1/14/2011 12:57 PM ET|
5 ways your bank spies on you
A halt in direct deposits, for example, might indicate a customer has lost his job. If the customer has a high behavior score and a high FICO score -- which are good indicators that he or she will find another job soon, Gordon said -- the customer might be offered a payment holiday, with the missed payments being added to the end of a loan. If his scores aren't so high, suggesting a protracted job hunt, the bank could suggest a workout plan or take other measures to reduce its risk.
Banks also may use depositor behavior scores to extend credit to people who may not have a credit history, such as young people or immigrants, Gordon said.
"The score was developed to help the underserved or inconsistently served," Gordon said.
3. Income estimators
The Credit CARD Act of 2009 requires bankers to assess applicants' ability to pay a credit card account, and they're allowed to use analytical tools that guess at potential customers' income.
And "guess" is the operative word, because income-estimation tools are used to extrapolate your pay from factors such as the size of your mortgage and your available credit lines. The estimations aren't precise: Experian said last year that about 85% of the incomes it estimates around $35,000 are in reality only somewhere under $50,000 and that 15% are actually above $50,000.
It's not that your income is necessarily all that secret. Huge employment databases exist that list people's names, employers and salaries. But not everybody is in these databases, the information can be outdated, and using an income estimator is typically cheaper, so bankers increasingly use this tool, along with others, to evaluate you.
4. Wealth estimators
Another factor that determines your ability to pay is your overall wealth -- your home equity, savings and other assets. But bankers are also interested in ferreting out this information for marketing purposes, so they can reach out to potential customers and pitch more-appropriate products to the customers they have.
Credit bureau Equifax made a big move in this arena when it bought IXI in 2009. About 100 banks and other financial institutions submit information about individuals' investments and assets to IXI's database, which represents more than 40% of individual invested assets in the U.S. The data are anonymous, so the individuals involved aren't personally identified, but it's aggregated by ZIP code to give banks an idea of average wealth levels. The database is also used to construct models to estimate individual wealth.
5. Collection services
As you've learned, bankers have software that can help them assess whether a missed payment was likely an oversight or if you're really in over your head. Once it's clear you've stopped paying, bankers can use other tools, including software that predicts how likely they are to be able to collect from you and programs that monitor your financial situation, looking for signs of improvement -- such as a new employer or debt levels that start to decline.
Credit bureau Experian, for example, touts its Collection Triggers program with the tag line "When nonpaying customers resurface, be the first to know." The program offers daily monitoring of credit reports for a customizable set of triggers including new contact information or indications of increased ability to pay debts, which can help subscribing lenders "be the first to the (debtors') door for wallet share" -- in other words, the first to ask for repayment.
Now, the use of this and other monitoring tools isn't universal, and banks (and credit unions) often use the same tools in different ways. But it's a safe bet that your bank is using several tools to keep tabs on you and to extrapolate the various risks and opportunities presented by your behavior. That may be good news if you carefully manage your accounts, but woe betide you if you mess up. Remember, Big Banker is watching.
Liz Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "The 10 Commandments of Money: Survive and Thrive in the New Economy" (find it on Bing). Weston's award-winning columns appear every Monday and Thursday, exclusively on MSN Money. Join the conversation and send in your financial questions on Liz Weston's Facebook fan page.
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-I fired all banks a few years ago. I now do credit unions and refillable debit cards, live in an RV in a park, carry no loans and do all business in cash that is not on my debit card, which gets quite a workout to actually 'earn' the reasonable fees.
How did I get put in this position? Layoffs, missed tax deadlines, unable to pay the tax on unemployment wages, and the killer -I buried a 25 year old stepson that had zero health benefits thanks to the insurance industry and their draconian mentalities. -all at the behest of our capitol hill folks.
I'm not mad...far beyond that...I'm going to VOTE AS MERCILESSLY as the establishment has been with me.
This IS WAR!
My dad always used to say " Never be a borrower or lender be " and "if you have to buy anything on credit it's the same as wearing a rope around you neck". He said "if you want to buy a big ticket item, it's called layaway " if you cant do that then walk away. He knew back then what this country's banking system would turn out to be like. I've also noticed that jobs will do a credit check before they consider hiring you. What has this world come to? GREED! My land lord decided to charge me $100.00 extra a month because my son is living with me temporarily. I'm struggling to make ends meet. It's bad enough I am stretching every dollar I earn, This makes me want to scream!!!
Banks need to stop making up there own rules and stop nailing us little people!!!! I work hard, it annoys me when banks think they can charge an outrageous fee for overdrafts!
