The European Court of Justice (ECJ) has restricted the use of the controversial Schufa score for creditworthiness: Companies are not allowed to decide whether to conclude contracts with customers solely based on the automated score. The ECJ decided this on Thursday in Luxembourg. According to the judges’ ruling, so-called “scoring” is only permitted under certain conditions.
The Court said in a press release that this is an “automated decision in individual cases” that is fundamentally prohibited by the GDPR – provided that Schufa’s customers, such as banks, assign it a significant role in the granting of credit.
In addition, the ECJ had to decide whether private credit reporting agencies were allowed to store data from public directories even after they had been deleted from these directories. Here the Court ruled that it is in contradiction to the General Data Protection Regulation (GDPR) if private credit agencies store such data longer than the public insolvency register.
The score is important for energy suppliers, transport companies and mail order companies
The ruling could have far-reaching consequences. Many companies use the Schufa credit score to decide whether to enter into contractual relationships with customers, such as granting them a loan or not. This was shown by research by South German newspaper and NDR.
The research team asked around a hundred large companies in Germany whether such assessments were important for them when making contract decisions. Several major energy suppliers confirmed that they use the score to assess new customers. Anyone who is certified by Schufa as having good solvency will receive a special contract with favorable conditions from the energy supplier. Anyone who is judged less well has to go to more expensive basic care.
The score is also crucial for larger transport companies when it comes to whether subscriptions are taken out, as well as for mail order companies, especially in order to assess the creditworthiness of new customers. Two major payment service providers also said the score was important to them. Most companies do not want to be named.