Consumer-lending discrimination in the FinTech Era
Open accessAbstract
U.S. fair-lending law prohibits lenders from making credit determinations that disparately affect minority borrowers if those determinations are based on characteristics unrelated to creditworthiness. Using an identification under this rule, we show risk-equivalent Latinx/Black borrowers pay significantly higher interest rates on GSE-securitized and FHA-insured loans, particularly in high-minority-share neighborhoods. We estimate these rate differences cost minority borrowers over $450 million yearly. FinTech lenders’ rate disparities were similar to those of non-Fintech lenders for GSE mortgages , but lower for FHA mortgages issued in 2009–2015 and for FHA refi mortgages issued in 2018–2019.
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Researchers have demonstrated issues caused by similar ML systems in education and housing.
“researchers have demonstrated issues caused by similar systems in education [6,34,37,59] and housing [7,57], highlighting the importance of understanding these types of systems to mitigate potential harms.”
From It’s Just Not That Simple: An Empirical Study of the Accuracy-Explainability Trade-off in Machine Learning for Public Policy (2022) · cites this paper as [7]
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References 46 · Cited by 659
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- Authors
- Bartlett, R., Morse, A., Stanton, R., & Wallace, N.
- Affiliations
- University of California, Berkeley (US)
- United States Department of the Treasury (US)
- Corresponding author
- Stanton, Richard
- Venue
- Journal of Financial Economics
- Publisher
- Elsevier BV
- Published
- 2022-01
- Volume
- 143
- Issue
- 1
- Pages
- 30-56
- ISSN
- 0304-405X (ISSN-L)
- OpenAlex
- W2770743945
- Cited by
- 659
- References
- 46
- Citations by year
- 2026: 165 · 2025: 166 · 2024: 100 · 2023: 91 · 2022: 78 · 2021: 31 · 2020: 16 · 2019: 7 · 2018: 5
- FWCI
- 74.13
- Type
- journal article
- Language
- en
- Open access
- green
- www.nber.org
- Licence
- Locations
- Journal of Financial Economics (publishedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- Berkley Law Scholarship Repository (University of California, Berkeley) (submittedVersion)
- Topics
- Social Sciences › Business, Management and Accounting › Management Information Systems › FinTech, Crowdfunding, Digital Finance
- Social Sciences › Sociology and Political Science › Urban, Neighborhood, and Segregation Studies
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Housing Market and Economics
- Keywords
- minority borrowers, Black borrowers, fintech lenders, mortgage refinancing, creditworthiness
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