Bradley Partner Riley Key Quoted in Auto Finance News

 Bradley attorney Riley Key was quoted in Auto Finance News on social media as a new underwriting tool.To get more auto finance news, you can visit shine news official website.

Auto lenders can use social media to identify the credit risk of borrowers with limited credit histories, but must be aware of the risks, Key explained.

“[Social media] has become particularly useful in the insurance industry. Both Fico and the [Consumer Financial Protection Bureau] have previously put out requests for information or have acknowledged potentially using social media data in the underwriting process as an alternative [form of] data,” Key added.

Consumers’ average screen time has increased to about 7 hours amid the pandemic from 4, and 48% of consumers have increased their time on social media platforms such as Facebook, Twitter and Instagram, according to data from Digital Information World, a company that provides digital marketing insights and social media trend data. This offers a window of opportunity for lenders to learn more about consumers for underwriting practices and to reach those who are unresponsive to phone calls and email, Key said.

Social media can be useful to highlight, for example, a consumer’s employment status and location, as well as provide an alternative contact method to reach the borrower, Key said.

“Social media is a useful way to gather information,” he added. “For borrowers that have limited or no credit history, it’s a good way to expand and make available financial products in areas that might not otherwise have been possible.”

However, not many financial institutions use social media for underwriting, in large part due to the inherent risk, Key noted. Social media data is more highly scrutinized from a fair lending perspective, for one, and lenders must establish that social media data is a reliable predictor of credit worthiness.

Lenders who contact borrowers via social media must also consider liability related to the Fair Debt Collection Practices Act, Key added. “The [Federal Trade Commission] has stated the FDCPA does not prohibit social media communications, but there are some specific risks that you should be aware of — things like making required disclosures and revealing the existence of a debt to a third party,” he said.