“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.”
At first blush, this language suggests that a person’s own fiscal responsibility may no longer be the only determining factor in calculating creditworthiness; the personal finance patterns of your Facebook friends could be analyzed by potential lenders, as well. If the average credit rating of your social connections is unsatisfactory, your loan application may very well be rejected…that is, assuming Facebook decides to implement this particular use of their patent.
From a practical perspective, since Facebook relies largely on its users feeling comfortable publicizing personal information, if the company were to suddenly have a legal obligation to disclose their intention to gather personal data for credit scoring purposes, their users would likely flee. In the eyes of the typical Facebook user, this would be a far more severe offense than, say, suddenly changing the layout of their profile page, and users might actually make good on the oft-threatened promise to close their accounts with the social media giant.
From a legal and moral standpoint, the Equal Credit Opportunity Act lays out strict guidelines as to the kind of criteria upon which creditors are and are not permitted to base loan decisions. If lenders actually decided to mine Facebook’s data to assess a customer’s credit application, they would most likely only do so to supplement their scoring for those without much of a traditional credit history from which to draw conclusions. Considering that a large portion of the approximately 20% of “credit invisible” Americans are said to be in low-income and/or ethnic neighborhoods, it is likely that those demographics would be singled out for an assessment of their Facebook friends. Judging one’s credit risk based on the kind of people with whom one fraternizes is a slippery slope that could form a basis for civil rights suits.
Bottom line: Given their business model, it is not in Facebook’s best interests to test the trust of their user base in such a manner. The fact that this patent exists does not mean that the social network will exercise this feature. If it does choose to pursue the credit-analysis angle, it should inform its users and be mindful of the civil rights law. So, don’t go deleting your Facebook account just yet…at least, not solely out of fear that your deadbeat former college roommate’s credit score will lead to a loan denial.
[A more detailed discussion of the moral and regulatory implications of this patent can be found in a recently-published interview with Aaron Rieke, an expert on technology and civil rights.]