Hacker News Reader

Comment by direwolf20 | Hacker News Reader

What stops you spending $20k and declaring bankruptcy for your LLC?

Credit scores are probably illegal in the EU due to the laws against mass surveillance.

You got it, FICO/Equifax/Transunion stop it. The $20k is basically raised on the founders' credit, not the LLCs; richer founders can get a lot more credit right up front. And yes, FICO is probably infeasible in the EU with current laws, that's the point. Fix that first, these businesses are just as critical as actual banks.

Mass surveillance laws don't prevent a bank from doing due diligence on a loan when you ask for a loan, or from suing you if you lied. In Germany it's hard to get a liability shield and there's no compassion for idiots — if you borrowed $20k by lying to the bank about your other loans, your wages will be garnished for life until you pay it back including punitive interest. They could rely on that instead of mass surveillance.

I have a feeling FICO would be more destructive than beneficial for Europe. Look what it's done to America. Borrowing $20k for a startup is not worth that.

The problem isn't that. The problem is that I can't go to a German bank with a non-German tax ID (and without German residency) and get a loan. I am limited to the handful of banks in my country (and Germans to theirs).

FICO doesn't just do aggregation, they also do integration: as an American, running away from credit card debt to a small credit union (a community bank in the States) is as bad as stiffing Citi or JPMorgan.

The American credit market is far more liquid than Europe, partly because it's much larger (one market as opposed to 27) but also because its graded and stratified: as a bank/fund you can choose the risk you want to take and take it accordingly. We're definitely missing that down to individual/SME scale.

Are they forbidden or do they just not want to? There's a service called Raisin which aggregates interest–bearing savings accounts from across the EU from participating banks. Maybe that is now your profitable business idea: build a Raisin for loans.

They're definitely not. You can 100% have a list of late payments on loans by person and business. This already exists in some places.

You can't hoover up every other piece of personal data to build it, but you could definitely get consent to access this information for other loans.

Credit scores are mass surveillance. Essential to the idea is that you already have one in the background. If a bank uses some calculation based on information you provide to decide to give you credit, it's still not a credit score.

> Credit scores are mass surveillance. Essential to the idea is that you already have one in the background. If a bank uses some calculation based on information you provide to decide to give you credit, it's still not a credit score.

US style credit scores are mass surveillance, because they incorporate all of your bank transactions. The actual use-case for credit scores doesn't require that, it merely needs a prediction of whether or not you'll repay a particular loan.

That is totally doable using public data, and one could also offer a service where your bank details get ingested to provide further information (using consent as a basis for the processing). All of this is possible in the EU, under current legislation.

You'd also include public data and area based data based on address, which again is entirely legal.

Source: worked in the insurance version of credit scoring in Europe for a few years.

Reply on news.ycombinator.com