Who should the Schufa belong to? : The bidding war for Germany's largest credit agency goes into the next round

The value of the Schufa is measured in the amount of data: The employees of Germany's largest credit agency in Wiesbaden manage countless entries about place of residence, payment history or credit inquiries. Sensitive information from 68 million people - in purely mathematical terms, from almost every adult German citizen.

These masses of data are used to make forecasts about creditworthiness, which Schufa passes on to its contractual partners. Telephone providers, banks or savings banks can call up the entries in a matter of seconds to check the creditworthiness of their customers. The so-called scoring, with which the solvency is assessed, can determine in case of doubt whether we are allowed to conclude a mobile phone contract, have a bank loan approved or can move into a new apartment.

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Contrary to what is often assumed, the Schufa is not an authority, but a private-sector group, organized as a stock corporation. Until now, the Hessian holding has belonged to a group of savings banks, cooperative banks and other credit institutions such as Commerzbank and Deutsche Bank. So far, because the Swedish financial investor EQT also seems to have recognized the value of the huge data treasure. In Germany, the investment company has primarily invested in healthcare companies, most recently taking over the online retailer Zooplus together with another investor. And maybe soon Germany's largest credit agency. On Monday, the Federal Cartel Office approved EQT's plan to take over up to 100 percent of the Schufa shares.

A 100% takeover has been examined

But the investor does not have an easy time of it. A takeover battle between EQT and the existing shareholders has been smoldering for months. In the past, the latter have not always agreed on their attitude towards the takeover; some were willing to sell, others not. The Swedes announced last year that they initially wanted to take over the 10 percent stake held by Société Générale in Schufa. An agreement was reached with the major French bank on an amount of 200 million euros.

Apparently the financial investor didn't want to stop at the ten percent of Société Générale. EQT reported to the Federal Cartel Office that it was examining a complete takeover and thus sole control.

But TeamBank AG also had the cartel office examine a larger stake in Schufa-Holding. With almost 18 percent, Nürnberger Bank is currently one of the largest individual shareholders. Unlike EQT, however, this is about expanding TeamBank's minority stake in Schufa. According to Nuremberg, the diversity of the credit agency's shareholders is a guarantee of its neutrality. However, it remains questionable how this is really going, as the owners of Schufa are also their data suppliers.

No objections from the Cartel Office

Although the interests of EQT and Teambank are opposed to each other, the Cartel Office approved the takeover plans of both sides on Monday. Andreas Mundt, the President of the Bonn authority, said: "In merger control, we only examine the competitive effects of notified mergers. From this point of view, both projects had to be approved.”

None of the two projects is a sure-fire success. Also because the savings banks and cooperative banks can still make use of their right of first refusal.

Antonia Becher from the non-governmental organization Campact calls on the existing shareholders to use this right of first refusal in view of the high sensitivity of the Schufa data: "Such important data must not become the plaything of financial investors. According to media reports, EQT is more concerned with its own returns than with data and consumer protection.” So far, more than 200,000 people have signed the campaign's appeal. That makes it clear how much people are against selling Schufa to EQT, said Becher. Campact wants to get the signatures to the current owners as soon as possible in the hope that they will still prevent the deal.

According to its own statements, the financial investor with the disputed shares would not have direct access to the Schufa data. Alexander Roßnagel, Hessian data protection officer, also sees no reason for concern: "Data protection law applies to SCHUFA Holding AG regardless of the composition of the shareholders," he says. It is also an advantage if EQT focuses more on transparency for data processing. The Swedish investment company had announced that it wanted to stand up more for consumer and data protection interests. An app was announced and a data cockpit where everyone can see their own Schufa entries.

EQT has expansion plans

A key point of criticism remains whether the interests of a financial investor are compatible with the tasks of a credit reporting agency. EQT is planning to expand the Schufa business model across Europe. Linked to this is the question of where the priorities lie: not in terms of data protection, but in terms of expansion and value enhancement?

Tabea Rößner (Greens), Chairwoman of the Digital Committee in the Bundestag, is not fundamentally opposed to a sale, but she considers the financial investor's business model to be problematic in this context. It is based on “making gold out of data.” A thorough examination is all the more important. It must be examined what happens to the data of the citizens and where it would go. But credit bureaus should also be given more attention in general, according to Rößner. For example, in relation to deletion periods: "We already discussed this in the past legislative period in connection with insolvency law, and we will continue to work on it," said the member of the Bundestag.

Non-transparent credit checks

So far, the Schufa has been heavily criticized, especially when it comes to consumer friendliness. The origin of their credit rating forecasts is considered opaque. The credit agency has already declared some people to be at risk for no comprehensible reason. The credit bureau keeps your procedure for confirming your creditworthiness under lock and key: a trade secret.

"Against the background of the risk of incorrect evaluations due to automatically determined scores such as those from SCHUFA, it is particularly important to prevent contractual partners from making decisions at the expense of consumers based on the scores," criticizes Rößner.

More on the subject

Comments on the bidding wars of their shareholders However, the Schufa did not agree that they did not want to get involved in the takeover battle. With the decision of the Federal Cartel Office, this is now entering the next round.