Banks Concocting New Ways To Spy On You

Feel the hair on your neck rising? Your bank is watching, with greater scrutiny then ever before. Banks are figuring out new scores and models to figure out your credit worthiness, using everything from how you deposit and withdraw money to how you pay your rent.

Sound scary? Well, this is to be expected. One factor in the housing crisis was the over-reliance on the overly-broad and, at the time, pretty gameable FICO system. So now credit bureaus, information warehouses, and banks are working together to get some increased granularity on you using:

* Your banking behavior (your balance and how you withdraw and deposit)
* An estimation of your income (which you don’t get to see)
* Rent payment history
* Credit bureaus are sending daily reports out to collection agencies indicating if your financial status changes. Say, if you got a job or started paying off a debt, which could show you’re ripe to go after for other unpaid debts
* Home value
* Wealth

If you’ve been a good consumer and paid all your bills on time, this could open up new borrowing opportunities or better rates for you. If you’ve been slipshod, it could end up harming your ability to access certain financial tools.

New Ways Bankers Are Spying on You [WSJ via Lowcards]

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  1. oldwiz65 says:

    Next thing you know they will drive past your house and see if you keep it up to their standards. Or maybe they will rate you by what you happen to wear when you walk into a bank? Perhaps tellers could report you if your hands are not clean?

    • Beeker26 says:

      Sadly none of this would surprise me.

      • econobiker says:

        Some municipality in the Northeast US was using Google Satellite to see out if homeowners had installed pools in their backyards but not declared these since the pool would increase property taxes.

    • duxup says:

      No need to drive by. Google does that for them.

    • Buckus says:

      There is a direct correlation between clean hands and good borrowers

      /sarcasm.

    • BHall says:

      They do not need to drive by; they can use street view or birds eye and once Google gets enough satellites to enter a 6 month update cycle it will be more than enough. After that your home insurance company will be on the lookout for any above grade pools you set up in the back yard, and the city will be watching for that new addition.

      I am trying to think up a good point of view for the consumer but drawing a blank.

  2. FatLynn says:

    Is this always a bad thing, or just a bad thing if it means you have a harder time borrowing?

    • jpmoney says:

      The devil is in the details, as usual.

      You could do everything “correctly” and pay your bills on time, save, etc, etc. I think this is going to end up, at least in the short term, like your insurance company doing a credit check – it is searching for some sort of reason to jack up your rate.

      I hit 25 and got the dip in my premiums from not being in an accident and now being part of a statistically less risky group. But the next renewal included a credit check and they jacked up my rates because I didn’t have a “long enough” credit history. Note that I have had a CC since 19, so I’m not sure how I could have had a longer credit history.

      They will use these metrics to find some way to further increase fees and rates. Oh, you paid your medical bill on your credit card (which you did because you get 1% cash back so you charge everything and pay it off every month) so they deem that “risky” behavior.

      • vastrightwing says:

        Exactly, more information will mean the banks/insurance companies can now justify jacking up their fees. Even if you’re not a credit risk, they may take one piece of information and raise your rates saying, “according to our records, you are a higher risk due to…”

      • Me - now with more humidity says:

        It’s your fault for not being born years earlier!!!!!

        /snark

    • ihatephonecompanies says:

      The idealist would say that this is good because it means that lenders have a more accurate assessment of your financial situation – that is, you should have a hard time borrowing if you are a bad credit risk whereas if you are a good risk then it should be easier. More information means a bank can customize financial products to meet individual needs!

      Being a cynic however, I would say that this is bad since consumer financial services are getting more and more predatory. More information means a bank can customize financial products to trap people into financial products just a bit beyond their means, trapping them into very profitable cycles of debt servicing costs.

    • balthisar says:

      Really… isn’t the consumerist mantra, “thou shalt not borrow”? So this could be a good thing!

      On a more serious note, I don’t loan money to people unless I know a lot about them. Since that’s our money the banks loan out, I don’t really see a downside.

  3. McRib wants to know if you've been saved by the Holy Clown says:

    Is this bad?

    • econobiker says:

      Think dynamic pricing based on your history and the bank making money from your personal activity data.

      Joe Smith walks in for a car loan and the bank knows it can benefit to steer him to car dealer for Brand A since the dealership has already found out that Mr. Smith had financed an earlier model of the same brand A car. The dealership has paid the bank to sell them a list of all the people who financed a car brand A through car brand A’s finance arm, then the bank gets a further kickback for recommending maybe the bank gets even more of a kickback.

  4. crazedhare says:

    Out of curiosity, and this may be totally naive, but how do they know my rent payment history? That is, they can asses whether a LL has commenced eviction proceedings or collection, but absent that…?

    • Beeker26 says:

      If you pay by check or do a withdrawal for the same amount of money the same time every month I think they could figure it out.

    • ARP says:

      Well if you have a consistent payment to Acme Properties around the 15th of the month and then you skip a month (or two) and its combined with a low balance, then it might flag that. They don’t know for sure that its your LL, but they can make a good (and largely accurate guess).

      As someone who works with analytics, you’d be amazed about what they know about you even by going to their website.

