.  Oh, and who thinks this data won't be used to discriminate against people of color in 2017?

Count on it.