If your Facebook friends don't pay their bills on time, you may soon be less eligible to get a loan.
Some lenders, like Lenddo, a tech startup that offers loans in developing countries, and the German company Kreditech have started using social media data to determine the creditworthiness of potential borrowers instead of traditional measures like credit scores, according to CNN. If Lenddo, for example, finds that you're Facebook friends with someone who was late paying back one of their loans, the company could determine that you're a high credit risk and deny you funds. If you interact with that person a lot, your chances for a loan are even worse.
"It turns out humans are really good at knowing who is trustworthy and reliable in their community," Lendo's CEO Jeff Stewart told CNN. "What's new is that we're now able to measure through massive computing power."
Using social media data to determine creditworthiness is just getting off its feet for now; Lenddo mainly targets middle-class people in smaller markets like the Philippines, Columbia, Poland, and Mexico. But harnessing big data to assess credit risk could go mainstream soon, CNN reports. Kreditech gives out 10 million loans each year, and will soon launch operations in Australia, the Czech Republic, Argentina, and Russia.
Not everyone is enamored with the innovation. Via CNN:
John Ulzheimer, a credit expert at CreditSesame.com, says social data aren't necessarily indicative of whether the borrower will pay back a loan on time. FICO [a credit scoring company that traditional lenders use] only considers a handful of factors, but they are all 'incredibly predictive of risk,' Ulzheimer said.
There's also the potential to game the system. Consumers can easily control how many Facebook friends they have... The same cannot be said for what goes into their credit score.
"To me, using social media is a little bit dangerous," Ulzheimer said.
Republicans have pulled out all the stops to kill Obamacare, the president's landmark health care law that requires every American to purchase health insurance by 2014. There have been lawsuits; there have been bills (40 in the House so far); there has been a Supreme Court case—all aimed at rolling back a law that that the GOP says is an assault on individual liberty. Now, with only a few more months to go until the individual mandate—the requirement that we all have coverage—kicks in, Republicans are frantic; some are even threatening to force the United States to default on its debts if Democrats don't agree to delay the law.
1. Rick Santorum? The Allentown Morning Call reported severaltimes in 1994 that Santorum wanted to "require individuals to buy health insurance rather than forcing employers to pay for benefits." Santorum denies allegations that he ever supported an individual mandate.
2. President George H.W. Bush: In 1991, Mark Pauly, an adviser to the first Bush, and now a conservative health economist, came up with a Heritage-style health care proposal for the president as an alternative to the employer-based mandate that Democrats were pushing at the time.
4. Mitt Romney: Romneycare was Romney's signature legislative achievement as governor of Massachusetts, and it served as a model for Obamacare. During the 2012 campaign, the presidential contender had trouble deciding what his position was on Obamacare, and he deflected the blame for having conceived a similar plan; at one debate he noted that "we got the idea of an individual mandate…from [Newt Gingrich]."
5. Newt Gingrich: Though he reversed his position in May 2011, Gingrich had been a big supporter of the individual mandate since his early days in the House. In 1992 and 1993, when Republicans were looking for alternatives to Hillary Clinton's health care plan, many, including then-House minority whip Gingrich, backed the Heritage idea. (Gingrich has said that most conservatives supported an individual mandate for health insurance at the time.)
Twenty of his fellow GOPers cosponsored a 1993 health care bill which included an individual mandate and vouchers for poor people. As health scholar Avik Roy wrote at Forbes in 2012, "Given that there were 43 Republicans in the Senate of the 103rd Congress, these 20 comprised nearly half of the Republican Senate Caucus at that time." Here are those lawmakers:
On Tuesday, Mother Jones reported that a lobbyist for the Financial Services Institute, an industry trade group whose members stand to benefit from weaker investor protections, secretly wrote a letter signed by 32 progressive House Democrats aimed at scaling back new regulations the Department of Labor (DOL) wants to impose on retirement investment advisers. Now, in an only-in-Washington twist, FSI is citing the letter its lobbyist ghostwrote to bolster its case against these protections, including in a recent missive to the Securities and Exchange Commission (SEC) urging a delay in implementing them.
The June 14 letter, authored by FSI lobbyist Robert Lewis, was signed by lawmakers including Tulsi Gabbard (D-Hawaii) and David Scott (D-Ga.) and argues that the new safeguards the Labor Department is considering, which would force millions of retirement investment advisers to act in the best interest of their customers instead of their own, "could severely limit access to low-cost investment advice" for "the minority communities we represent." FSI then cited its letter opposing the new rule—as if it had no hand in writing it—in a recent letter to the SEC, and on its own blog and website. (Hat tip to Claremont McKenna College political science professor John Pitney, who first noted this on his blog on Wednesday.)
FSI's July 5 letter to the SEC requesting that the rule be delayed and weakened notes that "we share the views of other commenters," including the "thirty-two members of the Congressional Black Caucus, Congressional Hispanic Caucus, and Congressional Asian Pacific American Caucus…who wrote to the DOL encouraging interagency coordination on this issue to avoid uncertainty and disruption in the marketplace." FSI did not disclose the fact that "the views of other commenters" are in fact its views. (FSI did not respond to a request for comment.)
Here, FSI also cites the letter in support of its interests on its blog:
And here, the trade group cites the letter on its website:
The Labor Department rule would force retirement investment advisers to act in the best interest of their customers, instead of putting their own profits first as they legally can now—a move that could crimp industry revenue.
As I reported Tuesday, since the lawmakers who signed the letter represent low- and middle-income districts with large proportions of minority voters, it could help the financial industry make the case that there is broad-based concern about the new rule. FSI is doing all it can to make sure that case gets made far and wide.
A new mortgage rule issued by the Consumer Financial Protection Bureau (CFPB) that takes effect January 1 limits fees on new home loans to three percent. The regulation is "one of the most direct and important responses to the mortgage crisis," Sen. Elizabeth Warren (D-Mass.) and Rep. Maxine Waters (D-Calif.) argued in a recent editorial in American Banker. But 12 House Democrats and Sen. Joe Manchin (D-W.Va.) have joined with Republicans to cosponsorbills that would eviscerate the new cap and clear the way for lenders to steer Americans into riskier, higher-cost loans.
On Tuesday night, Chris Hayes, the host of MSNBC's All In, picked up Mother Jones' scoop about the 32 progressive House Dems who signed onto a letter written by a financial industry lobbyist opposing new investor protections for millions of Americans' retirement accounts.