Privacy for Loan Applicants Versus Predictive Power for Loan Providers: Is It Possible to Bridge the Gap?

Consumers have to trust that financial services will work for, rather than against them. In a recent speech, Mark Hoban (2010) MP, Financial Secretary to the UK Treasury, stated that “We need a financial sector that works for consumers—one that earns their confidence, competes for their services, and keeps them properly informed.” The collection, use, maintenance, and disclosure of consumer information, is an essential part of any financial transaction (MacCarthy and Gellman 2010). However, recent research suggests that more needs to be known about the public’s worries about how their personal information is used and protected (Raab 2004)—and that applies to financial services. This chapter explores consumers’ privacy concerns about information requested on loan applications. Currently, loan applicants have low expectations of privacy— they are expected to: (1) answer all questions, without exception; (2) consent to all terms and conditions (which often includes their data being passed onto third parties); and (3) accept that their credit record will be checked. Based on our interviews and surveys, we argue that it is possible to maintain the efficacy of the loan risk assessment process and respect applicants’ privacy at the same time. In Sect. 3.2, we review existing literature on the perspectives of loan providers and loan applicants, and identify a discrepancy between information that loan providers and loan applicants consider relevant. To explore this discrepancy, we conducted