Office of Congressman Emanuel Cleaver, II
First published August 2018
Last year, Congressman Cleaver launched a groundbreaking investigation into the small business lending practices of Financial Technology (FinTech) companies, studying the various methods companies use to protect against discriminatory practices. One of the primary concerns raised by Congressman Cleaver was the specific algorithms used by FinTech firms. While many FinTech firms claim these algorithms protect against discrimination, they have generally provided little evidence into how they are utilized to do so. The questions surrounding the algorithms are particularly troubling because, in some cases, they have the ability to utilize certain information about loan-seekers without their knowledge. Information collected can come from a wide range of sources, including the loan seeker’s Twitter or Facebook profiles, specifically who they follow, and the number of criminal records and/or bankruptcies in the loan seeker’s zip code. Not only is this information unrelated to the purposes of loan-seeking, it can be used to discriminate against certain people, predominantly lower-income borrowers and people of color. The following report includes the detailed findings of Congressman Cleaver’s investigation. Companies mentioned in this investigation are LendUp, Fora Financial, Biz2Credit, Kabbage, LendingClub, and OnDeck Capital, Inc. It should be noted that LendUp is, in fact, a consumer lending company, but they have graciously agreed to participate in this investigation.