Path: utzoo!utgpu!news-server.csri.toronto.edu!cs.utexas.edu!samsung!emory!rsiatl!jgd From: jgd@rsiatl.UUCP (John G. DeArmond) Newsgroups: comp.org.eff.talk Subject: Re: OUTLAW ALL DATABASES!! Damn right! Message-ID: <5140@rsiatl.UUCP> Date: 28 Nov 90 08:59:42 GMT References: <7425@hub.ucsb.edu> Organization: Rapid Deployment Systems, Inc. (making go fast things and things go fast) Lines: 275 I was going to address Peter Da Silva's blathering but Oreo gives me a much better context - Plus he's much more lucid. jim@piggy.ucsb.edu (Oreo Cat) writes: >Theres one important point in this debate which I haven't seen anyone >bring up yet. From what I read of John DeArmond's articles, one of the >reasons he is upset is because of some sort of credit dispute. I >sympathize with him, but banning or restricting databases will only >make things much much worse. Actually, my credit is spotless and had always been so, as anyone with half an interest could find out (no damn :-), my credit history like everyone else's is available to anyone who wants to get it.) My concern is as a result of working IN the credit industry, working with people who have been involved much deeper than me and observing the slimy and potentially destructive things that can be legally done with your personal information. Consider some things: * Your credit is available to anyone who wants it. If you don't believe me, just visit your local credit union and join as a business. Though you are legally supposed to get written permission from the victim, in practice, all you really need is the person's legal name and SSN. (address will work but not as accurately). * For the central credit database systems I've written software to interface to, none of the dialup lines have any security. You dialup, give a logid (which is trivial to guess since most key entry clerks are female and most use their first names.), no password and you are on. All you have to do is know how to format the transaction record. * If there is an error in your credit record (and the inside estimates run as high as 30%), nothing short of a suit will get it removed unless you can provide CONCLUSIVE proof to the contrary. In the overwhelming majority of the cases, the erroneous data remains and an explanation from you is attached. The credit grantor must then believe who he wants - and it is seldom you. * The IRS buys qualified databases and computer models your lifestyle and therefore your income from your buying habits. If you don't report what the computer thinks is enough income, instant audit. The tragic thing about this system is that it punishes the frugal person, in that a careful buyer/trader can live an apparent lifestyle much higher than his income would indicate. What the IRS does is impute income, assess you tax on it plus penalties and interest and then make you prove your innocence. * Your detail buying habits are increasingly being recorded and kept in databases. Stores now know not only what you bought (via UPC capture), they know the time you bought it and in what quantity. Soon insurance companies will be able to know the most intimate details about your lifestyle - and charge you for it. If you understand the concept of insurance spreading the risk and therefore the cost over a large body, you should be terrified of what this means. You eat too much red meat for the insurance man? Your rates go up. You buy too much booze? You suddenly end up in the SR-21 assigned risk pool for auto insurance. You buy some mountainclimbing equipment - even if you're using it as rigging in your shop - and suddenly you can't get life insurance. If you don't believe the severity of this aspect, look closely into the rash of so-called "preferred buyer" programs that will be springing forth in the next year. You'll be baited into participating with a few useless trinkets. * Even for such innocuous things as telephone saleslime, you will be increasingly targeted based on your personal information stored in databases. If you watched the Nova PBS program on the subject of direct marketing tonight (11/28), you will know what I mean. I've worked very hard to stay off these lists and still I get one or 2 slime calls each day. 1984 is upon us and it won't even take view screens. Your life will be modeled well enough that the computer will predict what you'll buy before you do it. From what I've seen in my work, this will happen in the next couple of years. >This may seem very elementary, but I want to make things clear... >Banks take a risk with each loan or line of credit they extend. They >take this risk because the payoffs for them can be very good if nothing >goes wrong. If things do go wrong, they could end up loosing money, >or having it tied up for a long time. So how do they know if a >particular person is worth taking the risk on? The best way currently >is to look at past performance. How much credit does the person >currently have, as compared with their current income? Do they have >a steady job which will be there in the future? How much in the hole >are they currently? Have they ever in the past made late payments? >etc... From this they can pretty much tell how you are going to >handle their money. >Now where do they get this information? From databases, of course. >What better way is there? You have a very complete set of fairly >accurate facts (at least most of the time). Consider what would >happen if these databases didn't exist. How would the banks know if >you are a good risk? The only way is to either get the applicant's >permission to collect information. Then they would have to do it >all themselves. This would cost a fortune! You don't think they >would take your word that you are a good, upstanding person? Can >you imagine how many would use this to their advantage? Just get >a few friends to say how good you are, and you have a bunch of money >to play with. First I'm going to address the fallacy of your argument and then explain (again) how my proposal addresses the issue. The plain truth is that credit databases tell you practically nothing about the creditworthiness of a person. All it shows is the HISTORY which has NOTHING AT ALL to do with your ability or willingness to pay in the future. A classic example is mortgages. The mortgage companies claim to have a formula to determine whether or not you can make the payments. The problem is that this formula, which usually calculates a ratio of your debt load to your net income, is changed radically to meet business objectives. For many many years, the rule was 1/3 of your net income could go toward house payments. But when the market gets soft (as in Atlanta right now), they'll let you do maybe 50% of your net income. And in crazy areas like LA, some lenders will let you commit as much as 65% of your income to debt. Understand what is going on here. They clain out of one side of their mouth that a formula exists with which to evaluate your past history and predict your future performance while speaking a number seemingly at random from the other. Secondly, having had large holdings in the rental real estate business and having had a storefront business, I'm quite familiar with personal credit. What I got from the credit reporting agencies was useless. My collection percentages went UP when I trashed the reporting services and simply made a SWAG (scientific wild-assed guess). Here's why: * Most people who are stiffed by a deadbeat do NOT