The increased use of Yelp reviews, Facebook “likes” and other social media interactions to determine a borrower’s creditworthiness has caught the attention of regulators in US Department of Treasury, amid concerns that the data is too subjective and could result in discriminatory lending patterns if not used properly.

On October 29, Antonio Wiess, an advisor to Treasury Secretary Jacob Lew, gave remarks at the Information Management Network Conference on Marketplace Lenders.

Just because a credit decision is made by an algorithm, does not mean it’s fair,

he said. Of particular concern to Wiess, is the ability of consumers to protest factual errors that influence their credit scores under laws such as the Fair Credit Reporting Act. “This is an area of real concern for consumers even when they have more robust protections,” he said. “The existing model is far from perfect, but applicants at least have the right to check — and correct — their personal data that gets used in credit decisions.”

Supporters of the practice, which include the credit reporting giant Experian and online marketplace lenders such as Kabbage, say positive social media interactions can help fill in the gaps on credit histories and help otherwise credit-challenged borrowers — especially startups and small businesses — obtain loans.  In response to Treasury’s request for information, Kabbage said by letter that by operating online, they are able to incorporate a number of different factors into their evaluation of loan applicants. That allows the lenders to made credit decisions quickly using real-time information from bank accounts, social networks and web analytical services — accessed with the consent of applicants — gives the online lender “a more comprehensive view of the customer.”

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