Financial regulators told banks that they must prove that the use of AI in loan applications does not discriminate against minorities. The move follows growing concerns over systeming racism in banking.

Why should we care?
While AI modeling aims to eliminate human bias by getting rid of human middlemen, ostensibly “neutral” variables can become stand-ins for race, baking racism and financial exclusion into the source code. “If somebody is in a group which is already discriminated against, they will tend to often live in a postcode where there are other (similar) people… but living in that postcode doesn’t actually make you any more or less likely to default on your loan,” said Sara Williams of Debt Camel, a UK-based finance blog. Accountability is another core concern: Human loan reviewers can be identified and cited as needed, while big data-driven AI models are far more difficult to pinpoint and tweak. In part, fair loan rates see fewer defaults because the rates are lower. This regulation may make for a healthier loan landscape through less exploitative rates and fewer defaults in the long run.