      • crazedhare says:

        Interesting. And I assume by signing some 6pt fine print I have authorized the (a) compiling, and (b) sharing of that information?

        • pecan 3.14159265 says:

          I’m pretty sure that they already do – the bank has to compile and store that information, because it regurgitates it to you in the form of your monthly statement. You can elect to not receive a statement, and one might not be generated, but you can still search the last X months of your banking transactions.

          Sharing is a different matter, but credit scores are determined from credit reporting, so maybe it’s determined from banking reporting too.

        • ARP says:

          Yes. Their Terms of Service, Privacy Policy, and Privacy Notice on their website probably allow it. The FTC is considering stepping in to regulate the use of this data but data aggregators, marketing groups, and “git the gubment out of my life” types are resisting. Google audience analytics. All they need is a IP address (even if you cycle them) to determine:
          Age range, income range, location (down to zip code), and other details about you. When they combine that with what you actually purchase, and your surfing habits, they know more about your personal life than your friends or family do.

          • crazedhare says:

            Very interesting, thanks for the primer. Of course I was aware to some extent of the issue, but I’ll be interested to read more about it.

          • Happy Tinfoil Cat says:

            Fascinating. They can’t tell that I’m a psychopath can they?

            • Me - now with more humidity says:

              Not until after the crime, when the reporter interviews your neighbors: “He was such a nice, quiet man. Wouldn’t have picked him for a psychopath. Although he did have a really big walk-in freezer installed in the basement after that big dinner party when no one left.”

    • jpmoney says:

      There is a database that landlords can use that tracks that sort of thing. Similar to the DB that tracks who bounces checks and so on.

    • jessjj347 says:

      I think the algorithm would have to be pretty darn intelligent. I mean there are some things that it could look for – e.g. if the same amount of money is taken out around the same time every month. But how would it determine who the money is going to ? What about the amount? Is it rent or a mortgage or a business expense, etc? What if the withdraw fluctuates by a few days? What if the you pay your LL for water and rent, so the amount fluctuates?

      What if one month you pay for rent, but the next your roommate does? That would mean one month, for example, $500 comes out and the next month $1000 comes out for both you and the roomie.

      I think rent payment history is not possibly to accurately access automatically…

    • human_shield says:

      Your bank can easily determine what type of payments you are making. Wells Fargo for example, offers a Spending Report that automatically categorizes debit, credit, and bill pay purchases. They know what vendors are gas stations, home repair shops, restaurants, landlords, etc. Unless you pay cash, your bank can instantly create a spending profile of you.

    • Portlandia says:

      I would guess if you make a large payment (as a percent of your monthly deposits) each month at the begining of the month it might be pretty damn easy to figure out how much your rent is or at least your portion of the rent.

    • Me - now with more humidity says:

      Might depend on whether you rent from an individual or a large management company.

  5. Loias supports harsher punishments against corporations says:

    This might be an argument for the continuing erosion of the middle class.

  6. dolemite says:

    I still say if our credit score/history has such an impact on our lives, private citizens shouldn’t have to pay to access the information. It should be provided, free of charge from a government website. Maybe integrate it into the social security system so we can check our credit history/score/social security contributions at once.

    • crazedhare says:

      Agreed. It seems as if everyone BUT me can access an aggregate overall third-party picture of my personal, financial and long term situation.

    • Beeker26 says:

      Well we do get free access to it at least once a year. And if your report is ever used against you you’re also entitled to a free report.

    • MrEvil says:

      I agree, the FCRA isn’t doing enough. Basically we, the public, are at the mercy of these private cartels that answer to nobody other than their shareholders and their customers. Yet they can have a profound and lasting influence on an individual’s life. Really only GOVERNMENT should have that sort of power, because we can at least vote those fuckers out of office or take up arms against them and rebel (Worked for Americans 235 years ago).

      We either keep the credit bureaus private and subject them to heavier regulations and force them to disclose more information to the public at large. Or we just get rid of the private ones and have the government take over (which is not the most ideal thing to happen).

      • Beeker26 says:

        Honestly, the worst thing to ever happen to consumers was the Fair Credit Reporting Act of 1998. It absolutely infuriates me that companies that *do not grant credit* can use your credit score against you, and are under no obligation to report on your behalf. The system is ridiculously stacked against the consumer. It’s literally a game you simply cannot win.

        I for one just do not want to play anymore. In 6 months I will be 100% debt free and that will the end of it. Short of an unexpected emergency there is absolutely nothing I need so badly that I must go into debt to have.

        I’d like to think the events of the last few years are spurring an entire generation to follow suit, but somehow I really doubt it.

        • jpmoney says:

          You’re also assuming that the data is actually correct.

          As for living off the grid, you’re also assuming that someone doesn’t put that information in there for you.

          /sigh, I’m in the rabbit hole again :(

      • thekevinmonster says:

        I think you might mean credit score. That is also used, in addition to a full credit report, but it’s compiled by a private company and they charge everyone for it, including you.

        For that matter, there’s a lot of data kept in databases owned by private companies that can have a significant impact to your life but which you cannot access yourself.

