Senator Elizabeth Warren Questions Federal Agencies About Discrimination in Fintech Lending
Senator Elizabeth Warren and colleague Senator Doug Jones (D-AL) addressed a letter to multiple federal agencies this week to inquire about their individual roles in overseeing fintech, particularly as it pertains to potential discriminatory underwriting.
The senators cited a UC Berkeley study that examined discrimination in the era of algorithmic underwriting. “With algorithmic credit scoring,” the researchers write, “the nature of discrimination changes from being primarily concerned with human biases – racism and in-group/out-group bias – to being primarily concerned with illegitimate applications of statistical discrimination. Even if agents performing statistical discrimination have no animus against minority groups, they can induce disparate impact by their use of Big Data variables.”
The letter tasked the Federal Reserve Chairman, OCC Comptroller, CFPB Director, and FDIC Chairman with responding to 5 questions by June 24th. They are:
1. What is your agency doing to identify and combat lending discrimination by lenders who use algorithms for underwriting?
2. What is the responsibility of your agency with regards to overseeing and enforcing fair lending laws? To what extent do these responsibilities extend to the fintech industry or the use of fintech algorithms by traditional lenders?
3. Has your agency conducted any analyses of the impact of fintech companies or use of fintech algorithms on minority borrowers, including differences in credit availability and pricing? If so, what have these analyses concluded? If not, does your agency plan to conduct these analyses in the future?
4. Has your agency identified any unique challenges to oversight and enforcement of fair lending laws posed by the fintech industry? If so, how are you addressing these challenges?
5. Has your agency identified increased cases of lending discrimination in financial institutions that participate in the fintech industry? Are there additional statutory authorities that would help your agency enforce fair lending laws or protect minority borrowers from discrimination in their interactions with the fintech industry?June 12, 2019