Can you be denied for a loan or mortgage because of your Facebook friends?

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If a recent patent is any indicator, then that you very well could be denied for a loan on a credit card, a car, or even a mortgage because of who you’re friends with on Facebook.

This summer, the U.S. Patent office granted an updated patent on technology that combs social media for evidence of a person’s closest network of friends and then relays that information to potential creditors, who can make lending decisions based on the friends’ perceived financial stability.

While some will call the practice of making lending decisions based on an applicant’s social network of friends discriminatory, banks and creditors say it’s just part of the comprehensive information gathering process to ensure their investment is safeguarded. And while it may not technically be illegal to factor in the network – and net worth – of a person before granting them a loan, it’s definitely controversial, at worse seen as an unauthorized invasion of privacy and civil liberties.

The U.S. patent, originally which Facebook acquired from Friendster and inventor Christopher Lunt in 2010, actually has a much broader scope of intended use than just data mining for lenders. In fact, the main purpose of the patent is to protect technology that formulates and tracks how social media users are connected in a social network to protect them from spam. Unsolicited friend requests, direct messages, spam emails, sales pitches, and uninvited friend search preferences that encroach upon social media users threaten to diminish their experience – and jeopardize the ubiquity and value of a Facebook. So this patented technology looks to enhance the existing Facebook algorithms to track social connections to reduce spamming and uninvited guests.

But the fourth listed use in the patent’s official application (called use cases in patent-speak) definitely outlines that same technology functioning as a way for lenders to aggregate credit scores and financial data from your Facebook friends when you apply for a loan.

From the patent’s use case:
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 authorized 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.

Of course most of us didn’t even realize that Facebook has the capacity to collect credit scores and other financial data, but the rate and cope that our personal data is collected and shared or sold online is startling. And Facebook, the world’s largest social media with over 1.39 billion monthly users in virtually every country, has seemingly hit its creative zenith a couple years ago and is now looking for every way to maintain its market share – and monetize.

As awareness of this patent comes to light, the philosophical debate will smolder – or it should; is it ethical to approve or deny someone for a loan based on the credit scores of their social media friends? Shouldn’t lending decisions be made with transparency so the consumer can monitor and improve their financial position? And how will the 51 million Americans who are “credit invisible” – with limited or no access to credit scores or banking fare? Or those who went through a foreclosure, bankruptcy, or some other challenge to the credit score? Will this lead Facebook users to start screening who they are friends with based on credit scores and financial wherewithal?

Will we eventually have our relationship status, education, hometown, work, AND credit score listed on our Facebook profile?

Important questions, all.

We’d love to hear where you stand on this issue so feel free to comment on this blog, share on Facebook, or email us any time.

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