It’s not unusual for banks to offer different interest rates on loans to different people—in fact, it’s expected. Your credit score and how much collateral you own is all par for the course. But what about a bank that offers a different interest rate depending on which web browser you use to visit their site? It seems absurd, but Capital One is doing exactly that.
Capital One has recently been sending out emails advertising auto loans with interest rates of 3.10 percent. One potential customer, Devin, decided to look into the details. He fired up his browser (Firefox 4 beta 6) and visited Capital One’s website, where the bank proudly offered him a rate of 3.5 percent. What caused the rate to spike? He dug a little further and, depending on the browser he used, unearthed a range of rates starting at 2.3 percent and topping out at 3.5 percent. The consumer blog The Consumerist posted Devin’s story.
Shocked (and a little appalled), I decided to investigate myself. What I found largely confirms Devin’s results, but with an added wrinkle. Which choice of browser does influence the rate Capital One offers you, but the websites you visit appear to play a role as well.
I headed over to Capital One’s website using Safari and Firefox and was offered auto loan rates as low as at 3.5 percent. The same was true of Internet Explorer. Devin had mentioned that he saw the lowest rate when using Google Chrome, so I downloaded and installed it on my Mac. Curiously, when I visited Capital One’s site in Chrome, it offered me a 3.5 percent rate instead of Devin’s 2.3 percent. Browsers, it appeared, were not the entire story.
The only difference between web browsers on my computer is the amount of history each has stored. Browsers record where you’ve been on the web in two primary locations, a history file and cookies, small files that websites and advertisements drop like crumbs onto your hard drive to record where you’ve been on the web. When I started Chrome the first time, it offered to import my Safari preferences and history, which I did. Capital One’s site must have recognized a pattern in Chrome’s cookie cache that caused it to return the highest rate rather than the low rate.
Unlike credit histories, browser histories can be wiped clean. After I cleared the history and cookies from each browser, Capital One spit out an entirely new set of interest rates. I was able to confirm Devin’s low 2.3 percent rate in Chrome, while the rates offered to Firefox and Safari dropped to 3.1 percent. Internet Explorer saw no change; it received the same rate as before, 3.5 percent.
Now these advertised rates are probably not the final rates people receive when they secure a loan, but they can influence it. Someone who is qualified for a 2.3 percent loan may end up paying more if they don’t visit Capital One’s site using Chrome.
Been There Before…
Capital One was one of the first banks to offer different rates under different, non-financial circumstances, said Brian Melzer, a professor of finance. For example, people who would call to apply for a loan over the phone would be offered one rate while people who applied over the Internet would be offered another. “It doesn’t surprise me that they’re now using the web browser” to split customers into different groups, Melzer said.
Melzer sees a couple of reasons why Capital One offers different loan rates to different browsers. Banks determine interest rates largely on how likely a person is to default on the loan, and Capital One may have data that suggests Chrome users are less likely default. Second, Chrome users may be offered a lower rate because Capital One thinks they are more web savvy and thus more likely to shop around. By teasing a very low rate, the Capital One may be able to snap up these customers before another bank can.
Along those same lines of though, I noticed that the browsers which returned the highest interest rates—Internet Explorer and Safari—are the default web browsers for Windows and Mac OS X. Firefox, though not a default browser, has enough of a following that many non-experts have installed it solely on the advice of family and friends. Capital One may think these people are more likely to take what they are given with few questions—whether that be a web browser or an interest rate. Chrome users, on the other hand, must both know of the browser and seek it out. Such a person may also be more likely to shop around for the lowest interest rate.
Still, these theories don’t answer why browsing history influences the loan rates Capital One offers. What data in particular is the bank reading? A cookie? A certain number or combination of cookies? After clearing the histories of my browsers, I visited various websites I thought may influence Capital One’s website—including other banks, payday lenders, and car manufacturers—and those I thought may not—including news sites and search engines. Nothing has triggered a change in interest rates on Capital One’s auto loan page yet.
Photo by Omar Omar.