Originally Posted by
chriswufgator
Problem is, there's absolutely no way to know whether it's a valid or meaningless correlation. That's the flaw, not that Austin Logistics' sales pitch would tell you that.
There is no such thing as a "valid"s correlation in this sense. Either there is a correlation, or there is not. If you mean "causality" then causality is irrelevant in a situation like this. Having had a credit card for 5 years rather than 10 does not
cause me to be any more likely to deafult - but it is correlated with a higher default rate.
Your "ban red cars" is a very poor analogy, because here we are talking about a private entity making a business decision, and not a state entity imposing the force of law.
To suggest that a lender not be permitted to use any statistically significant correlation they choose in the course of evaluating a borrower is akin to suggesting that you or I should be regulated in the combination of factors we entered into a stock screener when researching investment opportunities.
Originally Posted by
chriswufgator
Again, there is really no way to know based solely on transactional data (which is all Amex has available to them) whether any potential correlations are real or merely coincidence.
Coincidences are no less "real" correlations than combinations that are linked by causality. Correlation is a mathematical attribute,