D: Scoring system for the assessment of creditworthiness is regulated

Category: Nachrichten, Gesetz
By: K. Schiefer - 2B Advice GmbH - the privacy benchmark

On May 29, 2009, the German Parliament passed a law regarding the regulation of credit agencies. The changes apply, inter alia, to the data of those involved used to assess creditworthiness. The law will come into effect as of April 2010.

In the scoring system a numerical value representing the creditworthiness of a particular individual is determined on the basis of a statistical analysis. In this way, companies attempt to determine the creditworthiness of customers or partner companies to a largely automated extent using a predetermined method.

 

In future, the use of address data exclusively to determine the score value shall be prohibited. The minor weighting of additional data regarding place of residence in the context of this score value shall also be forbidden.

 

On the other hand, it shall be obligatory in future to provide information on how the score value is calculated. The information must be provided on a case-by-case basis and must be generally comprehensible; additionally, the scale of possible values is to be disclosed. These obligations apply to all companies that collect and sell information concerning the actual or reputed solvency of private individuals.

 

Those persons concerned shall be informed, at their own request, of the circumstances that have resulted in a decision that is not in their favor in order to provide them with the potential opportunity to succeed in asserting their interests in a personal conversation.

 

The obligation to state the importance of the detailed data, as this evaluation is the business of the individual credit agencies, and a reduction of the amount of groups of people/companies that are allowed to use the scoring system were both rejected. The use of the scoring system to determine creditworthiness shall therefore not be limited in future to credit-related issues; it can also be used by lessors, for example.

 

This law requires considerable changes within companies. The amount of data that can be used shall be limited, whereas a number of reporting requirements shall be introduced. As these requirements affect all those companies that collect information on solvency and pass it on to third parties, the companies concerned should start preparing for these new introductions at an early stage. Even if the law does not enter into force until well into next year, companies should already start to plan the procedures necessary for adhering to the reporting requirements and the adjustment of the data collection process.

(1225 times viewed)