        Is it anti-capitalist for me to wish that individuals should always have at least read-only access to all information other parties keep about them?

      • ARP says:

        I agree with you, but In this paranoid tea party climate, there’s no way that would happen. I think the government should hold this information. Despite all the fear mongering they do a pretty good job of keeping data segregated (perhaps more my incompetence than by design). There are also laws related to their use of personal data (which financial aggregators don’t have). They’re also non-profit. Meaning, they don’t have a incentive to sell this data to everyone who asks.

    • You Can Call Me Al(isa) says:

      My credit union now checks it and gives a score to me in my online portal. I was excited when I saw this new feature.

    • ARP says:

      You don’t want the government to have control over your financial information, do you? I mean they might use it to monitor your spending…oh, wait. Financial Institutions and their use of the data can have a much greater impact on you than if they government held/regulated this data.

  7. AllanG54 says:

    If I’m borrowing someone else’s money, and I don’t mean the “bank’s” because it’s the depositor’s money in which the bank is really just the custodian, I would think they have the right to check every available outlet before deciding whether to give me the loan. In fact, I would want them to do it to every person who’s borrowing money from the bank in which I keep my deposits.

    • crazedhare says:

      It appears to me the problem is that they are doing whether or not you borrow money. We all have to submit to the intrusiveness because we MIGHT borrow money. It’s like saying everyone has to get a background check because they MIGHT someday apply to work for the defense department. Everyone must get scanned by the backscatter machine or pat down because they MIGHT sometime want to purchase an airplane ticket. I realize that those are (and are intended to be) somewhat silly answers, but it seems to me your premise that they are doing these things only when you seek to borrow others’ money is deeply flawed.

    • econobiker says:

      They are treating the info like website advertising- you have paid off a car loan ergo you may want to buy a new car.

    • evnmorlo says:

      You may just want to open a checking account and be denied because you typically don’t use such an account the right way, i.e. pay fees, have a high balance earning no interest. You may not be able to negotiate your salary for a job because they know exactly what your pay history is and how much you need to pay your mortgage.

  8. evilpete says:

    . . . And electronic paperless deposits & bill pay give the banks access to more info then people realize.
    Plus Advertisers are willing to pay big bucks for this information, so after billing you for the service they sell you info for even more $$

    • jessjj347 says:

      Good call. That’s got to be their primary source of data. There’s too many variables in looking at withdrawals/deposits .

  9. dragonfire81 says:

    “An estimation of your income (which you don’t get to see)”

    I have to admit, I have a big problem with this one. I assume they are looking at your account activity and using the amount of regular bi weekly or bi monthly deposits (presumably your paycheck) to estimate how much you make.

    But what if I have accounts at other banks or property or other assets they are not aware of?

  10. Happy Tinfoil Cat says:

    Just imagine the terror banks and government snoopers felt about companies like egold. It was full-on CIA type of misinformation program to destroy these privacy oriented companies at any cost.

  11. econobiker says:

    “Monetizing yet more personal data and activity history” coming soon to a bank near you…

  12. jesirose says:

    “* Credit bureaus are sending daily reports out to collection agencies indicating if your financial status changes. Say, if you got a job or started paying off a debt, which could show you’re ripe to go after for other unpaid debts”

    This is SO true.

    I had about 5 big debts. I slowly paid off 3 of them, and was disputing 1 of them. I waited a few months before finally paying off the 5th, since it was on a “payment plan”. Well between that time, the 1 I was disputing finally left me alone. The week after I paid off the 5th (3k), all the sudden the 1 started calling me again 3 times a day. (I finally paid it because they finally dropped it to the correct amount)

  13. zantafio says:

    Should you invest in gold?

    Well let’s see…
    Ron Paul, Glenn Beck, Adam Curry….
    Three conspiracy theorists nuts cheering for gold.

    Nuff’ said!

  14. u1itn0w2day says:

    Instead of a few tweeks or punishing those who violated existing ethical, professional and legal practices we now have the ‘ok you screw with us well find new ways to screw with you…and make lots of money at the time’.

    And a big thanks to all those who over used their credit cards and mortgage options like an 8 year with a 100$ bill near a candy store. And a special thanks to the banks who got hooked on gouging their customers like a junky on crack. With special consideration to those who couldn’t or wouldn’t use existing laws/tools to identify, pursue, punish the abusers.

    So now we have a high profile, politically motivated overhaul bill in place. And when most can’t make the current bill work rather than fix it they’ll demand another massive change with even more loopholes.

    • human_shield says:

      So the banks continue to screw us and the politicians still look like heroes trying to stop them. Hmmmm…

  15. areaman says:

    I’d like to mention another place where this could and will go wrong.

    More variables are introduced into the picture means more information needs to be processed/understood. This might make it more difficult for a work force who doesn’t get paid enough to do what they do. I can see the “The bank miscalculated my home value and paper wealth wrong” type of posts now…

  16. gman863 says:

    At least the banks don’t have carte blanche (yet) to randomly grope your naughty parts like the TSA.

  17. TheFingerOfGod says:

    Stool sample next?