Upstart automated consumer lending discrimination
Occurred: September 2022
Law firm Relman Colfax has found that 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.
Upstart assesses and predicts creditworthiness using so-called 'Alternative Data', including a person's educational and employment history. The company says its approach is more inclusive than the underwriting methods used by many banks.
The AI lender claims its algorithmic lending model approved 30% more Black borrowers than traditional models in 2020. However, academic research published in January 2022 indicates 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.
The company went public in 2020.
Operator: Upstart Holdings; Multiple
Developer: Upstart Holdings
Sector: Banking/Financial services
Purpose: Assess creditworthiness
Technology: Machine learning
Issue: Bias/discrimination - race, ethnicity, education, employment
Transparency: Governance; Black box; Marketing - misleading
Investigations, assessments, audits
News, commentary, analysis
Published: October 2022
Last updated: November 2022