report the information to reporting agencies. Too much paperwork. The only people who do are the large companies who can deliver the information on tape and can employ collection agencies in bulk. Whether a person beat Sears out of a charge bill has nothing to do with whether he will pay his rent or honor a personal line of credit with a small business. My experience has been that people who stick it to large companies respect small business. * The information that IS in the database is usually wrong. The industry will admit something like 30% errors if you squeeze 'em. I'd guestimate more like 50%. * The records are invariably incomplete. Why? There are 4 major and many minor credit database collection companies and there is little to no sharing of information for competative reasons. Thus, a given deadbeat would have to be reported to all 4 in order to give a decent chance of showing up. Large companies can do this with computerized collection software and links to the databases; small companies cannot. * A vast portion of the adverse data that ends up in your credit history comes from collection agencies. This information is typically keyed in by very bored and abused women working in boiler rooms. There is typically NO error checking or validation of the data. More than one agency I know of still makes the entry clerks manually format raw transaction records on DecWriters running at 300 baud! As you can imagine, these women, who are likely paid on a piecework basis, don't give a tinker's damn about the accuracy of your data. The quality of the databases reflect this. Let me give you a personal example. I use credit cards as a convenient if expensive form of commercial credit in my business. It has high interest but it means I don't have to talk to my banker very often :-) I keep a stack of high limit credit cards in the safe and use them on a case advance basis to finance things like product development, accounts receivable and so on. Now consider what my credit record shows. It shows that I've repeatedly run up large balances and then paid them off in a few months. In other words, I'm an excellent credit risk (and the unsolicited credit cards prove it.). WRONG! At the time I'm maxing out these cards, I'm at my most vunerable. Especially when I'm financing new development, the risks are high. So what looks like excellent credit is actually high risk unsecured loans. One wrong move (knock on wood so far) and poof! Instant LARGE bad debt. By now it should be obvious that the credit databases that lenders tout so highly are worthless. >So banning or severely restricting databases would make it very >difficult to get credit. Is this what you want? It's not what I >want. I'd much rather have my mistakes on record for all to see. >It makes it more difficult to receive credit, but not impossible. >Credit is not something the banks owe anyone. It's a service >they offer to those who they beleive can handle the responsibility. I'll explain again. Ahem.... My proposal would ban the use of your personal information WITHOUT YOUR PERMISSION. Got that? You could give ANYONE permission to use your information as you see fit. Second, contrary to the ravings of some people in this group, it would NOT establish a police state of any fashion because it would NOT authorize ANY government action except that initiated by the injured party. NO IRS Nazis running around destroying some guy for using his Rolodex. And it would not affect the collection of data, only its use. You could drive around the city and key every name into your laptop and as long as you did not use it, no one would legally care. What it would do is establish the rules under which you as a data collector could use the information he has collected. Third, it would force the decoupling of the trading of data from the granting of services. Could a hospital require you to fill out a medical history (collection) before treatment? Sure. Could it make treatment contingent upon your allowing them to report that information to a medical database? Hell no. Could a bank require a credit history as a prerequisite for a loan? Yep. Could it force you to permit it to report the loan to the data collection agency? Hell no. Could an insurance company force you to allow them to report your medical claims history to a database in order to buy insurance? Hell no. This one aspect would work miracles toward getting insurance back to what is is intened to be - a risk sharing mechanism. An enhancement to my proposal could requre that a data collector get your permission and approval on EACH piece of data before it is added to the database. That way you'd have veto power over any data you did not want to have added. Sure this would kill adverse databases such as credit but so what? They are worthless anyway. >I will concede that it is difficult to remove bogus information from >the records. I still claim that this is good. Keeps the crooks >from driving up the fees and interest rates even higher. This is specifically false. The really bad crooks practically never show up in the databases. The ones that get reported are people like you and I who get shafted by American Express and in exasperation say "F*uck you! You'll have to come and get it." So a dispute of perhaps a couple hundred dollars ends up spoiling your credit record for years. If you believe your statement, perhaps you could explain how such a dispute could possibly have anything to do with your ability or willingness to make your house payment? At present, such a "problem" would likely keep you from getting that mortgage. Explain the connection. >John DeArmond should look at his article regarding playing the >system when getting pulled over for speeding for some good pointers >he should keep in mind. While we're on the subject, perhaps you could explain why it is right for the insurance company to raise your rate based on your falling victim to the random revenue collection process called speeding tickets? Why should they be allowed to profit from the state's dubious taxation system? Secondly, why should I be forced to play the system? I'll not bitch so much about playing cops'n'speeders, as the competition is pretty lopsided in my favor. But why the hell should I have to jump through hoops in order to maintain my privacy or to enjoy my phone service that I've paid for? >And don't let the marketers get you all worked up! It's easy to >hang up the phone or toss the envelope in the trash. Why cannot I not work at night and sleep in the day and still have a phone without an answering machine to screen out the trash that solicits me all day long? Why can't I leave it open in case there is a family emergency and not be awakened all morning long? Why the hell does the system allow the bastards to start calling at 8:00 am and continue through 10:00 pm as they did today? Why can't I post my phone and mailbox the same way I can post my property against intruders? And why do I have to live in fear of the IRS gestapo trashing my life because some computer said they should? Perhaps ignorance really is bliss. Why can't we use a bit of our tax money to facilitate our sueing these SOBs into oblivion? When you can answer those questions, I'll no longer get worked up. John -- John De Armond, WD4OQC | "Purveyors of speed to the Trade" (tm) Rapid Deployment System, Inc. | Home of the Nidgets (tm) Marietta, Ga | {emory,uunet}!rsiatl!jgd | "Vote early, Vote often"