The German credit agency Schufa recently hit the headlines after rumors emerged that a positive credit check might be necessary to buy a 49 euro ticket. However, the company could soon face another problem as a ruling by the European Court of Justice could shake up the Schufa system.
Does Schufa scoring violate EU law?
The Advocate General of the ECJ, Priit Pikamäe, has stated in an opinion that Schufa scoring violates European law. Specifically, it is about the automated creation of a value (score) about a person's ability to service a loan.
In his closing submission, Pikamäe explained that under the General Data Protection Regulation, individuals have the right not to be dependent on a decision based on “automated processing – including profiling”. This could mean that the credit agency's scoring system could become obsolete because it is based on precisely such automated processes.
“Automated creation of probability values” under test by the ECJ
According to Pikamäe, being dependent on an automatic decision is the case through the “automated creation of a probability value about the ability of an affected person to service a loan in the future”. Schufa uses the score to give banks, telecommunications companies or energy suppliers an assessment of a person's creditworthiness.
A bad score could have negative effects when shopping online or when concluding a cell phone contract, although many of those affected do not even know that their creditworthiness is classified as insufficient.
Score value is a trade secret
The calculation of the score value is a Schufa trade secret, which was also confirmed by a ruling by the Federal Court of Justice (BGH) a few years ago. However, whether this practice is compatible with the European Union's General Data Protection Regulation (GDPR) is currently being examined by the European Court of Justice. The Wiesbaden Administrative Court had referred a corresponding case to the ECJ, which concerned a person affected's access to their Schufa data and the deletion of their entry, reports Golem . However, the credit agency only told the person concerned the score value and general information about the calculation, instead of giving them full access to their data.
Schufa under fire: Lawsuits and reports could lead to changes
The person has filed a lawsuit and could potentially win justice, as decisions based solely on the automatically generated Schufa score could soon no longer be relevant. However, it will take several months before a verdict is made. Although the Advocate General's opinion serves as a guide for the court in making its decision, the court is not obliged to follow it. Another case involving Schufa involves data from public directories such as insolvency court registers. In his opinion, the Advocate General recommended that Schufa should not store such data longer than the public directories themselves.
In particular, information such as the discharge of remaining debts after bankruptcy should be deleted after six months, while Schufa retains such data for up to three years. This could lead to those affected being prevented from participating in economic life again.
However, it remains to be seen whether the final ruling of the European Court of Justice will confirm these conclusions.
Source:
T3N
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