Cornell Law Review

“To be a poor man is hard, but to be a poor race in a land of dollars is the very bottom of hardships.”^{11. W.E.B. DU BOIS, THE SOULS OF BLACK FOLK 8 (1903).} Although our nation’s narrative paints a picture of progress towards economic equality, race-based inequality is an enduring aspect of the United States economy.^{22. Michael W. Kraus et al., Americans Misperceive Racial Economic Equality, 114 PROCEEDINGS NAT’L ACAD. SCI. 10324, 10324 (Sept. 26, 2017).} Indeed, even though it is well recognized that access to credit is necessary for individuals to achieve economic stability, minority communities nevertheless continue to be excluded from equal access to financial institutions and financial products.^{33. See infra Part I-C.} To be sure, throughout the last two centuries, there have been financial movements particularly aimed at banking the unbanked, such as credit unions, savings banks, and building and loan “thrift banks.”^{44. MEHRSA BARADARAN, HOW THE OTHER HALF BANKS: EXCLUSION, EXPLOITATION, AND THE THREAT TO DEMOCRACY 64, 77, 85 (2015).} However, these largely localized movements are an insufficient cure to modern banking problems that are propelled by not only deregulation and profit-oriented financial institutions, but also an electronic currency economy.^{55. See id. at 64, 101, 139.}

Within our growing electronic currency economy, financial technology (fintech) has had an undeniable impact on the way that both the banked and the unbanked interact with the economy. Moreover, given its accessibility and algorithmic infrastructure, fintech has the potential to serve as a modern mechanism for closing the race-based gap in financial services.^{66. Stephanie MacConnell, How FinTech Companies Are Closing the Banking Gap, FORBES (Oct. 23, 2017, 3:50 PM), https://www.forbes.com/sites/ stephaniemacconnell/2017/10/23/financial-inclusion-do-good-make-money/ #66c5daef3fc3 [https://perma.cc/TXL9-XPK9].} In doing so, however, fintech also poses the risk of going too far by employing lending techniques that go beyond merely closing the banking gap—if used imprudently, fintech can actually disadvantage protected classes of individuals.^{77. U.S. DEP’T TREASURY, A FINANCIAL SYSTEM THAT CREATES ECONOMIC OPPORTUNITIES: NONBANK FINANCIALS, FINTECH, AND INNOVATION 57 (July 2018) (noting that while one advantage of fintech is that it can potentially help avoid discrimination based on human interactions, it can also risk discrimination through using biased data in algorithms).}

This Note will explore the potential for financial institutions to use fintech to address race-based financial inequality while also being attentive to the possibility that seemingly innocuous technologies can generate biased banking practices against minority communities. Part I of this Note will discuss the history of the inequitable distribution of wealth in the United States and race-based gaps in access to financial services and products. Part II will then identify various techniques that financial institutions have used to target minority consumers. It will discuss the legality of those techniques under existing regulations, statutes, and case law. Part III of this Note will describe the role that algorithms, big data, and artificial intelligence have come to play in credit assessment and lending decisions, focusing on the risks inherent in algorithmic decision-making and the potential for these decisions to generate racially discriminate results. Part IV will then explore the opportunity for algorithmic lending in fintech to close the racial gap in financial services while still operating within the broader legal landscape. It will propose strategies that financial institutions can implement in order to adequately use big data and algorithmic credit assessment models to serve minority populations while also ensuring that the techniques they use have no impermissible discriminatory effect. 

To read more, click here: Closing the Racial Gap in Financial Services: Balancing Algorithmic Opportunity with Legal Limitations.