The next time you apply for a payday loan or a small business loan from your financial institution, the application’s success may depend on your Facebook friends, according to the latest patent filings from Facebook.
The social network juggernaut filed for a patent from the U.S. Patent and Trademark Office for a method that could potentially assist in long-term credit and bad credit loan lenders observe the social habits and connections of an application to conclude if they’re eligible for a loan.
Facebook purchased the patent from Friendster in 2010, which was established by Christopher Launt, who is now employed by getinsured.com. It was first identified by Smartup Legal.
A footnote in the patent outlines that when a customer applies for a loan then the lender would be able to peruse Facebook and find out the credit standing of the individual’s social media friends. Therefore, if the average credit rating of an applicant’s connections maintains a minimum credit score then the application would be approved.
“When an individual applies for a loan, the lender examines the credit ratings of members of the individual’s social network who are connected to the individual through authorized nodes,” the patent states. “If the average credit rating of these members is at least a minimum credit score, the lender continues to process the loan application. Otherwise, the loan application is rejected.”
Indeed, this perhaps would be a welcomed addition to the application process for the finance industry. Banks, for example, may add this to their arsenal of metric data for the review process. Some experts say they feel very uncomfortable by this concept.
“We have been exploring this method of determining an applicants trust score for several years now. Our initial data suggest that people of similar wealth and financial status tend to gravitate together. We hope to begin utilizing this as one of several tools to determine a borrowers trust score for bad credit loans by the end of 2015.” – Chris Lions
Here is what The Next Web’s Amanda Connolly opined late last week:
“I find this idea terrifying. I have absolutely no idea about the credit history of my friends and I don’t think they should be subjected to scrutiny if I, or anyone else they are friends with, is looking for a loan. Judging someone’s credibility on the company they keep (online or otherwise) is an unfair system. I wouldn’t unfriend someone just because they are in debt. In this day and age, it’s hardly an uncommon situation to be in and a move like this by Facebook could push people to make that tough decision.”
It should be noted that Facebook hasn’t necessarily confirmed what it intends to do with this patent. Moreover, there are laws in place for payday loan lenders and credit providers to determine someone’s creditworthiness. Nonetheless, it may cause a great level of discomfort for those who regularly rely on credit to get by.
Of course, the new patent may not just be for the bad credit loan industry.
For instance, the patent could be utilized by discouraging members from sending spam to other users who are not directly connected with others on Facebook. Or, it could help allow users to appear invisible to other users they’re not friends with, which means they won’t appear on search results or receive messages.
The conclusion often made surrounding this new patent is just because someone the applicant knows has bad credit it doesn’t mean they do as well. In addition, if this is taken into account in a customer’s application process and they’re rejected then they could very well look elsewhere for much needed funds, even in unscrupulous avenues.
With that being said, it should be realized that many tech firms file patents without any intentions of using them. So perhaps Facebook won’t use it at all.