Upstart consumer loan model discriminates against Blacks

A loan decision model deployed by San Mateo-based AI consumer lender Upstart produced 'significant disparities' in how often loans were made to Black and non-Hispanic white borrowers.

Law firm Relman Colfax discovered that Upstart assesses and predicts creditworthiness using so-called 'Alternative Data', including a person's educational and employment history.

The AI lender claims its algorithmic lending model approved 30 percent more Black borrowers than traditional models in 2020, and that it's approach is more inclusive than the underwriting methods used by many banks.

However, academic research published in January 2022 indicated discriminatory pricing exists in both traditional and fintech lending.

In July 2022, Upstart directors were hit by a class-action investor lawsuit claiming it made false and misleading statements about its business, operations and prospects.