Could Facebook Patent Be Used to Approve or Deny Loans?

Facebook just filed for a patent that tracks how users are networked together. The patent can be used to prevent people from sending spam to those they’re not legitimately connected with. But the patent filing also describes a less savory possibility: that banks and other lenders could examine the credit scores of those in your network when deciding whether or not to make a loan to you. For some experts, at least, this conjures up visions of housing discrimination, aimed at the poor and people of color.

facebook33“In short: You could be denied a loan simply because your friends have defaulted on theirs,” Pacific Standard simply states.

Digital Trends quotes the salient paragraph in the updated patent filing: “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 node. 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.”

That’s scary stuff for the critics of big data, who have long predicted that it could have nefarious uses. This kind of digital redlining, notes Pacific Standard, is one potential result. “It could make Facebook a lot of money. And it could make the Web even less safe for poor people.”

Digital Trends notes that the Federal Trade Commission bans discrimination based on a borrower’s gender, age, race, religion, or other personal characteristics, “putting the patent in a legal gray area.” “It’s unclear whether the FTC would allow lenders to evaluate the financial information of your friends when assessing you for a loan,” it says.

Most peoples’ Facebook networks are full of old high school friends, distant relatives and past co-workers, not a very good dataset for predictive modeling. “A policy that judges an individual’s qualifications based on the qualifications of her social network would reinforce class distinctions and privilege,” says Pacific Standard.

But don’t start unfriending deadbeat Facebook “friends” just yet. Digital Trends points out that, “tech companies snap up patents constantly, often without the intention to actually use them.” But what if the social networking company does use it? “Facebook is betting everything on its broken, privatized community,” says Pacific Standard. “The potentially discriminatory applications of big data are very scary.”