Credit scoring is a mathematical-statistical procedure that allows conclusions to be drawn about a buyer's creditworthiness, for example. Oldenburg lawyer Prof Dr Jürgen Taeger has examined the legal aspects of these procedures in an international comparison.
What is the probability that a buyer or borrower will pay their bills or instalments in accordance with the contract? Certain mathematical-statistical procedures, also known as credit scoring, make it possible to predict this. Without such statistical predictions of payment behaviour, the booming online and mail order business, for example, would hardly be able to function. Prof Dr Jürgen Taeger, a legal scholar at the University of Oldenburg, has now looked at the legal side of credit scoring in an international comparison in a study; his conclusion: "The legislator in Germany has created an optimal set of rules to balance the interests of business and consumers in credit scoring." Germany is exemplary when it comes to credit scoring, especially in the area of data protection.
Taeger's analysis is part of the large-scale study "Scoring in Focus: Economic Significance and Legal Framework Conditions in International Comparison", which was recently published. The Oldenburg lawyer was responsible for the legal part of the study, while researchers from the Centre for European Economic Research (ZEW) analysed the economic significance and functioning of credit scoring internationally.
Taeger and his research group led by Dr Edgar Rose at the Department of Law compared the legal conditions for credit scoring in Germany, Australia, France, Great Britain and the USA. The countries have a high degree of industrialisation in common, but differ considerably in their legal systems. In Germany, for example, the data protection regulations for credit scoring are particularly far-reaching. The circumstances under which data may be collected, stored and used are stipulated by law. Control and information rights ensure compliance with the legal requirements. For example, it is stipulated that the "customer" can receive information about their score and a detailed explanation free of charge. In addition, every private individual is entitled to a free annual overview of the data stored about them at a credit agency as well as the score values transmitted and their calculation. "This is not the case to this extent in any of the countries compared," explains Taeger. Further measures to legally regulate scoring, including a ban, would also be detrimental to consumers. "If the credit default risk becomes incalculable, there is a risk of higher prices and consumers will no longer be able to conveniently order goods on account online or buy in instalments," emphasises the lawyer.
The study "Scoring in focus: economic significance and legal framework conditions in an international comparison" was commissioned by the association "Die Wirtschaftsauskunfteien" and supported by the Bankenfachverband e.V., the Verband der Anbieter von Telekommunikations- und Mehrwertdiensten e. V. (VATM) and the Bundesverband E-Commerce und Versandhandel Deutschland e.V. as well as the Handelsverband Deutschland (HDE) (bevh).
Michael Schröder/Jürgen Taeger (ed.): Scoring in Focus: Economic Significance and Legal Framework Conditions in International Comparison, BIS-Verlag Verlag, Oldenburg 2014, ISBN 978-3-8142-2316-2