And now we can add on that former employees with a grudge will give personal information to place like Wikileaks as the fired Swiss banker has done.
Personally, I am past being concerned about what banks do or do not think of me. I feel that I will use them, when it does not cost me a cent. They can pay me interest-if I feel the interest is high enough to use them. It is amazing what people can do without having to rely on credit cards or credit scores. Debit cards can be used as credit, in the same way and with the same protection. Paying myself the interest that I would pay the bank is a much smarter way to think than the other mindset. If I want a big item, I'd better rethink how I can put money aside for that purchase or event. If I want, I can put things on price hold, or advance purchase (aka layaway) provided there is no fee or the sale price outweighs the holding fee. Or I can buy from certain vendors with no interest 3 or 4 payments and free shipping, but basically, I just wait and buy things on sale. Life is so much simpler when I do not have to worry about what a bank thinks. It is time for us to think for ourselves, about ourselves. It is one reason that I won't allow the banking industry into my 'life insurance', hospital insurance, or any other sort. of risk factors. I go from the NYOB philosophy. ( It is none of a bank's business should I need to go to a hospital, etc).. Although free, the insurance is not something that I will buy into, because it allows the banks into my medical history. The prying eyes of certain industries could prevent a loan, I favor the NYOB philosophy of doing business. It is none of your business (your meaning the bank, insurance, or marketing venturers, Wikileaks and other data predators) what, where, how or why I shop for this or that. It may not even be for me personally. It is just stupid to be concerned with someone else who is the invader-just do not give them the satisfaction and to go offline and pay cash for every transaction, or buy some no name cards and use them. Privacy is a difficult commodity nowadays.
@Bankerbabble......First of all, you misspelled (ironically) "rocket science" and "character"....FYI you lose some credibility in your argument on that alone...
Banks are private companies, EVEN THE FEDERAL RESERVE!!! (go ahead research it) These private companies have one main job, that is to handle all things financial for their clients/customers. Why is it that these companies need a bailout? Because they made poor decisions in character about who to loan out to and got themselves into a hole....yet we are supposed to allow them to have the final word in rating our worth? If a catering company was known for poisoning customers with their food, should we let them cater our wedding? No. So why let another private company be the judge of your character when they have obviously failed at doing so in a major way
Food for thought, since banks are privately owned, and the Fed is privately owned and not regulated by the government, the bailout money for those banks came from our government, who got that money from the Fed. When the Fed prints money for our government, they add interest to every dollar the government borrows for circulation, putting our nation further into debt. The only one coming out on top is the Fed. It's no wonder why Big Banks don't mind getting bailouts, since they are owned/regulated by the Fed, the ones making the money in all this....wake up America, before it's too late!!
You are all fooling yourselves. By way of any number of laws recently put into place, the federal government has essentially turned all banks into spies for law enforcement and the IRS. Everything you do – even with cash because you have to get the cash somewhere – is recorded and monitored for suspicious activity. 1984 is alive and well!
I bank with a credit union, and I can personally attest to the same tactics being used at many of these so-called 'customer owned' banks. The bank is only as decent as the people operating it.... Beside the convenience of using a debit card for purchases (minus overdraft 'protection'), and loans for individuals and business, the rest of the services are a scam to drain your wallet, period.
It is naive to think that the bank is trying to protect YOU from fraud, to the contrary, they are trying to protect the BANK, as well as it's invested interest in your account.
I guess if the article was titled something other than "5 Ways Your Bank Spies on You," no one would read it.
This article fails to mention the fact that regulators, like the FDIC, EXPECT and ENCOURAGE us to monitor our customer database in order to prevent a loss to the bank due to fraud, loan charge-offs, etc. In fact, some regulations MANDATE that we do this monitoring in a certain way.
This article was going along OK, until the last two sentences, "That may be good news if you carefully manage your accounts, but woe betide you if you mess up. Remember, Big Banker is watching." We may be watching, but thank your lawmakers and the FDIC for that, not us.
" That may be good news if you carefully manage your accounts, but woe betide you if you mess up. Remember, Big Banker is watching."
I found this closing sentence quite entertaining, and possibly unintentionally insightful. 'Big Banker' has mismanaged their credit, stocks, assets, integrity, accountability, reputations and
responsibility so thoroughly; that to assign overt judgement or any type of omniputence to 'Big Banker' is laughable.
Watch yourselves, be alert, that's the key. In doing so, your providing less fodder for and in turn watching 'Big Banker'.
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