Why GDPR could help your business access lending
If there is one thing taking a lot of time and attention in businesses across the UK (and EU) then GDPR sits firmly at the top of the agenda. Whilst it is a headache and something that is taking valuable time, within the GDPR requirements sit a couple of rights that could help businesses when applying for lending facilities.
The right that comes into play is the one surrounding your rights related to automated decision making and profiling.
Algorithmic underwriting
I have talked a lot about algorithms and their role in underwriting commercial credit. The vast majority of lenders use these systems, the lenders that don’t, certainly use a form of credit scoring which in itself is a type of profiling.
Until now lenders could use these systems to drive decisions and automate their systems. The days of the human assessing the deal and taking all your circumstances into account appeared to have gone.
In many ways, those days will stay gone but your rights under GDPR give you the right to insist on your proposal being assessed by a human being.
What it means for the borrower
You can’t insist that the lender you use totally changes their processes just to suit you. The lender will continue to use their automated systems as they consider them necessary and appropriate. As with many rights, the guidelines and how they apply can be opaque.
For the borrower, there is little to be gained by insisting your lending application is viewed by a human being, after all, you are likely to be unaware how a lender underwrites credit at the point of application. You may also find that the process currently used sees your application approved, so why ask for anything different.
Where you may want to use your new rights is where your application was declined. If you think there are extraneous circumstances or factors that apply to you that may have been missed then it could be worth insisting on a human review. The lender also needs to explain how they used your data to reach the decision they did.
It is important to note that the rights mentioned can only be insisted on by the person themselves. For lending cases this means the borrower needs to request the review, it cannot by the broker, accountant, intermediary or advisor.
It is something worth bearing in mind as lenders are unlikely to promote your right as they are doing everything as they should. I am merely pointing out that you have a right and may want to bear it in mind. Hope it helps.
By Dave Farmer
