Credit denial in the age of AI

Banks have been in the business of deciding who is eligible for credit for centuries. But in the age of artificial intelligence (AI), machine learning (ML), and big data, digital technologies have the potential to transform credit allocation in positive as well as negative directions. Given the mix of possible societal ramifications, policymakers must consider what practices are and are not permissible and what legal and regulatory structures are necessary to protect consumers against unfair or discriminatory lending practices. In this paper, I review the history of credit and the risks of discriminatory practices. I discuss how AI alters the dynamics of credit denials and what policymakers and banking officials can do to safeguard consumer lending.