Justice Department is scrutinizing takeover of Credit Karma by Intuit
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EDIT because I'll get HN throttled writing too many comments quickly: @smt88 Regulation can and should require providing regulators with credit scoring algorithms, and the regulation of those algorithms (starting with Fair Isaac's/FICO scoring models). This is no different than recent conversations about requiring ML models be transparent to regulators. This is what legislation is for.
For example, shopping around for good terms on a loan could hurt your credit score. Or never having borrowed, despite having a great income, somehow meant you can't buy a house.
As a lender, I'd want competition in formulas, not necessarily in the core data (the number of loans a person has now and their history of payments).
On the latter example, would you lend vast sums of money to someone who has never demonstrated their ability to manage and repay a loan?
> would you lend vast sums of money to someone who has never demonstrated their ability to manage and repay a loan?
Banks seem very comfortable lending it to guys who talk the talk regardless of their ability to repay. Hell we have on such trickster in the whitehouse, now. These rules only apply to the rich and the upper-middle class (the ones who really caused the financial loan industry to collapse in 2008).
> On the latter example, would you lend vast sums of money to someone who has never demonstrated their ability to manage and repay a loan?
I think this is a misunderstanding of the role of debt in the world today. Access to debt is all but a necessity to have any hope of financial stability. Prices of large costs like housing and college tuition have increased in massive surplus of the average person's ability to pay for them, which in many ways is a huge problem in and of itself, but the only way the system even sort of still works is easy access to debt.
In these circumstances it really doesn't make sense to just shrug it off and let some people fall through the cracks with no recourse because the antiquated and opaque system didn't approve them.
It goes beyond "there is no 'your score'" – there are absolutely credit scores that really matter, it's just the overwhelming majority of people who monitor their "score" from a free monitoring site are looking at something that may be at best a poor simulation of that score.
From what I've learned from a friend who did banking software development for decades: almost every lender pulls a FICO score from all three reporting agencies, discards the high and low, and uses the middle score to make their lending decision. In some cases lenders go out of their way to avoid building in manual underwriting because the score is typically quite accurate and manual underwriting allows bias to enter the system that may open up fair lending/housing lawsuits.
Credit Karma doesn't provide a FICO score. Most places that give you "free credit scores" don't. My friend says they jokingly call this a FAKO – a fake FICO. It means next to nothing because they tend to be based on an alternative model like VantageScore that isn't what lenders use to make decisions.
If you want a real FICO score, you can buy them from myfico.com and get them from all three bureaus, or you can get a credit card that gives you one: all Discover cards give a monthly FICO 8 from TransUnion and AMEX gives a FICO 8 from Experian (not sure if it's all the cards, and don't go to the "give my credit score" link on their site – you have to find the link to your FICO score)
His tl;dr: "a site that tells you your credit score means nothing, a site that tells you your FICO score means a great deal".
Easy access to debt financing drives up those prices. If people can't afford purchases w/o incurring debt and loans aren't available, prices would fall.
Instead, you're advocating making it easier for people take loans that exceed their ability to pay?
That's not rational from either a borrower, a lender, or a systemic perspective.
There are plenty of free options to get your real FICO score - discover gives it, Experian has a free plan. They give you your FICO score + summary of the report.
Creditors don't use that... First, shopping for a loan usually involves soft-pulls of your report and that gives you an interest rate and general idea if you get approved or not. Then you satisfied with rate and decide to proceed with loan - hard pull happens, this one gets recorded. Important thing - they pull your entire credit history, not just score, in fact there is no way to pull score. Then they either approve you or ask for more documentation like: bank statement, pay stubs, W2, etc. You can have 700s credit score while being deep in debt. Also, my FICO score was always higher than my Vantage score, not other way around.
Even paid Experian cost like 15$ a month and it shows you all your FICO scores: general, auto, house lending, banking etc. It's dumb to start shopping for a mortgage relying on just CK vantage score.
Yes, of course. I don't think paying off a loan requires practice. You don't become more trustworthy or responsible just because you borrow money.
In fact, someone without loans (and high income) suggests they take loans seriously and don't want to live riskily.
Depends on what they're borrowing for. If it's real estate, the valuation is solid, and the borrower has a reliable income, why not? They're obviously either well-resourced or financially responsible or both, since they've previously never needed a loan. That plus the existence of an underlying asset that can be taken back sounds like a low risk deal for the bank.
Also, don't mortgage applications look at your savings and other assets when lending? It's not just the credit score right?
> despite having a great income, somehow meant you can't buy a house.
The correlation between income, credit score, and risk is weaker than you might think. High-income people can also outspend their ability to repay. [0] Banks can use income to rule out a mortgage application, but that number is not useful for measuring the converse, because spending varies widely.
