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Brookings Institution·brookings.edu/articles/reducing-bias-in-ai-based-financia...

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4/5
High(4)

High quality. Established institution or organization with editorial oversight and accountability.

Rating inherited from publication venue: Brookings Institution

A 2020 Brookings policy report relevant to AI fairness and governance in high-stakes domains; useful for understanding algorithmic bias risks in financial services and the regulatory frameworks needed to address them.

Metadata

Importance: 52/100organizational reportanalysis

Summary

This Brookings Institution report by Aaron Klein proposes a framework to evaluate the impact of AI in consumer lending, examining whether AI will reduce or exacerbate existing biases in credit allocation. It argues that AI presents a rare opportunity to build fairer, more inclusive financial systems, but also risks reinforcing discriminatory patterns while making bias harder to detect.

Key Points

  • •AI in consumer lending can either reduce historical credit bias or entrench it further through opaque algorithmic decision-making.
  • •Traditional credit reporting systems perpetuate existing racial and socioeconomic bias; AI could bypass these but may replicate them via proxies.
  • •The paper proposes a governance framework for evaluating AI fairness in consumer lending contexts.
  • •Discriminatory outcomes in AI-based lending may be harder to detect than in traditional systems, raising accountability concerns.
  • •Policy interventions are needed to ensure AI-driven credit systems expand access rather than reinforce exclusion.

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#### Reducing bias in AI-based financial services

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- [Share](https://www.brookings.edu/articles/reducing-bias-in-ai-based-financial-services/#)


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# Reducing bias in AI-based financial services

##### [Aaron Klein](https://www.brookings.edu/people/aaron-klein/)   [![Aaron Klein headshot](https://www.brookings.edu/wp-content/uploads/2016/06/8Z1A0164-rotated.jpg?quality=75&w=167)](https://www.brookings.edu/people/aaron-klein/)  [Aaron Klein](https://www.brookings.edu/people/aaron-klein/)Miriam K. Carliner Chair \- [Economic Studies](https://www.brookings.edu/programs/economic-studies/),Senior Fellow \- [Center on Regulation and Markets](https://www.brookings.edu/centers/center-on-regulation-and-markets/)

July 10, 2020

![Credit cards of American Express are photographed in this illustration picture in this March 17, 2016, file photo. REUTERS/Kai Pfaffenbach/Illustration/Files  GLOBAL BUSINESS WEEK AHEAD PACKAGE - SEARCH 'BUSINESS WEEK AHEAD APRIL 18'  FOR ALL IMAGES - GF10000384784](https://www.brookings.edu/wp-content/uploads/2018/06/RTX2AE8X.jpg?quality=75&w=1500)

- 19 min read

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**Editor's note:**

This report from The Brookings Institution’s Artificial Intelligence and Emerging Technology (AIET) Initiative is part of “ [AI Governance](https://www.brookings.edu/ser

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