Do you think your actions, behaviors, propensity for crime or buying patterns can be encapsulated by a scoring system? Data brokers, analytics firms, retailers and even law enforcement agencies believe they can. In fact, according to a new report by CNN, it’s not just the famous credit score that is used to determine your actions, but other businesses and groups are now creating hundreds of “secret” consumer scores which are helping a variety of agencies and companies do everything from “promoting new products to investigating crimes.”
The most interesting aspect of these scoring systems is their pervasiveness, although consumers know little about them, how they are compiled or how they can be corrected if inaccuracies exist. So unlike your credit score, which you can periodically review, these scores are secretive.
This could all change in the future. In fact two consumer advocates, Pam Dixon and Bob Gellman, have written about these scores and have asked the government not only to review the scoring system but also to offer consumer scrutiny and transparency.
Why is transparency needed for consumer scoring?
Many of us have thought for years that what we don’t know can’t hurt us, but Dixon and Gellman argue that some scores “infringe on a consumer’s privacy and can affect their eligibility for everything from a new job to affordable insurance.” The pair also argue inaccuracies can hurt consumers by labeling them a “fraudster” when they are not and eliminating their ability to get could credit.
“Whether a consumer receives a coupon for a free soda is not a big deal,” they wrote. “Whether a consumer can complete a transaction is of significant consequence.”
What types of scoring are currently done on consumers?
According to the World Privacy Forum, there is a consumer profitability score that predicts how likely you are to repay your debts, a churn score which predicts how fast you move to competitors offering the same service, a medication adherence score that determines how likely you are to follow a prescription plan and a job security score that forecasts the likelihood that you might lose your job. Finally, retailers often use fraud scores to determine if a customer is likely to perpetuate fraud.
While many of these scores can be a valuable tool to retailers or credit agencies, as mentioned above, because consumers have little access to review these scores and do not understand how they are calculated, inaccuracies may go unchallenged. If your fraud score, for instance, indicates you are a high risk customer you could be rejected credit or declined credit card purchases.
Experts suggest consumers and individuals should be worried. For example, even the credit scoring system which is administered by the credit bureaus and is subject to consumer protection laws, is riddled with errors. According to a recent FTC study, as many as forty-two million Americans had errors on their credit reports. Just think how much worse the problem could be for commercial marketing databases that are not under any type of regulation and are not available for consumers to review and challenge.
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