Schufa scoring violates EU law – according to expert opinion

Most recently, the German credit agency Schufa made the negative headlines because there were rumors that a positive credit check might be necessary to buy the upcoming 49-euro ticket. A ruling by the European Court of Justice could shake the Schufa system.

Because the Advocate General of the European Court of Justice (ECJ) has Priit Pikamäe in an appraisal determined that the Schufa scoring violates EU law. This involves the automated creation of a value (score) about a person’s ability to service a loan.

Pikamäe explained in its Opinion that under the GDPR individuals have the right not to be dependent on a decision based on “automated processing, including profiling”.

However, this is the case through the “automated creation of a probability value about the ability of a person concerned to service a loan in the future”. The Schufa score is used by banks, telecom companies or energy suppliers to assess a person’s creditworthiness.

A bad Schufa score can have negative effects when shopping online or when concluding a mobile phone contract. In many cases, those affected do not know that their creditworthiness is rated as insufficient, according to a frequent accusation.

How the Schufa calculates the score is their secret – legally, as a judgment of the Federal Court of Justice (BGH) underlined a few years ago. The Administrative Court of Wiesbaden wanted to know whether this was compatible with the European GDPR and referred a case to the ECJ Golem writes.

In this case, it is about a person who, after being denied a loan, wanted access to his data from the Schufa. In addition, the Schufa should delete the entry. The Schufa only informed the person concerned of the score value and general information about the calculation.

On the other hand, the person complained – and could be right. Decisions based solely on the automatically generated Schufa score could soon be obsolete. However, a verdict is not expected for a few months. The opinion of the Advocate General serves the court as a guide in the decision-making process. But it doesn’t have to follow him.

Another case concerning the Schufa concerns data from public registers such as registers of the insolvency courts. The Schufa should not store this data longer than the public registers themselves, says the Advocate General in his final motion.

While the directories delete information such as the discharge of residual debt after six months after insolvency, the Schufa retains such data for up to three years. This prevents the people concerned from participating in economic life again.