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The Off-Label Use of Consumer Credit Ratings
Zulassungsüberschreitende Anwendung von Konsumenten-Kreditwürdigkeit
[journal article]
Abstract Sovereign, corporate and consumer credit ratings are used to assess the creditworthiness of borrowers. Yet these ratings often fulfill other functions as well, serving as measures of more general qualities of countries, businesses and individuals. When ratings are used outside the context of lending... view more
Sovereign, corporate and consumer credit ratings are used to assess the creditworthiness of borrowers. Yet these ratings often fulfill other functions as well, serving as measures of more general qualities of countries, businesses and individuals. When ratings are used outside the context of lending, we call it ‘off-label use.’ This paper develops the argument in the context of consumer lending and discusses the use of credits scores in the U.S. by car insurance companies in calculating premiums, landlords in selecting tenants, and employers in hiring workers. We argue that off-label use can have harmful effects through two mechanisms: error propagation and enhanced performativity. Both amplify small initial differences, exacerbate inequalities, lock borrowers in upward or downward spirals and increase economic inequalities. Turbo performativity results when measures influenced by earlier credit scores become direct inputs for calculating new credit scores. Off-label use of consumer ratings, therefore, should be treated not just as a privacy issue but also as a factor in economic polarization.... view less
Keywords
personal data; data protection; rating; evaluation; landlord; solvency; hiring; consumer; lending; inequality; United States of America; insurance
Classification
Economic Sectors
Sociology of Economics
Free Keywords
credit scores; hiring; residential rental; performativity
Document language
English
Publication Year
2017
Page/Pages
p. 52-76
Journal
Historical Social Research, 42 (2017) 1
Issue topic
Markets and Classifications: Categorizations and Valuations as Social Processes Structuring Markets
DOI
https://doi.org/10.12759/hsr.42.2017.1.52-76
ISSN
0172-6404
Status
Published Version; peer reviewed