Will Lending Decisions Be Based on Consumer Use of Capital Letters?

by Jeff Sovern

In our casebook, we quote a 1982 article that reports on a credit scoring system that took into account, in calculating the score, the first letter of the applicant's last name.  Credit scoring has evolved since then but maybe history is repeating itself or at least rhyming.  Today's Times includes an article, Banking Start-Ups Adopt New Tools for Lending, that opens:

When bankers of the future decide whether to make a loan, they may look to see if potential customers use only capital letters when filling out forms, or at the amount of time they spend online reading terms and conditions — and not so much at credit history.

The article reports on what are essentially credit scoring systems that identify characteristics that correlate with paying back loans.  The article also discusses how these new big data systems run the risk of discriminating in violation of ECOA, and the fact that one of those involved, Raj Date, was once one of the key figures in the CFPB.

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