German Cartel Office

Criticism of credit checks in online retail

If the credit check is unfavorable, buyers are often not offered the option of buying on account or paying in instalments.

(Bild: stock.adobe.com/annebel146 - stock.adobe.com)

Online retailers, credit agencies and payment service providers do not always adhere to the requirements of consumer law when carrying out credit checks. There is often a lack of transparency and information in the checks, stated Andreas Mundt, President of the German Federal Cartel Office.

When shopping online, retailers or payment service providers commissioned by them sometimes carry out credit checks on customers in order to reduce the risk of possible payment defaults. If the result of the check is unfavorable, shoppers are often not offered the option of buying on account or paying in installments.

"Retailers and payment service providers must provide clear and timely information about credit checks so that consumers can make a genuine, informed decision," said Mundt in a statement.

For many, credit scoring runs automatically in the background during the ordering process without being noticed. However, the processing of data is only permitted if data protection regulations and fair trading laws are complied with, according to the authority. In these areas, the Federal Cartel Office sees consumer rights violations.

Audits not transparent
The investigation showed that credit checks are often not transparent. Information about this is often not provided at all or is only given in the general terms and conditions in a way that is difficult to recognize. In some cases, the information is only provided after the check has been carried out - customers can then no longer prevent it.

Lively exchange of data
According to the study, online retailers, payment service providers and credit agencies exchange a large amount of customer data. This often includes not only previous payment behavior, but also the address, age and sometimes information such as the frequency of relocations or the time of the order.

Place of residence determines score
The amendment to the German Federal Data Protection Act is currently underway. It is also being discussed in this context to stipulate stronger legal protection against discrimination. Among other things, it should no longer be permitted to process address data. This is intended to protect buyers from receiving a lower score simply because of their living environment.