> For example, shopping around for good terms on a loan could hurt your credit score.
Credit bureaus do account for this, because as you might guess, shopping around does not correlate with credit risk. Usually this is done by counting only one application per time window. (45 days in the case of FICO) But, even then, hard hits on your credit are typically weighted very low. The reason it matters at all outside of that window is because they want to identify people who are, for instance, applying for new credit every 6 months because they are in financial trouble and digging themselves a hole of debt.
[0]: https://www.federalreserve.gov/econres/notes/feds-notes/are-...
It actually may be that deregulation could also work, as with many things we've found the worst of all worlds where there's just enough regulation to keep out any real competition and not enough to actually protect anyone other than a few lobbied interests. But deregulation would be a much riskier approach, whereas there is a pretty clear, minimally invasive path forward for regulation to solve a lot of these issues.
In addition to the things you suggest, I also think more regulation around what kinds of recurring bills should and should not be considered debt, and stricter rules around things being sent to collections. Right now, if e.g. you have a $30 utility bill for a partial month of service on your previous residence, the provider can send it to collections without really making any reasonable effort contact you. There are also predatory recurring bills that can be incredibly difficult to cancel and that turn into debt if you forget about them. At a bare minimum, physical mail shouldn't be sufficient notification that an account is past due, creditors should have to make some kind of reasonable effort to contact you that is consistent with modern social mores. There are lots of rules that could be put in place to better protect consumers from accidentally having their credit ruined. I really don't believe that a young person being a little bit careless, or not understanding the intricacies of the credit system and what is at stake, has anything to do with whether they are capable of making payments on a major purchase like a home years later.
The companies have certain parameters for who they want to advertise to and CK shows you ads and gets a commission. Your data would only be shared if you initiated a transaction with the advertiser.
Whether that makes the situation better is a judgment call. But, your data is never shared without your permission.
CreditKarma has worked well for me the past two years. I have W2 and 1099s and K1s and they never asked me to upgrade to handle additional forms. I think I used tax act before that and always had to pay something To unlock those “weird” forms.
1. Passion projects by passionate individuals
2. Released by companies to burnish the rep, improve recruiting, or reduce maintenance costs by sharing them
Laboriously writing tax rules for 50 states + federal the government can't possibly be any programmer's idea of fun. And the software has economic value so a company wouldn't write and open-source it, unless you can find a complement[1] to tax-prep that's even more profitable.
3) created by people to automate repetitive or expensive tasks for themselves.
I’d be interested in supporting the project because I do my taxes every year and it’s a laborious process.
No reason to capture 100% of the tax code. An 80/20 solution would be great.
although I never tried it myself
I used https://www.freetaxusa.com/ and it was fantastic. The interface is a little bit clunky, but the value is there. They charge $7 for "deluxe support" which was easily the best $7 I can remember spending.
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Edit: re-reading this comment I see how it reads very much like I'm making the whole thing up and shilling for Free Tax USA, so some more detail on the CK incorrect behavior I experienced -- CK kept listing my K-1 partnership income as income from rental properties, which in turn caused the interface to be broken if I tried to click into the rental properties section where it valiantly tried to show me the zero rental properties that contributed to the number from my partnership income. I contacted support, and they told me they didn't support K1 partnership income. I asked what it meant to not support K1 partnership income if they had K1 partnership forms to fill out. They said they'd get back to me by email. They emailed me a few days later (after the filing deadline) with a generic link to partnership income documentation. By then I had already filed with Free Tax USA.
https://www.propublica.org/article/filing-taxes-could-be-fre...
Part of Intuit's $80 billion market cap depends on taxes continuing to be hard to file directly with the IRS.
https://www.propublica.org/article/irs-reforms-free-file-pro... (IRS Reforms Free File Program, Drops Agreement Not to Compete With TurboTax)
I wouldn't want government anywhere near that. Especially when the government can shut down whenever theres a dispute. No thanks
Also it seems to me we don't have much to lose. Our choices were: pay intuit or give our personal information to creditkarma to do god knows what with. Now we don't even have that.
But, the tax rules are changed _by the government_.
I'm no saying I think the government built program will be the best one out there, but nobody is saying it needs to be the only option - just that the IRS should be allowed to help it's constituents.
States are going to have to coordinate with Federal ?
Just play that out. What a mess.
No more than they already do. I have to file my state and federal returns separately today (and I don't think that's different for anyone who has to pay state income taxes). It's easier because my state (WI) defers to the federal government for a lot of tax rules, but that's entirely a local decision.
If the federal government decided to make it easier to file your federal taxes they could just do it. There's no need to coordinate with the states (and I wouldn't expect them to).
