Status: 07.12.2023, 15:44 PM
Almost every adult has had to deal with the Credit Bureau at some point. The ECJ has taken a close look at the use of scoring - and set clear guidelines. Is the business model of the Schufa now shaky?
Luxembourg - Europe's highest court has set tight limits on the use of the Schufa score. Companies are allowed to use the Schufa score, which quantifies people's creditworthiness, to decide whether to enter into contracts with customers - but only if it is not the only basis for decision-making. According to the European Court of Justice (ECJ) in Luxembourg, if this value plays a significant role in the granting of credit, it constitutes an "automated decision in individual cases" that is prohibited under the General Data Protection Regulation (GDPR).
Banks, telecommunications services or energy suppliers usually ask private credit agencies such as Schufa about a person's creditworthiness. The credit bureau then provides an assessment, the so-called score value. This is intended to show how well the person concerned fulfils his payment obligation. According to its own information, Schufa has information on 68 million people in Germany.
The background to the current decision are two cases from Germany in connection with the Schufa before the ECJ. On the one hand, a woman sued who was denied a loan. She asked Schufa to delete an entry and grant access to the data. The Schufa only provided the score value and general information about the calculation, but not the exact calculation method. The Administrative Court of Wiesbaden referred the case to the ECJ in order to clarify the relationship with the General Data Protection Regulation (GDPR).
Schufa provides its contractual partners with an assessment of the creditworthiness of consumers. © Andreas Arnold/dpa
Violation of the GDPR
The judges have now made it clear: If a contract is largely dependent on the Schufa score, this violates the GDPR. This could have an impact on many companies that have so far relied on the assessment of the Credit Bureau.
The citizens' movement Finanzwende welcomed the decision: "The ruling is good news for all consumers - and a heavy blow for the Credit Bureau," said the consumer protection expert at Finanzwende, Michael Möller. The judge's decision forces the Schufa to deal more responsibly than before with its quasi-monopoly position. "The power of the credit bureau is crumbling - it's about time."
The Schufa itself also evaluates the verdict positively, because it provides clarity. "The overwhelming feedback from our customers is that payment forecasts in the form of the Schufa score are important for them, but are usually not the only decisive factor for concluding a contract," Schufa said after the ruling. "That's why the vast majority of our customers will continue to be able to use Schufa scores without having to adapt their processes."
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Data protection expert Christoph Ritzer from the law firm Norton Rose Fulbright in Frankfurt, on the other hand, sees a "considerable dilemma" for the banking industry if the Schufa scores can no longer be used as easily as before. According to Ritzer, if proof of income, energy supply contracts and other data have to be submitted again, this is likely to significantly delay decisions on loan or rental agreements.
"It can therefore be assumed that the providers will either have to check the creditworthiness of their customers more intensively themselves, or ask the customers to register with the credit bureau and agree to the scoring." This is a typical Pyrrhic victory for consumers: "In the end, only those who allow Schufa to process and pass on their data will benefit from the ruling," says Ritzer.
Consumer advocates nevertheless hope for more transparency - and for more laws: "In order for consumers to finally be able to understand how their creditworthiness score is determined, the legislator should now give the credit agencies concrete requirements," demanded Michaela Schröder from the Federation of German Consumer Organizations. Federal Consumer Protection Minister Steffi Lemke (Greens) said: "We have already agreed in the coalition agreement that transparency in scoring must be improved. We will now examine the relevant regulations in a timely manner."
Storage of data from public directories
The second case concerned the storage of data from public directories, such as insolvency registers. The ECJ had to decide whether Schufa was allowed to use data on consumer insolvencies and store them even longer than the courts. The judges have now put a stop to this practice: It violates the GDPR if private credit agencies store such data longer than public insolvency registers. This is because the discharge of residual debt granted is intended to enable the person concerned to participate in economic life again; however, this is always used as a negative factor in the assessment of creditworthiness.
In March, the Advocate General at the ECJ was already very critical of this practice in his opinion. As a result, Schufa had voluntarily shortened the storage period of the entries from three years to six months.
The German courts must now decide on the specific cases, taking into account the decision of the ECJ. Dpa