This Thursday, July 10, Massachusetts Attorney General Andrea Joy Campbell announced a $2.5 million settlement with a company that offers education financing products based in Delaware. The settlement resolved allegations related to the company’s lending practices, which Campbell’s office claimed violated consumer protection and fair lending laws because of the company’s use of artificial intelligence models that had the potential to cause disparate harm to minority borrowers. The allegations claim that the company’s practices failed to take reasonable measures to prevent unfair lending outcomes for borrowers from minority groups. Specifically, the Attorney General claims that the company used AI models to determine loan eligibility, terms, and pricing without first testing and training its models to ensure fair outcomes for all borrowers. The allegations also include violations stemming from the company’s use of a so-called “Knockout Rule” designed to auto-deny applications based on immigration status as well as other impermissible rules resulting in disparate impacts to Black and Hispanic loan applicants. The terms of the settlement require the company to enact and implement major changes to their lending practices to ensure compliance with all applicable laws, both state and federal.
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