An investigation by The Markup found that lenders using AI technology in their loan applications were more likely to deny home and short term loans to people of colour than other members of the applications. Banks in the UK were cleared of racism in loan decisions by a government review almost a decade ago but were still found to be lending less to ethnic minorities.
High street banks are exploring ways to automate more of their lending, including the use of AI and
more advanced algorithms, to decide who to lend to based on historical data held on different types of borrowers, who can be grouped by categories such as postcodes and employment profiles.
Country’s financial regulators have now warned banks looking to use AI to approve loan applications that they can only deploy the technology if they can prove it will not worsen discrimination against minorities, who already struggle to borrow.
In their submission on regulating digital finance, the EU’s financial regulators have called on lawmakers to consider analysing the use of data in AI/Machine Learning models and potential bias leading to discrimination and exclusion.
