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Lenders may eye smartphone use before giving you a loan

Matt Hamblen | Dec. 7, 2015
The practice is already being used with loans given in Kenya, Tanzania.

That kind of business intelligence can also be applied to creditworthiness, although it isn't clear how interested the carriers are in engaging in such analysis.

Questions of privacy

Because smartphone users are consenting to have their device behaviors monitored when they download apps like Branch, most experts don't see major concerns about a person's privacy.

In many cases, the people wanting loans via smartphones need money badly enough that they will let a lender see how often they are talking, texting or browsing, experts said.

"The obvious reason people do this is that they have no alternative," said Marc Rotenberg, president of the non-profit Electronic Privacy Information Center in Washington. "Yes, they are desperate, and the data mining firms exploit their vulnerability just like loan sharks. The obvious question is what is done with all the data obtained from the applicant."

In the case of Branch, the company says on its website that it will not sell a user's information to third parties. With other lenders, it is less clear how data is used once a loan has been given or refused. Litan said it is likely that the lenders aggregating the data are not selling it and are probably bound contractually not to do so. Because the lenders and carriers technically own the data they gather, it is also unlikely a user would have the ability to delete it, she said.

Jack Gold, an analyst at J. Gold Associates, said the practice of analyzing smartphone behaviors for judging creditworthiness is another example of how personal privacy is fading away. "In the long term, there is no privacy," he said. "In a completely connected world where every electron passes through some sort of broker, the amount of privacy you'll have is close to zero, unless governments step in to change that."

Gold was harsh on the practice of measuring smartphone use to evaluate credit risk. "It makes no sense to me," he said. "There are many people who are good credit risks that don't use their smartphones all that much, and the contrary is also true."


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