ECJ ruling - Benchmark for creditworthiness: court restricts influence of Schufa score
Companies may not decide whether to conclude contracts with customers solely on the basis of an automated assessment of creditworthiness by Schufa. The European Court of Justice ruled on Thursday in Luxembourg that the so-called Schufa score must be regarded as a fundamentally prohibited "automated decision in individual cases" if Schufa's customers assign it a decisive role in the granting of credit.
Banks, telecommunications services or energy suppliers usually ask private credit agencies such as Schufa about a person's creditworthiness. Schufa then provides an assessment, the so-called score value. This is intended to show how well the person concerned fulfills their payment obligations.
The background to the proceedings before the ECJ is a case from Germany. In one of them, a person who had been refused a loan asked Schufa to delete an entry and grant him access to the data. Schufa provided him with his score value and general information on the calculation, but not the exact calculation method.
The Wiesbaden Administrative Court referred the case to the ECJ in order to clarify the relationship with the General Data Protection Regulation (GDPR). The GDPR stipulates that decisions that have legal effect on people may not be made solely through the automated processing of data.
Court in Germany still has to rule on Schufa score
The judges in Luxembourg have now ruled that scoring falls under this and is only permissible under certain conditions. Schufa customers are not allowed to give the score a decisive role in the granting of credit. The Wiesbaden Administrative Court must now decide whether the German Federal Data Protection Act contains a valid exception to this prohibition that is in line with the General Data Protection Regulation.
Schufa welcomed the ruling: it provides clarity on how scores may be used in the decision-making processes of companies in accordance with the GDPR. "The overwhelming feedback from our customers is that payment forecasts in the form of the Schufa score are important to them, but are generally not the only decisive factor in concluding a contract," Schufa announced after the ruling.
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Companies should not rely entirely on Schufa's automated creditworthiness assessment, known as the Schufa score, to deny credit to customers, as the European Court of Justice (ECJ) has classified it as a prohibited "automated decision in individual cases" with significant influence. The ECJ's ruling encourages Schufa customers to consider the Schufa score, but it should not be the sole determinant in granting credit.
Source: www.stern.de
