Schufa Under Pressure: Criticism of Second Database Containing Years-Old Consumer Information

As the company confirmed upon inquiry, this additional data is needed to validate and check new risk-calculation procedures. Schufa argues that the storage serves exclusively for testing and control purposes and that the data must therefore be retained.

Scope of Data and Those Affected

According to the company's own assessment, the shadow database concerns nearly every consumer for whom a credit inquiry has ever been made. In total, Germany's largest credit bureau stores data on more than 68 million people, as research has shown.

From the data held on file, Schufa calculates, among other things, so-called test scores, which it passes on to corporate clients – including non-banks such as energy suppliers and telecommunications providers. How the value is derived and which factors play a role is, according to experts, a closely guarded trade secret of the credit bureaus.

Criticism from Consumer Advocates and Data Protection Experts

Claudio Zeitz-Brandmeyer of the Verbraucherzentrale Bundesverband (vzbv) expressed doubts about the company's account: 'weil es für die Unternehmen, die diese Daten bekommen, sehr verlockend ist, diese Daten nicht nur für Testzwecke zu verwenden, sondern sie auch tatsächlich beispielsweise für Kreditentscheidungen heranzuziehen'.

Several experts point to statutory deletion deadlines and the principle of data minimization enshrined in the GDPR. They criticize that customers have so far had no idea that this older data about them is being stored, and see this as a structural transparency problem.

Schufa and Commissioned Expert Reject Allegations

Schufa takes the view that it is permitted to use the historical data for the stated purposes and invokes legal provisions. Tim Wybitul, a data protection expert commissioned by Schufa, also rejected the allegations: 'Die Vorwürfe gegen die Schufa treffen nicht zu. Daten sind zu löschen, wenn sie für die Zwecke ihrer Verarbeitung nicht mehr benötigt werden. Allerdings dienen die Tests der Überprüfung der Richtigkeit der Scores. Das ist ein wichtiger und legitimer Zweck.'

The group also stated that the calculation of a score for a point in time in the past – so-called score enrichment – takes place exclusively within Schufa's own environment. Companies have no independent access to Schufa data; the comparative tests are conducted exclusively under the supervision of the financial regulator BaFin, so that data details cannot be passed on to clients.

Content of the Stored Old Information

In substance, the data concerns things such as presumed old loans and credit cards, garnishments and private insolvencies, as well as debts that those affected often settled years ago. According to the critics, consumers are not informed that this sensitive old information continues to be held in the background and used to calculate test scores.

Consumers can view their Schufa score free of charge. In the past, however, the Schufa score has repeatedly drawn criticism: consumers have complained about poor ratings that they could not explain or that were based on incorrect data.

In March of the current year, Schufa also introduced a new calculation method based on twelve criteria. The factors include, among others, the age of the oldest bank account and the oldest credit card, the presence of payment disruptions, and the status of loans.

Regulatory Review and Ongoing Proceedings

The Hessian State Data Protection Commissioner is now also looking into the matter. In a preliminary proceeding, he is currently clarifying whether Schufa must inform consumers about the storage. The authority declined to comment and referred to the ongoing proceeding.

Independently of this, court cases against older Schufa scoring methods remain pending before the Federal Court of Justice. Observers see the current debate as further evidence that the practices of credit bureaus need to be scrutinized.

Significance for Consumers

Peter Hornung, who reports on the background of Schufa's data storage, sums up the criticism: the storage of data that is 'teilweise auch überholt' raises the fundamental question of whether the shadow database is compatible with applicable law. Consumer advocates are demanding that the credit bureau immediately inform those affected about the additional storage and delete old data that is no longer needed.

Schufa scores have a direct impact on the everyday lives of many people: they determine whether someone can obtain a mobile phone contract, sign a lease, or get a loan. Given the far-reaching implications of these assessments, critics consider a broad societal debate about the handling of historical financial data long overdue.