Capital One has admitted doing the same, as well as a number of other lenders.
There's been analyses done since, that show that when controlled for all other variables in credit reports, credit issuers issue less credit to blacks.. e.g. Cohen-Cole, 2011, Credit Card Redlining, Review of Economics and Statistics
I said "One example: Credit card issuers have been known to take into account places that you have made purchases in assessing risk. If you shop at businesses that are primarily frequented by minorities, odds are you'll get a lower credit limit than if you didn't"
You asked for a source.
I provided a source of the same. Yes, things like purchase histories are used as proxies for race and used to deny credit to mostly people of color.
Then you go here:
> Credit Card applications do not ask for race.
which was never asserted.
> I suspect it’s more likely based on zip code or similar.
As for the latter, no, it’s not a proxy for race. It might be highly correlated with race, but that is very different. I don’t know why everyone does these gymnastics to find a racist angle to everything, but it’s nonsense and it’s very harmful to spread that narrative.
Nobody is searching for black zipcodes and using that as an input to deny credit. The goal is to increase revenue by giving as much credit as possible with the least risk possible, so it wouldn’t even make sense.
Scoring based on where you shop is still behavioral analysis. I think it’s a bad policy, but it isn’t targeting people of color. Your zip code affects insurance rates too, and that’s based on claims. It doesn’t cost more to insure your car in south side chicago than beverly hills because there are black people there, it costs more because there are more claims. The same effect is seen in “white” zip codes that are in areas with severe winters.
> I don’t know why everyone does these gymnastics to find a racist angle to everything, but it’s nonsense and it’s very harmful to spread that narrative.
Black people default on loans more, adjusted for income, education status, etc. But we've decided it's socially un-okay to ask people if they're black and adjust how much we're willing to loan based on the answer.
But instead, we measure all kinds of ancillary things, many of which are highly correlated with being black and not obviously correlated to ability to repay, and dump them into a model, where we come up with weights that make basically the same decisions as if we'd asked if they were black. Is this is fundamentally better somehow?
Mind you, I don't have a wonderful answer as to what to do: it's important to accurately price credit risk. But it's also important for society to treat minorities equitably, especially when inequitable treatment might reinforce the very problems/reasons why some minorities are worse credit risks.
It might be better to explicitly have the "is African American?" question in the model, because then regulators, policymakers, the public could perhaps eventually know the exact contribution of this factor... while approaching it obliquely makes the effect far less clear.
https://consumerist.com/2008/12/22/amex-lowers-your-credit-l...
Capital One has admitted doing the same, as well as a number of other lenders.
There's been analyses done since, that show that when controlled for all other variables in credit reports, credit issuers issue less credit to blacks.. e.g. Cohen-Cole, 2011, Credit Card Redlining, Review of Economics and Statistics