U.S. Rep. Emanuel Cleaver (D-MO) has asked the Consumer Financial Protection Bureau (CFPB) to investigate financial technology (fintech) companies to determine if their small business lending algorithms are discriminatory.
In a letter to Richard Cordray, director of the CFPB, Cleaver said fintech lending algorithms may be using data that might have a disparate impact on small business underwriting decisions.
“I am deeply concerned that some [fintech] companies may be using algorithms that shut out hardworking individuals from communities of color from accessing affordable small business credit,” Cleaver said. “It is important to determine if minority-owned small businesses are being charged higher rates, or if they have been subject to predatory rates by these fintech firms.”
He also cited some of the complaints of fintech companies, sourcing a Harvard Business School report, which include high annual percentage rates, additional fees on loan renewals, hidden prepayment charges, and misaligned broker incentives.
“The silent pickpocket of discrimination shouldn’t thwart the American Dream. Americans looking to start a small business shouldn’t pay higher interest rates because of their race or ethnicity,” Rohit Chopra, a senior fellow at the Consumer Federation of America and former assistant director of the CFPB, said.