To me this makes it seem like acces to loans is a right,in which case the EU should make a lender of last resort that can loan to people who would otherwise get rejected.
Not to the people making those decisions. That's brand new.
No bank EU or not has people manually approving loans.
This is obviously bad for both legal and moral reasons. Legally you may be (unintentionally) violating anti-discrimination laws. Morally you may be setting up a system that arbitrarily denies people who are otherwise deserving with little to no recourse.
It does not matter who personally made that decisi9n, the bank is operating this code and paid someone to write it.
With 'AI' there is no way to know.
Let's imagine my bank is sexist, the code literally says "if WOMAN, Reject'
You can sue my bank for discrimination, and in process of discovery you can request information and documents from the bank, including the code / formulas.
If you have a solid argument, let's say my bank never approved a mortgage for a woman, the judge will grant your request. You, or someone appointed on your behalf, will look at the code / excel formula, see that it's discriminatory by design, and you can request massive punitive fines, because this demonstrates contempt for the law.
Now let's say I instruct my developers to create a neural network that is as convoluted as possible but is unlikely to approves mortgage for a woman. That can be easily done. There will be no proof that we ever did this on purpose, and even proving that it is discriminatory will be challenging. At best, my bank will get a slap on the wrist.
That is why they are banning AI from some areas of life.
That isn’t how it would work in reality.
It would be up to the bank to prove that their practices are non discriminatory if there will be a discrepancy between the number of applications issued.
The plaintiffs will be able to sue and win based on the outcome alone.
As far as actual rights go then you have the right to appeal any automated decision and have a human review it without any bias. Which again it doesn’t matter if it’s AI or a an algorithm based on flipping a coin.
The credit score system already in place in the US is frequently as arbitrary in some cases already. I don't think I need to preach to HN about that (crypto money and all that). Does Europe do it much differently?
Not an arguement for AI to do it, but the only reason why the current system is better (at least in the US) is its sluggish incompetence.
Almost every country has some kind of credit reporting system, but many of them differ from the US in how they do it. In particular, in many countries, credit bureaus only hold negative information such as failing to pay bills or repay debts – which means if you keep up to date with all your bills and debts, your credit history will be blank. At which point, lenders will generally ask you to provide evidence of your employment history, salary, bank balance, assets, etc, and base their lending decision on that. They may well internally convert that all info into a "score", but every lender is going to have a different scoring system. Here's an article – https://www.businessinsider.com/credit-score-around-the-worl... – which discusses the systems used in different countries, including several European countries. There is no uniform approach to this in Europe – the UK and Germany are closer to the US in their approach, the Netherlands, Spain and France are closer to the "credit bureaus hold negative info only" system.
Germany here.
a) But we are still not required to "build score"
b) There is currently yet another legal challenge against the Schufa (our credit scoring agency), this time in front of the ECJ.
Yes, as far as I'm aware the US & Canada are unique in having 'a credit score' for people; elsewhere there may be agencies offering scoring services to lenders, but it's not something individuals ordinarily nor need to care about, and it's not 'their score' it's just that particular company's (Equifax's, or whoever) rating.
It's not taken as seriously, nor does it need to be.
The credit score system is not arbitrary, it's a specific formula that applies equally to everyone.
>You get punished for just looking at it.
No you do not. There are hard inquiries and soft inquiries, and an individual viewing their own credit score is considered a soft inquiry which has absolutely no effect on your credit score.
As for Europe, there is no one homogeneous answer. Different parts of Europe handle credit differently. The UK and Germany are very similar to the U.S., whereas in France there is no concept of a credit rating or credit score.
With that said, generally the countries that do not have a credit scoring system are much harder to get a loan from.
That doesn’t mean the formula is reasonable or transparent. An AI is also a specific formula that applies equally to everyone. It’s about how the formula takes “weight” on the individual’s differences.
> There are hard inquiries and soft inquiries
Why there are “hard inquiries”? Why someone else inquiring my credit score should affect my credit score?
Dinging your score over that only punishes you for soliciting credit offers from multiple lenders at once so you can choose the best terms. Which ought to be an antitrust violation.
And there are obviously better ways to prevent "double spend," like reporting the new loan being granted, which actually should reduce the credit score due to the new debt. It's not as if we can't make computers capable of updating this information in real time.
> The VantageScore credit score model takes rate shopping, e.g., for a mortgage or car loan, into consideration. All inquiries for mortgages, auto loans and major credit cards that appear in your credit file within a 14-day window are interpreted as a single inquiry.
I believe that's the case for the FICO score algorithm as well. I think a 14-day window is probably too short, but it likely does cover most situations.
You have to understand that there is a no "credit denied" feedback into the credit rating system. The standard pattern for an approved credit application is a hard-pull followed by the opening of a new tradeline, both of which affect your score. If you're applying for credit, but not being approved, then that just shows up as a hard-pull with no new line.
The FICO score is also set up specifically to ignore additional hard-pulls for the same type of credit within a bounded period; so if you go shopping for a mortgage (or an auto loan, or a student loan), then multiple queries within a 30 day period are coalesced, and only count once from a scoring perspective.
