Schufa buckles – economy

Thousands of people dare to take the step into self-employment every year, they want to be successful as photographers, building contractors or restaurant operators. Sometimes the courageous step works, sometimes not. What can then follow is that personal bankruptcy with all their problems. Debtors in Germany then have to do penance for years and, for example, give up part of their income. This is called the good behavior phase. If this is successfully completed, a consumer will be released from the remaining debt after three years. A corresponding notice is then stored in a public register for six months, after which it is deleted so that a new start is possible.

However, for those affected, this is not the end of it, because the Schufa stores this information for three years. It is included in their evaluation, the so-called Schufa score. She passes this on to her customers, such as the banking industry and online retailers, who use it as a basis for important decisions. Because the evaluation of the powerful credit agency is so important, this sometimes has serious consequences for those who have previously failed, for example when looking for an apartment or if they do not get a mobile phone contract due to the bad score.

A man didn’t want to put up with that, he sued the Schufa – and now he was right in a way, albeit in a somewhat unusual way. The Federal Court of Justice (BGH), in which the case is now pending, did not decide for or against Schufa on Tuesday, but suspended the procedure to await a decision from the European Court of Justice (ECJ). A similar case is currently being heard there, in which a verdict is still pending and is only expected in a few months. But recently there was a clear tendency for a judgment to the detriment of the German credit bureaus.

Despite the suspension, the man has already achieved what he wanted. Because on Tuesday, Schufa announced that it would significantly reduce the storage period for entries from completed private bankruptcies. Instead of the previous three full years, the Schufa will only store these for six months. That is as long as the data can also be found in public registers. Schufa intends to delete all reports that have been stored in the database for more than six months by the March 28 deadline in the coming weeks.

Almost two weeks ago, however, there was a clear signal from the ECJ

In a statement, Schufa board member Ole Schröder was quoted as saying: “With our decision, we are creating clarity and security for consumers. The credit agency emphasizes that this decision has no effect on the validity of your Schufa score.

With its concession, the Schufa is anticipating a decision that recently looked as if it could go against the credit agency. Because in the hearing in February, the BGH did not take it easy with the question of whether a credit agency may store such incriminating information beyond the statutory six-month period – which initially only applies to the public register. Almost two weeks ago, however, there was a clear signal from the ECJ. In a comparable procedure, the EU Advocate General took the view that it had to be over after six months at the latest. The storage of data by private credit agencies beyond the statutory registration period is not legal. Because such data would have significant negative consequences for those affected, their interests should be placed higher than the interests of private companies.

The Advocate General is a special figure at the ECJ, borrowed from the French legal system. He advises the court how to decide. It is not certain whether the ECJ will ultimately follow these guidelines, but it often does. That should also have persuaded Schufa to give in.