Online mortgage lenders less likely to discriminate against minorities - Business Insider

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Unlike in-person lenders, fintech lenders don't discriminate when it comes to approving a loan application

, 46% of those in the LGTBQ community are afraid they'll be discriminated against when buying a home. found that 55% of the loans it made to married LGTBQ couples in the last year were in states that don't provide legal housing protections to the LGTBQ community.Online companies are less likely to discriminate

In a paper titled "Consumer-Lending Discrimination in the FinTech Era" by Robert Bartlett, Adair Morse, Richard Stanton, and Nancy Wallace and published inin June 2019, the authors found that fintech lenders, which evaluate applicants using an algorithm instead of meeting them in person, discriminate 40% less than lenders who meet applicants face-to-face.

When Latinx and Black borrowers are approved for loans, they can be charged higher interest rates. The study shows that on average, lenders charge Latinx and Black applicants 7.9 more basis points than white people to purchase a home, and 3.6 more basis points to refinance — adding a total of $765 million in interest annually among these communities.

Unlike in-person lenders, the research showed online fintech lenders don't discriminate when it comes to approving a loan application. However, found the report, fintech algorithms can still discriminate based on neighborhoods and shopping behavior, which affects interest rates. Fintech lenders still discriminate less frequently than non-fintech lenders, though.

 

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In order to ensure financial inclusion for all, this is the way to go. An example is Kenya, where the entry of fintechs has really deepened the financial sector

The discrimination is invisible as it happens before the loan is marketed. Needy is kept in dark. That does not mean that there is no discrimination.

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