Beware of your friends in FB

Your Facebook (FB) friends could determine your eligibility for a loan: not at the moment, but possibly in the near future. The social media company recently received a patent from the US patent office that will help them understand the credit worthiness of your FB friends. Even though, the patent also grants FB the ability to undertake other functions including filtering of spam messages; the’ credit equation’ has created uneasiness among its users.

Foutoun Hajjar, Head of Bahrain office, Al Tamimi opined that the use of social media sites to determine the creditworthiness raises ethical concerns. “The credibility of judging an individual’s credit worthiness based on his/her connections is at best questionable” she said and added that such a practice will make who you ‘hang out with’ as important as or more important than the assets you own.

Mahesh Balasubramanian, Audit Partner at KPMG Fakhro said that the information available on FB and other social networking sites may not be really accurate and reliable and added “it is also important to note from regulator perspective how the credit score determined will be permissible under banking norms.”

He further said that “Information privacy or data protection laws prohibit the disclosure or misuse of information held on private individuals. Over 80 countries and independent territories have now adopted comprehensive data protection laws including nearly every country in Europe and many in Latin America and the Caribbean, Asia and Africa. The US is notable for not having adopted a comprehensive information-privacy law but rather having adopted limited sectoral laws in some areas”

Ms Hajjar is of the opinion that the financial institutions may face a backlash of public criticism if they attempt to use this type of technology. “The big banks know that this type of profiling is a ‘dangerous game’ which may backfire,” while also pointing out that the use of social media to gauge an applicant’s credit worthiness is unnecessarily punitive: ” It can mean the difference between lending someone a significant (sometimes life changing) loan or not. Although this technology is not new – it is used in the US and other countries by various types of non-bank lenders, eg: Auto loan companies: However, banks and other financial institutions may find themselves in breach of privacy laws if they start implementing this type of tool across social media sites such as FB. Further, banks open themselves up to public criticism across social media networks (such as FB) in the event that an applicant is refused a loan based on his/her social connections.”

The patent awarded to FB may not be easy to implement in practice as the information collected should follow certain basic principles of data protection, the Audit Partner at KPMG Fakhro added. For all data collected there should be a stated purpose, the information thus collected cannot be disclosed without prior consent and data should be deleted if not needed for the stated purpose.

“The lack of information about the parameters for the patent’s use — how many friends will be polled and how, for example — also leaves many privacy questions unanswered, “ Mr.Balasubramanian said and added that the data collection and dissemination needs to be to be governed by an ethical framework and continuous monitoring by regulatory supervision.