There are plenty of scores we know about — the score of the football game, the points your friend just scored against you in a word game on your phone and won’t stop crowing about — heck, some of us even still brag about our SAT scores. And of course, there are traditional credit scores. But there’s a new digital player in the scoring game, and it could be troublesome for many consumers, as it operates under the cover of almost complete secrecy.
The New York Times delves into this eScore, as it’s being called by one company generating them, noting that right off the bat it could be worrisome as we’ll likely never even know what our own scores are. They’re also known as consumer valuation or buying-power scores, and companies are all about using them to decide whether to offer you credit, certain ads or a better cable plan. Or maybe, those businesses won’t offer you anything at all if you’re deemed an undesirable.
The business of eScores uses huge amounts of data and computer algorithms to calculate your score in order to compile a digital ranking of American buyers. The scores look at your job, salary, home value and what kind of products you buy to predict how you’ll spend.
There are a few companies calculating these scores right now, like eBureau and its spinoff TruSignal. The head honchos there see these scores as a way to calculate the odds — take on this customer and reap big returns or pass on someone who won’t be so profitable. So if your e-score is low, you might not get the same access to home loans, credit cards or insurance as higher scoring consumers, or could even be denied attentive customer service if you’re not valuable in the first place.
Of course, this has many consumer advocates worried, and the federal government is paying attention as well. The scores aren’t generated using federally regulated consumer data, however.
“The scoring is a tool to enable financial institutions to make decisions about financing based on unconventional methods,” says David Vladeck, the director of the bureau of consumer protection at the Federal Trade Commission. “We are troubled by these practices.”
Because these scores are calculated without using consumer credit data and for the purpose of marketing to consumers, businesses don’t have to tell customers why they’re being passed over, unlike with traditional credit scores. The rise of digital valuation has critics worried that laws aren’t keeping up with the times.
“There’s a nontransparent, opaque scoring system that collects information about you to generate a score – and what your score is results in the offers you get on the Internet,” Ed Mierzwinski, consumer program director at the United States Public Interest Research Group in Washington told the NYT. “In most cases, you don’t know who is collecting the information, you don’t know what predictions they have made about you, or the potential for being denied choice or paying too much.”
So how does it all work? When consumers use sites with tools like an online rate calculator and submit their contact details and other information, that is basically generating a lead. Companies take these leads as well as how many potential customers bridged the gap and became actual customers, and give it to a business like eBureau.
Details like age, income, occupation, property value and more are all added in by eBureau from its databases, the numbers are crunched and prospective customers are rated based on how similar they are to previous customers. At that point, eBureau can report back to its client how likely someone is to enroll or worth the effort to woo.
While businesses like eBureau say they’re trying their best to make sure the system is all on the legal up-and-up and make sure consumer privacy isn’t breached, critics are worried that eventually the system will move from simply narrowing the field of prospective customers to actively keeping certain consumers at a disadvantage.
“I’m troubled by the idea that some people will essentially be seeing ads for subprime loans, vocational schools and payday loans,” a professor at Seton Hall University School of Law, who is writing a book about scoring technologies told the NYT, “while others might be seeing ads for regular banks and colleges, and not know why.”
Secret E-Scores Chart Consumers’ Buying Power [New York Times]