09/12/2015 01:39 EDT | Updated 09/12/2015 01:59 EDT

Facebook Patents Tool That Could Let Lenders Deny Loans Based On Your Friends

In early August, Facebook quietly filed a patent for a tool that analyzes and tracks how users are networked. Fairly benign, right? Maybe not.

Check out the patent application:

In a fourth embodiment of the invention, the service provider is a lender. When an individual applies for a loan, the lender examines the credit ratings of members of the individual's social network who are connected to the individual through authorized nodes. If the average credit rating of these members is at least a minimum credit score, the lender continues to process the loan application. Otherwise, the loan application is rejected.

This may be the reason why Facebook insists people identify themselves using their real, 'authentic' names.

Before you grab your pitchforks and torches, remember you agree to provide Facebook with this data whenever you use their services, either on your phone or computer.

Check out the data policy regarding networks..

We collect information about the people and groups you are connected to and how you interact with them, such as the people you communicate with the most or the groups you like to share with. We also collect contact information you provide if you upload, sync or import this information (such as an address book) from a device.

..and finances.

If you use our Services for purchases or financial transactions (like when you buy something on Facebook, make a purchase in a game, or make a donation), we collect information about the purchase or transaction. This includes your payment information, such as your credit or debit card number and other card information, and other account and authentication information, as well as billing, shipping and contact details.

David Christopher, communications manager for, told The Huffington Post Canada that the implications of the possible uses of the tool, if Facebook were to make it available to Canadian creditors, are worrying.

"It allows companies to analyze a person's friends," Christopher said. Because of the data made available by the tool, potential borrowers could be denied and found "guilty by association" if some of their friends have poor credit.

Conversely, Scott Hannah, president and CEO of Credit Counselling Society, believes that the tool could benefit both lender and borrower.

Hannah draws a parallel between his clients and the data provided by the tool about potential borrowers. He says that "many times, a client will recommend us to their friends/family who are having financial difficulty."

He anticipates the impact on the average consumer could be favourable "for those that don't have a long or rich credit history. If, of course, the person's network seems responsible, stable financially."

But "it could also have a negative impact. Just because you have contacts who don't know how to handle their money, you could get rejected," Hannah said. "I would hate to be painted by that brush. By how a family member or friend was handling their finances."

The tool would seem to be a natural extension for using the data that users willingly provide by using Facebook and its services.

However, Hannah doesn't see creditors actively using the data without a thorough vetting process. "Banks are extremely good at managing risks," he says.

"If there’s an opportunity to leverage social data to speed up process and at the same time to mitigate risk they’re going to look at it," Hannah said. "The tool could shift [the] approval process, [and] help with risk management [by] using different data in a different way."

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