ECJ sets strict requirements for Schufa – Economy

As is well known, Schufa is involved in forecasting, but you really didn’t have to be an expert on the future to predict the ruling from Luxembourg. The opinion of the Advocate General, but above all the consistently strict course of the European Court of Justice data protection suggested that things are likely to be tight for the credit agency with its treasure trove of data from 68 million citizens. That’s how it happened, the verdict was extremely strict, or very data protection-friendly if you look at the other side. The very last word has not yet been spoken, first an administrative court must implement the ECJ’s requirements, after which the legislature will probably explore whether a new legal basis can be created for Schufa’s business model. But it is already clear that the ruling will mean a major blow to the credit forecasting business.

The score changes the directions of biographies

And it’s not just about more transparency, better legal protection, and shorter deletion periods. The ECJ has decided on the very special business of credit agencies, but in doing so it has taken up one of the big questions of our time. How does a society, how does a legal system deal with automated decisions? So with algorithmically calculated values ​​like the Schufa score, which is so powerful that it can change the direction of a human biography.

Now you can Schufa Don’t demonize it as the dark side of the force. It satisfies the need for information in the banking sector and online commerce, a need that is likely to have grown in a time of diminishing ties between customers and companies. If you want to assess whether the customer is liquid, the more anonymous your clientele is, the more you have to rely on the Schufa score. Where personal trust is not available as a contractual basis, the algorithm is intended to provide answers.

Schufa therefore provides the lubricant for a trouble-free credit economy. But it is also a decision-making body that is both discreet and influential, as the ECJ has now made clear. The score can determine the plans of a small business owner or the economic recovery of a bankrupt. It may not be the only deciding factor in all cases, as Schufa repeatedly asserts. But especially for new customers, it is this one number on which the future depends.

In other words, Schufa reflects the distribution of power in a society based on property and economic freedom. Whoever has the money derives a right to informational sovereignty over those who need money. That may be a legitimate concern. However, the credit agency’s practice collides with a principle of European data protection, which – keyword artificial intelligence – has established a very promising ban: no one may be subject to a decision based exclusively on automated processing.

The Schufa example can be used to illustrate what this means. A customer’s creditworthiness is determined based on statistical probabilities. Your own default on previous loans plays a role, but parameters beyond your own misconduct are also used, for example frequent moves or the number of accounts.

Translated, this means: The analysis of the behavioral patterns of countless people from the past shapes the view into the future – into the future of a very specific individual, mind you. His personal integrity and trustworthiness are devalued when the average person does not behave with integrity in a similar situation. The behavior of the crowd becomes a decisive factor in the fate of the individual.

This is the reason why the ECJ ruling is important far beyond Schufa. Artificial intelligence will increasingly become relevant for all kinds of decisions, and ultimately it works no differently than Schufa: it recognizes behavioral patterns and creates correlations from them. This creates dangers for personal freedom because the statistical view of the algorithmic decision only sees the individual as an average size. It’s good that the ECJ defends the human factor.