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New law nixes online activity as a factor in consumers' credit scores

The law prohibits credit reporting companies from using

The law prohibits credit reporting companies from using a consumer's social network to help determine creditworthiness. Credit: Getty Images/iStockphoto/tolgart

A consumer’s credit score cannot be affected by their online activity, including the credit scores of their Facebook friends and Twitter followers under a bill signed into law by Gov. Andrew M. Cuomo on Monday.

The state law, which takes effect immediately, prohibits credit reporting companies, such as FICO, from using a consumer’s social network to help determine their creditworthiness. Banks and other lenders use credit scores to make loans and issue credit cards, among other activities.

A FICO spokesman said Monday the California company has never proposed using social media information to set consumers' credit scores and has no plans to do so.

FICO CEO Will Lansing, in a 2015 interview with the Financial Times, seemed to suggest Facebook activity could be helpful in setting credit scores. The spokesman said Monday that Lansing's comment had been misunderstood.

The New York law passed the State Legislature overwhelmingly last spring. It was first introduced in 2016 after Lansing's comment.

One of the legislation's co-sponsors, state Sen. Anna M. Kaplan (D-Great Neck) said Monday, "Your credit score should be determined by how responsible you are with your finances, not how you choose to express yourself on social media. If we allow consumer reporting agencies to judge creditworthiness based on an individual's social media, it would result in insidious new forms of discrimination and would make our credit scores far less accurate."

The law's sponsors, Sen. Brian Kavanagh (D-Manhattan) and Assemb. Marcos Crespo (D-Bronx) agreed, adding the federal General Accounting Office found 75 percent of credit scores are incorrect because they are based on faulty information collected by credit bureaus.

Crespo said, “A person’s online use and search history is absolutely irrelevant to their creditworthiness.”

A few years ago, credit reporting companies and lenders first floated the idea of using computer algorithms and artificial intelligence to gather information on consumers’ internet usage and social media footprint.

"If you look at how many times a person says 'wasted' in their [Facebook] profile, it has some value in predicting whether they're going to repay their debt," FICO's Lansing said four years ago.

However, FICO spokesman Greg Jawski said Monday the company "does not and has no plans to use social media data or social media analysis in calculating FICO scores. Social data does not meet FICO's stringent scientific criteria for data sources used in credit risk scoring," he said.

New York State regulators have received no complaints this year about consumers' credit scores being impacted by their use of the internet and social media, according to an official familiar with the matter who declined to be identified by name. The official said the state had warned insurance companies about using social media data to help determine premium payments for consumers.

In the 63-member Senate, the lone "nay" vote on the legislation came from Kenneth P. LaValle (R-Port Jefferson). In the 150-member Assembly, there were three "no" votes, including from Anthony Palumbo (R-New Suffolk).

Cuomo, in approving the legislation, said, "Basing someone's credit score on who they know [via the internet] is not only an invasion of privacy, it is a way for these [credit reporting] agencies to unfairly target and penalize low-income New Yorkers."

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