But more importantly the ding is maybe 10 points which is pretty much irrelevant to the “buckets” that define credit worthiness (>800, 700-800, etc).
Plus individual lenders can look at the report themselves and make their own determination.
AI’s are not “a specific formula” and not only that, it’s decision-making is opaque to humans.
You can learn literally everything you need to know about how the FICO credit scoring systems works in probably two or three hours of dedicated research, even though the model itself is a trade-secret. When lenders deny credit, they're legally obliged to provide the specific reasons why.
This is not-even-in-the-same-ballpark as AI, where no-one can even tell you how inputs relate to outputs, not even the creators.
https://www.ftc.gov/news-events/news/press-releases/2013/02/...
It's one of the few things thats so obvious its bipartisan. I'm amazed you think its worth defending. There should not be a punishment for LOOKING at a credit score hard or soft, that's insane.
To require someone take on debt in order to have good credit is pretty arbitrary. You can have all the money in the world, but no debt? you're fucked. The fact you can juice your credit with someone elses credit cards is also really arbitrary.
Banks lending you money don't care (at least not as a primary concern) how much money you have, their first concern is whether you have a history of paying back debt you owe. A credit score scores you on your ability and willingness to pay back your debts on time.
And yes, this means someone who takes on debt with a credit card only to immediately pay the balance before any interest accrues both has a stellar credit score and no debt in any practical sense.
This also means someone who is making their house or car payments properly also has a good credit score, outstanding debts negatively affecting the credit score slightly notwithstanding.
No, you’d be totally fine paying cash for anything you needed.
Yes (Finland and afaik other nordic countries at least).
The lenders use statistics, not individul spying to set their rates.
Not completely false, but misleading: you get penalized if a lender looks at it with the express purpose of using it to decide whether or not to offer you credit (called a "hard pull"). You looking at your own credit report does not penalize you, and certain other activities (like getting pre-approved for a loan) won't either.
The penalty for hard pulls isn't that bad, anyway, and disappears after a relatively short while. I currently have 7 hard pulls (I've been chasing credit card rewards offers lately), but my overall credit score is still over 800.
* perhaps closer to PATCH as multiple requests in short time are combined as one (as in mortgage shipping)
On the flip side it also causes a hole that’s increasingly hard to dig out of because if you have bad credit or borderline credit and apply for a card to see if you’re allowed back in at the capitalist buffet, you enter into a feedback loop of diminishing credit worthiness.
It isn’t true however that any form of read changes credit worthiness. There are many routine reads that have no impact. It’s specifically when you’ve directly requested an evaluation for expanded credit. It can’t happen passively, as sometimes banks refresh your credit history and even offer more credit automatically. It also can’t happen for other purposes than expansion of credit.
That's not prima facie unreasonable. If you have someone who suddenly starts applying for lots of personal loans (for example), that's probably something you'd be interested in, as someone who has previously extended credit to that person.
As the prior poster indicated, when you look at your own credit file, it's not a hard pull. Nor is it a hard pull when a creditor updates their records on you as part of ongoing monitoring of your account. It's only a hard pull when the subject is specifically requesting a new, or increased, extension of credit. Those soft-pulls are GETs.
Can you elaborate? Everyone of the banks I use have an affordance on their website/app that allows me to see my credit score, history, etc. The bank puts it pretty front and center, so if even juts viewing it has a negative impact, why do you think the bank would make it so easy?
people often think that the problems that pertain to their country are universal, but they would be wrong.
A ban on "AI social scoring" would be neither necessary nor sufficient to make your scenario a reality.
Genuinely, why does process matter? Shouldn’t outcomes?
Maybe you’re not from the US, but we have a looooong history of “good unbiased processes” leading to awful and biased outcomes.
Yes, process matters in that they need to be reviewable and fixable. Them being good or unbiased is a function of how much scrutinity and oversight there is, but before even talking about biases, we need to know what's happening.
Even outside of fixing the system, in most countries if your get a credit application refused you can request the info that lead to the decision and act on it (update/fix your credit history for instance). Even if you can't fix specific aspects you at least know what conditions block you and deal with it accordingly (no use in reapplying twelve times if you're banned for life for instance, same way you might want to wait 6 months if it's a matter of prescription)
So yes, knowing what, why and how is as critical as the final outcome.
That's not the case. As long as there is no discrimination based on a legally protected characteristic (e.g. race) you can lend to whoever you want based on whatever criteria you want.
Bread can be baked to feed the needy, or to fill the bellies of soldiers who invade a peaceful neighbor. Who is to blame? The people inventing industrial bakeries, or the people using them to feed their invasion army?
Automated human classification without recourse nor transparency is what the EU is against. "You cannot get a loan because the AI says so" is not acceptable.
> Would it be good if it was computed by hand on paper instead of through AI?
Yes. As a judge can check what information was used and what algorithm applied to get to a conclusion. And it may declare that use of data or algorithm illegal.
> They fear the amplification factor of such tech, but the amplification factor works for the good and for the bad
Maybe just go slower. Something like an Hippocratic oath can be a good principle to follow for high impact technologies. To do some good may not justify the harm.