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Facebook's New Patent, 'Digital Redlining,' and Financial Justice

Facebook s New Patent Digital Redlining and Financial Justice The Atlantic


In August, Facebook secured an otherwise innocuous U.S. patent about how to analyze a user’s friend network to let them do something. Most of the patent discusses the fairly mundane technicalities of running a social network—until, last in a list of examples, there appeared the following paragraph:

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 […]. 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.

In other words: The patent would let a bank analyze your Facebook friends when you applied for a loan. If too many of your friends have poor credit histories, the bank could reject your loan application—even if your own credit was fine.

“A neutral policy or practice that disproportionately burdens a group of people on a prohibited basis is still illegal,” says Rieke. So if a bank tried to use Facebook’s friend-network-based credit scoring, he believes that bank would quickly face a disparate-impact suit.

“Someone would file a disparate-impact lawsuit against a creditor who used it, saying: I’m poor, my friends are poor; or, my friends are poor and therefore you denied me credit; or my friends are of a particular ethnic status and therefore I was declined; and there would be a disparate-impact lawsuit,” he said.

Then, “the creditor would have to show that this friend score actually predicted creditworthiness, and that there was no better way for them to score that person,” he said.

This would be a tough case for the bank, especially since many credit agencies right now say there is no better guarantor of someone’s ability to pay back a loan than their credit history.

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I cannot find anything scientific online that says a person with friends with good credit is more credit worthy. Or that a person with friends with bad credit is less credit worthy.

So it's interesting that Facebook mentions that in the patent but I wonder if the patent will actually be used that way. 

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