August 03, 2005

Credit reporting invades my privacy . . . and privacy commissioners don't care

Credit reporting is an invasion of my privacy. (Apparently, I'm on a privacy jag right now -- I'm sure it will pass with the lunar phase. Until then please bear with me.) I know it's ridiculous to feel this way . . . because our society demands and accepts the credit reporting structure for good and valuable reason. I am obviously wrong. Be that as it may, my reasoning goes like this: There is information about my current and historical commercial transactions and financial situation -- salary, credit outstanding, retailers I purchase from, etc., etc. -- that is extremely private. It is the effluent of bi-lateral (commercial) relationships that I maintain with others -- independently -- to satisfy theirs and my needs, whatever those may be. What makes a third party (the credit bureau) relevant or privy (in the legal sense) to that detritus except the singular desire of the collective of the "other party?" Why should a new, separate potential relationship require and also be privy to the details of my private activities with others? To me, the (potentially extraneous and superficial) knowledge about me that others are able to realize from that information, which is vigorously aggregated and analyzed, seems invasive and violating. I'll elaborate below.

This outpouring is the result of a little article in today's Toronto Star (Errors in credit scoring cost dearly) that harangues about errors in credit reports and the downside of (bad) credit scores. Here's a snip from the article:

It's well known that you can get a free copy of your credit report . . . But if you really want to know how clean or dirty you look to lenders, you need to know the score. This is a three-digit number, ranging from 300 to 900, designed to predict the possibility that you won't pay your bills.

You can't get your score, however, without paying a fee. . . . Unless you pay $20-plus each time or persuade your lender to make a voluntary disclosure, you're in the dark about a key measure of financial health.

Lenders use credit scoring routinely to accept or reject applications and price their products. Why should credit bureaus turn this into a profit centre?

I left the question in at the end of the block gratuitously, but can't really argue with anybody creating a profit centre out of fulfilling a need or market demand. This was, however, the flavour of the article. My own trouble with the situation is a little more abstract.

This is a hard position to rationalize in any coherent way because all aspects of it are completely understandable. The data repositories and knowledge assembled -- by record (i.e., you, me, and everyone else) -- exist because there is a need. The need is sensible: protection for money lenders. Lending money is a risky business (which is at least part of the reason for interest) and a sensible lender seeks to protect its money. There are at least two approaches to this: up-front and back-end. Back-end protection is relatively simple: coercion and occasionally physical penalty. The borrower repays or harm visits him/her. That's messy though and does not eliminate the potential loss of the investment should the borrower have to be "dealt with." It's much easier to take precautions at the front-end.

So civilized lenders ensure that they minimize risk up front. What can they do? Well, I had a bank once tell me that to obtain a $40,000 revolving business line of credit I could deposit with them $40,000. (That seemed a little unworkable to me.) That, of course, would severely stricture the volume of mortgage, car loan, and other highly profitable lending that could be done. It would also practically eliminate the, "Don't pay until 2006," volume-driving incentive of many a furniture retailer. The alternative is to assess borrowers' repayment ability and likelihood. Contrary to the investment industry's advice that "Past performance does not ensure future results," the consumer credit industry relies on history.

Perfect sense: in the absence of alternatives, making an assessment about a potential borrower based on past performance is not a bad thing to go on. Of course that information has to come from somewhere. Since it would be too cumbersome for every lender to approach all of each applicants' previous lenders -- after obtaining that person's agreement to do so! -- aggregators gather and assemble the data. We agree to it only because without a credit history that can be pulled up from an aggregator, we are nobody and can't get credit. So, we let potential creditors both gather and provide information to the credit history aggregators in exchange for the commercial relationship. A virtuous viscious cycle that takes a private relationship and effectively makes it public.

Don't be fooled. That information -- and more importantly, that knowledge (which is more dangerous and troubling) -- about you is public. It is allegedly available only to you and those who request it (after obtaining your consent). But you are never in control of that information. The value of what you want, consumer, and the unequivocal demand that you grant access to this knowledge about you is profoundly knit into the fabric of our consumerist life. It practically ensures that anybody who wants the information will get it. Sometimes, due to lapses in protection and security, even those who don't want it get it.

As anyone who has had to deal with a credit bureau discrepancy (especially following an identity theft) can attest, first you go through hoops to see your file, then it is practically impossible to amend that information file because it's not yours. The information and knowledge now belong to someone else -- and both the provision of the underlying data and the corroboration of its accuracy are in others' hands. It is not possible for you to add to, subtract from, or amend this very personal information by yourself. You have not that right or control.

All this is backdrop for my consternation about "privacy" in the information age. I think they are representative of others' similar challenges. Here it is: my notions about "privacy" specifically as it relates to me and as an abstraction generally is contextual and flexible. It defies hard and fast regulation. (As Groucho said, "Those are my principals, if you don't like them....I have others.") For example: I don't find junk mail or other solicitations, in person or on the phone, to be particularly invasive of my Privacy. I do believe them to be annoyances and trespasses upon my physical and mental personal spaces. Even within that, I tend to qualify in a purely personal and subjective way based largely on circumstance: personal interruptions on the street (like the time-share hawker in Cancun or the panhandler in Toronto) run from code-red invasions and demands through to merely annoying interferences with my plans for the moment. The first is more deeply invasive to me because it is commercial; the latter more troubling because it is equally annoying but also morally destablizing (but that's fodder for another post).

Phone solicitations are the most rank in my view. Why? Well, to begin with I think that all incoming phone calls are disruptive and invasive (but we're conditioned from youth for Pavlovian response to the sound of a telephone ringer). The phone solicitation is an especially unwanted and undesired imposition on my time and attention (i.e., my mental space). To make matters worse, the solicitor at the other end -- likely paid by success -- tends to be aggressive about ensuring that I comply with his desires which are, typically: to stay on the phone, to listen, to agree to something, and perhaps to permit the solicitor or his colleagues to either breach my physical space or make further phone calls. And they ask "confirming questions" proving that (a) they have some information about me and (b) they are fleshing out even more knowledge about me.

The question must be something like: "They called you up, so they have some information about you. Don't you think that's an invasion of your privacy?" In short: no. Why not? In my view, most of that information is publicly available in one form or another. And, even were it not, having certain information publicly available or known is the price of joining in and participating in a civilized social system. Contrary to popular belief, I am not a curmudgeonly hermit closed off from the rest of the world secretively conducting bizarre acts behind protective barriers. I come out and enjoy the world and interact with others. Sometimes I prefer to be anonymous and conduct my affairs without trace and obligation to stand up to that record. But most of the time, I am satisfied to be leaving little traceable breadcrumbs behind me. If one wishes to enjoy the company of others in this journey, one of the costs is to be known.

I realize this answers nothing. It may provide no new light on the subject. It may not even be clear what I'm trying to say. No matter. It had to be said.

In any event, I wrote a few papers some time ago under the umbrella of "Identity Planet" -- all available on the content/identity portion of this Site -- that went on at even greater length about ownership of information. It seems to me that what gets stirred up in this wondering about something as structurally well-woven into our society as credit reporting/bureaus is that maybe we truly don't own any of the information about ourselves. Maybe these effluents belong to somebody else and what is really going on is that we are trying to rationalize that reality with the desire to be in control of ourselves and our "information."

Greater minds than mine will have to mull through this. At least tonight -- I'm tired.

Posted by Grayson at August 3, 2005 09:06 PM