Status: 03/16/2023 2:50 p.m
According to an expert at the European Court of Justice, Schufa score values violate European law. The saving of bankruptcy entries is also criticized. A verdict is awaited.
According to an expert at the European Court of Justice (ECJ), the creation of so-called score values for creditworthiness by Schufa violates European law. In addition, the Schufa may not store data from public registers – such as the registers of the insolvency courts – longer than the public register itself, said the ECJ Advocate General Priit Pikamäe in his opinion. A verdict is expected in a few months. Opinions of the Advocate General are not binding on the judges, but they often follow them.
Private credit agencies such as Schufa are often used by banks, telecommunications services or energy suppliers to obtain an assessment of a person’s creditworthiness. The score is intended to show how well the person is meeting their payment obligations.
Do score values violate the General Data Protection Regulation?
The background to the proceedings before the ECJ are several cases from Germany. In the first lawsuit, the plaintiff asked Schufa to delete an entry and give him access to the data after he was denied a loan. However, the Schufa only gave him his score and general information about the calculation.
The calculation method itself is a trade secret, as the Federal Court of Justice (BGH) decided years ago. The Wiesbaden Administrative Court submitted the case to the ECJ in order to have the relationship to the European General Data Protection Regulation clarified.
The regulation stipulates that decisions that have legal effect for data subjects may not only be made through the automated processing of data. The Advocate General ruled that the automated generation of a probability value, like the score value, already constitutes a prohibited automatic decision. This also applies when the final decision is made by third parties such as banks.
Saving the discharge of residual debt
The second case concerns the possibility for private individuals to free themselves from their debts within a certain period of time through consumer bankruptcy, even if they are unable to repay everything. After a successful procedure, the so-called residual debt exemption is granted.
While the insolvency courts make this information public, they delete it after six months. In contrast, Schufa keeps such entries in its register for up to three years.
The ECJ Advocate General considers this practice to be unlawful. The aim of the discharge of residual debt is that those concerned can participate in economic life again. That would be thwarted if private credit agencies were allowed to store the data on the insolvency longer. The Federal Court of Justice is currently examining a similar case.