Can an algorithm decide whether you can get a loan?

When applying for a loan, the initial decision can be made by the algorithm, but if the customer is not satisfied with such a decision, he or she has the right to contest it.

If the algorithm decides that it is not possible to grant a loan based on the entered data, then the decision can be challenged and a person can review it.

If a credit decision is made using automated data processing, the customer has the right to know how such a decision is made. Under the General Data Protection Regulation, the company must inform the consumer of the automated processing in its data protection requirements and, in general, explain the logic behind the algorithm.

Before using the service, the customer should definitely read the data protection requirements in order to be informed about the method of data processing and their rights.

Often, however, consumers are not familiar with data protection requirements, and even if they do, the text is complex and the scope or impact of the technology used is not understood.

For example, in a decision to refuse a loan, the company could immediately inform the consumer in plain language that it was an automatic decision and that they have the right to challenge it.

Monitoring consumer behavior

In general, data protection law provides that a person has the right not to be subject to a decision based solely on automated processing if it has legal consequences for him or her or has a similarly significant effect on him or her.

As an exception, automated processing may be used if it is permitted by law and appropriate measures are provided for. It is also permitted when entering into or performing a contract with a customer or if explicit consent has been given.

Algorithm-based personal data processing based on the consumer’s consent is also used to monitor consumer behavior. It is often used by e-commerce to profile customer data. The consumer usually consents to this by opening a customer account or applying for a customer card.

In this way, offers are targeted to the customer based on the profiling of the purchase history. If the customer base data show that the customer has bought cat food in the last five years, it can be concluded that he has a cat and offers of cat food and other cat products will be sent to him in the future.

If you do not want to receive such offers, feel free to let the company know, as your consent can always be withdrawn.

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Hedman

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