Right, but you're looking for a one service solution to look after all that, state and fed included, organised by fed. If that is what you're looking for it's already done, just not by the government, HRBlock TurboTax and others, my point is, if it was for the government(FD) to look after, it would be a nightmare, they wouldn't do it as well.
It works in other countries because as you're paid you're taxed on your income. That doesn't fly when you have multiple jobs, with each state having their own tax system, I'm not saying its good or bad or even that it CANT be done, I'm just saying I would prefer a company who gets paid to do it, to make sure its done right.
EDIT: This has received multiple downvotes and I'm surprised this was a controversial opinion. Do people genuinely think that industries in a capitalist society won't act in their own self interest regardless of the negative repercussions to society as a whole?
Yes, TurboTax will make more money thanks to their incredibly effective lobbying efforts, but the price is that all Americans have a somewhat worse experience filing their taxes each year. This compounds over hundreds of millions of taxpayers and most importantly, is completely unnecessary.
If I managed to somehow convince the government to pass a law that everyone has to pay me 1$ every year, that would clearly be in my economic interest, but nobody would argue that that would be a good thing.
Lastly I highly doubt that TurboTax is employing hundreds of thousands of people.
The point of my post isn't to excuse the lobbying. It is to blame the lobbying on the people who could actually curtail it as well as recognizing that almost everyone would do the exact same thing that the tax prep industry is doing given their situation.
>Yes, TurboTax will make more money thanks to their incredibly effective lobbying efforts, but the price is that all Americans have a somewhat worse experience filing their taxes each year. This compounds over hundreds of millions of taxpayers and most importantly, is completely unnecessary.
Almost every law is going to make someone worse off in some way. I don't think it is reasonable to expect that every lobbying organization needs to weigh every possible outcome. Even if they did, they are inherently biased. Judging the ultimate outcomes is the job of the politicians being lobbied.
>Lastly I highly doubt that TurboTax is employing hundreds of thousands of people.
I was speaking about the industry as a whole and not specifically TurboTax. H&R Block itself balloons up to over 90k employees during tax prep season. [1] You can maybe nitpick depending on what exact definition you use for "job", but there is little double that hundreds of thousands of people are employed in the tax prep industry over the course of the year.
[1] - https://en.wikipedia.org/wiki/H%26R_Block#Corporate_affairs
If you think lobbying the government should be illegal, maybe you should lobby the government to get that changed.
It would obviously also be reasonable to blame the government for allowing it and lobby to have the laws changed, but it is entirely appropriate to blame someone for doing something that's legal but wrong. "It's technically not illegal" might fly in the courtroom (and I stress might), but it doesn't and shouldn't fly in the court of public and private opinion.
The first step in breaking the cycle is forming public opinions that differ from the law. I chose "stealing cars" as an example because it's easy to judge independently from the law and therefore illustrate why the "it's OK because it's legal" line of thinking creates a problematic loop that makes it difficult to fix bad policy.
So we should blame all of the car thieves for stealing cars? That's what I've been advocating for all along!
Much of society participates in the lobbying side at some level. I don't think it is appropriate to single out specific instances of lobbying as immoral or to shame all of society for participating. We should instead be focusing on the one side of the equation that is easiest to change, the politicians.
Should I not blame clothing companies for contracting out to sweat shops? We should absolutely blame companies that are acting against the country's interests. Not all unethical behavior is illegal.
>Every other industry would do or is currently doing the exact same thing
You are of course free to blame whoever you want, but if you call out the clothing industry for these behaviors while also working in the tech industry which is notoriously guilty of nearly identical problems with its international workforce, I would certainly call you hypocritical.
Either way, I think a more appropriate path to actually fixing the problem isn't to shame the people with the bad behavior. It is to work to make that behavior illegal. This specific example is more difficult than the tax prep issue due to it involving other nations. However there are certainly trade regulations that could be put in place to disincentivize poor labor conditions for companies who wish to access the American market.
Did they really change? [1] When you rely on public outrage as a motivator, the changes are only as permanent as the public is attentive and motivated.
[1] - https://www.forbes.com/sites/siminamistreanu/2020/03/02/stud...
> Some brands including Adidas, Bosch and Panasonic told ASPI they had no direct contractual relationships with the suppliers indicated in the report, but no one could rule out a link further down their supply chain.
Our society has come a long way on this issue. Of course more progress is needed and all of these companies know this connection is a liability.
No, but you should also not expect a large company to run itself out of business for ethical reasons. If Nike uses sweatshops Reebok's only options are to follow suit or go under. Making unethical behavior illegal or at least unprofitable is the only option in a free market society.