I am surprised these guys are able to operate outside the normal credit reporting laws. He’s referencing things that happened in 2009, which is well outside the usual 7 year limit for credit report data.
Clearly, these companies are going to make the argument that this is not credit report data subject to consumer credit laws, but I’m curious if that has been tested at all. I would think an enterprising lawyer could make that argument.
Seven years only applies only to certain delinquencies, not all information in general. Most "aged" reports will have information dating back well past seven years (loan origination dates, address history, former name(s) used, etc.).
Usually a closed account will stop being reported to credit bureaus 10 years after the last activity on that account. I don't know if that's due to law or custom. My own credit report contains accounts closed more than seven years ago but less than 10 years ago and it does NOT include the one account closed 13 years ago.
The impetus for a company like Sift was better fraud detection. I haven't evaluated the platform in some time, but if I remember correctly; it democratized the fraud decision process by feeding Sift data on successful orders. Clients would score their own orders based on whether or not it was returned, charged back or simply a successful no-friction order.
Something like 80% of customers have issued a chargeback, 86% of chargebacks are "friendly fraud", increasing at a rate of 41% every two years. The dollar figure I've heard is $20+ Billion in friendly fraud.
So, obviously there's an altruistic nature to why a company like Sift has this data. But, I'm of the opinion that they saw the dollar value in this type of scoring and collection system.
Well sure. And a pretty core impetus for a company like Equifax keeping data on loan repayments is also better fraud detection. That's even more true in the insurance business which uses consumer credit agency data extensively.
Fundamentally what they are doing seems like the same thing. They're keeping a file on people that corporations are using to decide if they're trustworthy.
We decided a long time ago that consumers need to have the right to see and challenge that data for accuracy, as well as to have limits on how long it can be held against them. I see absolutely no reason why those principals should not apply here as well.
And it seems at least arguable that they already do. Clearly there's arguments on both sides, but reading the basic definitions here on what comprises a credit report and a credit reporting agency, and the prohibition on reports more than seven years old, it seems like a non-frivolous case could be made:
Aren't the credit reporting laws pretty strictly scoped to making decisions about loans? I imagine these companies are pretty explicit with their clients that scores can't be used for those purposes.
They are also used as a factor in determining car and homeowners insurance premiums in most states. (People who pay their bills on time are less likely to make insurance claims)
> Aren't the credit reporting laws pretty strictly scoped to making decisions about loans?
Absolutely not. The Fair Credit Reporting Act is one of the laws governing background checks for hiring (in addition to credit reporting), for example.
(and if it comes out that the reports referenced in the article were used by someone somewhere to reach a hiring decision, I expect lawsuits will quickly follow)
They’re able to operate this way because everything has been secret. With the new California law it’s probably just a few months until there’s a class action against any or all of these for discrimination against multiple protected classes.
Clearly, these companies are going to make the argument that this is not credit report data subject to consumer credit laws, but I’m curious if that has been tested at all. I would think an enterprising lawyer could make that argument.