“That feels like shit.” If one of her company’s projects fails, Schufa boss Tanja Birkholz sometimes finds clear words. At the beginning of August, she had to admit a data breach with her brand new app Bonify; now it became known over the weekend that the Schufa is currently sending letters to its corporate customers that seem panicked. The reason: There is a threat of a judgment from the European Court of Justice (ECJ), which could endanger the business of the credit agency.
In the letters that were leaked to the “Süddeutsche Zeitung” and the NDR, Schufa asked for a signature. Your corporate customers should use it to confirm that the infamous score “does not apply” to decisions that “impair” consumers – i.e. are disadvantageous for them. For example, if no contract comes about in the first place or the interest rate on a loan is worse.
Although Schufa does not make any of these decisions itself, the Advocate General of the ECJ argues that the Schufa score could be an automated decision – and therefore illegal. With the letters to their corporate customers, Schufa now wants to forestall a negative verdict. It sounds like: Please deny us our meaning! That was “an absurdity,” one of the companies contacted said to the “Süddeutsche Zeitung”. And that’s exactly what it is.
Anyone who says credit check in Germany must also say Schufa. The “protection association for general loan security” plays a central role in local contracts. It collects comprehensive information about our financial (mis)behaviour – on loans, mobile phone contracts, rent payments. It then sells this data to banks, companies and landlords for pennies.
With this model, the Schufa has become the largest German credit agency. It has over 940 million pieces of data on over 68 million individuals and six million companies. It processes more than 165 million inquiries annually. In view of these dimensions, to downplay one’s own importance – that is really quite absurd.
Consumers will soon be able to view their Schufa score in an app for free. Anyone who gives the credit agency more data in the future could improve their creditworthiness. Those are the plans
“The first talks with our customers were more relaxing,” says the Schufa headquarters in Wiesbaden. Banks in particular would include many more data points in their decisions. In e-commerce and mail order, the Schufa score even plays a “subordinate role”.
Scoring expert Matthias Spielkamp from Algorithm Watch, on the other hand, told the SZ that the Schufa score has a great influence “on the lives and life decisions of many people in Germany”. Schufa itself writes on its website that the score is “very important information for companies or banks”. From the center of the credit agency it says: You have to distinguish whether the score is “only important” or “decisive”.
That the Schufa is a black box is heard again and again. And that is also one of the main criticisms of the credit agency: its lack of transparency. Consumers often do not know what information Schufa collects about them and how this is evaluated. This leads to distrust and insecurity. This is exactly what they wanted to solve with the Bonify app, for example.
But despite many downloads, the app is hardly used and recently hackers even discovered a data breach. And again and again, incorrect entries are discovered in the Schufa databases, which can have a very negative impact on the lives of those affected – for example when looking for an apartment or lending. Anyone who discovers an error then has it twice as difficult: the correction is considered lengthy and complicated. The process can endanger livelihoods.
These problems have existed for years. When Tanja Birkholz became head of Schufa in 2020, she actually announced a major change offensive. They wanted to become better, more approachable, more digital. The semi-secret letters to business partners and petty scandals at Bonify prove the opposite. In this way, Schufa shows that it is still rather untrustworthy.
It’s time to finally reform Schufa – to make sure it works fairly and transparently and lives up to its promise: “We create trust”. Only in this way can it retain its place as a necessary player in German finance and escape the negative headlines. Perhaps it is really the very last chance for the almost 100-year-old credit agency to finally redeem what it demands from all of us: transparency.
Note: This article first appeared on capital.de.
