New Federal Data Protection Act – even more power for Schufa?

It is already the largest credit reporting agency in Germany: Schufa. According to research by NDR and making the Süddeutsche Zeitung even more powerful.

At the beginning of February, Federal Interior Minister Nancy Faeser and Consumer Protection Minister Steffi Lemke presented the government draft for the new Federal Data Protection Act (BDSG). The so-called scoring is also newly regulated. Credit agencies such as Schufa use a scoring system to evaluate the creditworthiness, i.e. the ability to pay, of customers.

If a score is good, people can hope for a loan. If it is bad, the loan is usually not available or only available on worse terms. When calculating such credit ratings, certain long-controversial data categories are to be excluded in the future: information from social media, incoming and outgoing payments to bank accounts and also address data.

It is a step that consumer advocates very much welcome. Making a person’s creditworthiness dependent on their address is discriminatory and unfair. For example, residents in a residential area would be rated better than others who live in an area with many high-rise buildings.

Advantage Schufa

But the ban on address data could have consequences that the federal government may not have considered: For Schufa’s competitors Crif, Boniversum and Infoscore Consumer Data, consumers’ address data play a central role. This can also be seen from their company websites. There they describe how they calculate their scores.

Schufa, on the other hand, writes on its website that address data will only be used “in a few exceptional cases”. Because it has a wealth of meaningful information about consumers that it receives from banks and savings banks. Schufa has this data exclusively because the credit institutions are co-owners of Schufa. Through the planned ban on including address data in the scoring calculation, Schufa could further expand its market power, an idea that is now also alarming consumer protection and politics.

Data protection officers see a dilemma

The new law leads to a dilemma, says Carmen Wegge from the SPD, data protection expert and member of the responsible interior committee of the Bundestag. She says: “I don’t want Schufa to have a monopoly in Germany.” At the same time, she is also against other credit agencies “having a discriminatory score that has a negative economic impact on the lives of people in this country.”

Christine Steffen from the North Rhine-Westphalia Consumer Center is also skeptical: “It would definitely be a worrying development.” After all, Schufa has repeatedly tried things in the past that “were not completely clean in terms of data protection or that gave you a stomach ache.”

An even more powerful Schufa could also be disadvantageous from a market perspective, says Indra Spiecker, professor of public law at the University of Frankfurt. “When I have a large provider, I always have the problem that they can usually dictate market conditions.” This often leads to unfavorable competitive conditions for consumers. It is now important to make the consumer rating system more transparent and to better ensure the quality of the scores. “We cannot stand still with what we have now.”

The law was passed in the summer

In fact, the Bundestag is now asking itself what measures there could be beyond the draft law to make data quality more secure, says SPD MP Wegge. Independent certifications for consumer reviews could be introduced.

So far, Schufa and Co. have been able to commission their own experts who have confirmed the scientific nature of their scores. The reports only had to be submitted to the locally responsible state data protection authority. Consumers were not given any insight due to reference to trade secrets.

The new Federal Data Protection Act is due to be passed in the summer. Until then, politics and consumer protection will likely continue to concern themselves. Schufa explains that it assumes that there will continue to be a “competition for the best solution at the best price” in the future. When asked, their three largest competitors did not comment specifically on this. The credit agency Crif simply writes that they want to wait for the legislative process.