Clearly, these companies are going to make the argument that this is not credit report data subject to consumer credit laws, but I’m curious if that has been tested at all. I would think an enterprising lawyer could make that argument.
Usually a closed account will stop being reported to credit bureaus 10 years after the last activity on that account. I don't know if that's due to law or custom. My own credit report contains accounts closed more than seven years ago but less than 10 years ago and it does NOT include the one account closed 13 years ago.
Something like 80% of customers have issued a chargeback, 86% of chargebacks are "friendly fraud", increasing at a rate of 41% every two years. The dollar figure I've heard is $20+ Billion in friendly fraud.
So, obviously there's an altruistic nature to why a company like Sift has this data. But, I'm of the opinion that they saw the dollar value in this type of scoring and collection system.
Fundamentally what they are doing seems like the same thing. They're keeping a file on people that corporations are using to decide if they're trustworthy.
We decided a long time ago that consumers need to have the right to see and challenge that data for accuracy, as well as to have limits on how long it can be held against them. I see absolutely no reason why those principals should not apply here as well.
And it seems at least arguable that they already do. Clearly there's arguments on both sides, but reading the basic definitions here on what comprises a credit report and a credit reporting agency, and the prohibition on reports more than seven years old, it seems like a non-frivolous case could be made:
Absolutely not. The Fair Credit Reporting Act is one of the laws governing background checks for hiring (in addition to credit reporting), for example.
(and if it comes out that the reports referenced in the article were used by someone somewhere to reach a hiring decision, I expect lawsuits will quickly follow)