Owing to the initiative of the Polish EDRi member Panoptykon, bank clients in Poland will have the right to receive an explanation of the assessment of their creditworthiness. The initiative proposed and fought for amendments in the Polish banking law, and resulted in an even higher standard than the one envisioned in the General Data Protection Regulation (GDPR).
There is naturally a strong asymmetry of power between banks and clients. So far that manifested itself for example in the fact that banks were able to demand their clients to present any information connected with their life situation and the purpose of the loan, as well as to obtain information from other sources. Apart from the generally binding principles of personal data protection, there were no other restrictions in that scope. In effect, the client who was denied a loan by the bank was able to only guess what the problem was – income, the form of employment, or perhaps any liabilities not paid on time. That will change: clients of Polish banks will be able to check what were the decisive factors in the assessment of their creditworthiness.
More than the GDPR
A consumer will have the right to obtain “information on the factors, including personal data, which affected the evaluation of their creditworthiness”. That right applies irrespective of whether or not a credit decision was automated and regardless of its content.
The GDPR guarantees transparency limited to automated decisions. However, in reality, the line between the assessment made by the algorithm and the final credit decision made by an analyst may be blurred. Moreover, irrespective of the degree of human involvement, a credit decision is based on an advanced analysis of personal data and on the profiling of clients. From that perspective, extending the right to explanation to all decisions based on profiling and using big data is an excellent solution.
What should the bank tell the client?
The right to explanation encompasses factors – including personal data – which affected the creditworthiness assessment. The bank does not need to provide a full list of factors taken into account in that process, but it has to disclose all those which had an impact on the final decision. It will not be enough to specify that the basis for the negative assessment was, for instance, the income. The bank will be obliged to disclose what exact amount of income it took into consideration. This creates room for dialogue and a chance to correct mistakes (such as a missing zero in the amount of income, or rectifying an outdated report from a credit information bureau). In a long-term perspective, it also serves as a valuable instruction for those clients who wish to increase their credibility towards banks. The information received may become an impulse to a timely repayment of liabilities or seeking another form of employment.
Translating law to the banking practice
The new regulations will undoubtedly strengthen the client’s position towards the bank. In relation to each automated credit decision, the client will have the GDPR rights to request rectifications, to question the decision, and to obtain human intervention. In relation to each decision issued with the participation of a bank employee, the client will also be able to use the new right and ask for specific personal data which affected the final decision. These are two independent procedures, safeguarding a high standard of transparency and data protection.
With this achievement, Panoptykon has improved to a significant extent the power inbalance between banks and their clients. This achievement could be used by human rights and consumer groups as a precedent. As we see in this case, the rights contained in the GDPR need organised action all across the EU to make the goals of the Regulation work in practice.
The right to explanation of creditworthiness assessment – first such law in Europe (12.06.2019)
The right to explanation FAQ (only in Polish, 05.04.2019)
Infographic: When can I use the right to explanation? (only in Polish, 12.04.2019)
Infographic: Mortgage: how the right to explanation works? (only in Polish, 05.04.2019)
Infographic: Installment purchase: how the right to explanation works? (only in Polish, 05.04.2019)
(Contribution by EDRi member Panoptykon Foundation, Poland)