On 30 July 2008 Germany's federal government published a revised draft (Kabinettsentwurf) of an act changing and amending the German Federal Data Protection Act (Bundesdatenschutzgesetz). The draft act defines and regulates scoring procedures to strengthen consumers' (Verbraucher) access to information and describes consumers' rights to information in case of automated credit decisions or decisions based on scoring procedures.
One of the draft act's main goals is to regulate consumers' information rights so they understand the credit agencies' scoring procedures, which in many cases relate to loan applications. These scoring procedures measure credit risk using a standardized mathematical formula based on a credit report. Credit agencies use several factors, such as age, employment and marital status, and combine these factors with other information to get a final rating for a consumer. Factors that can negatively affect credit scores include late payments, lack of credit history, location and unfavorable credit card use. Banks, in particular, use credit scores to determine whether to provide a loan and the loan's interest rate. The draft act requires Germany's credit agencies to inform consumers in a reasonable way about their scoring procedures, especially in the case of an automated credit decision, to provide consumers the opportunity to correct their scores in the event of misunderstandings or mistakes.
Prior to this publication, previous drafts of the act (Referentenentwürfe) have been subject to consultation and debate between the Federal Ministry of Interior (Bundesministerium des Innern), Germany's banking associations, consumer protection agencies and other concerned parties. The main issues of discussion include the intended extension of Section 6a of the draft act with regard to automated credit decisions and the disclosure of the reasoning behind a negative result in case of a fully or materially automated decision. Furthermore, the discussions considered consumers' information rights stipulated in Section 34 of the draft act for scoring decisions. The main arguments addressed to the government for future consideration are based on regulations in the European Data Protection Directive (95/46/EC) and the Consumer Credit Directive (2008/48/EC) which have been, and should only be, implemented in Germany's law on a 1:1 basis which limits the implementation of extensive consumer information rights. In particular the Consumer Credit Directive states similar consumer information rights that should be considered and reflected in the draft act. Contrary to what is stated in the current draft act, a more transparent regulation of scoring procedures or strengthening of consumer information rights should not be required to avoid any gold-plating implementation of EU Directive regulations.
It should be noted that the new draft act bears significant changes compared to previous drafts regarding the rights and the extent of information addressed in Section 34 clause 2 No. 2 (addressing formulas for calculating the probability of the data, but not how results are weighted) and the precondition for the transfer of data to the credit agencies according to Section 28a. clause 1. Despite these changes, there are still concerns regarding consumer information rights as they conflict with banks' and other parties' rights to protect their business secrets.
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