Fair Lending & Compliance

Consumers Call For More Inclusion In Lending. Let's Answer The Call.

Mike de Vere

November 18, 2020

The 2020 election season was noisy, confusing, and anxiety-producing, but taught me two clear lessons. One, a record turnout says that participatory democracy is alive and well. Two, we’re sadly more politically divided than we were in 2016. We’re living in a country that’s unfolding in two competing universes.

As business leaders, we don’t have the luxury of picking a universe. We have to serve everyone—and help where we can to make the world a better place to live. As a business goal, that’s right up there with profit. Blackrock CEO Larry Fink said, “Every company must not only deliver financial performance but also show how it makes a positive contribution to society.” In my industry, that means making credit more available to deserving people who can’t get it today because the current system is flawed.

The 2020 Zest AI/Harris Poll Consumer Credit Survey published today reveals that too many consumers think the current system is unfair. Seven out of ten Americans say they would move their financial accounts from their current firm to a financial institution that has more inclusive lending practices. Six out of ten Americans would switch to a financial institution that increases access to credit for people of color and for women.
To meet increasing consumer expectations, financial institutions will need to use every tool necessary to ensure full and fair access to credit in a responsible way. Just last week, an executive at a top global bank told me it was imperative for his organization to drive more inclusion and fairness into their business. “We are not going to wait for the government to tell us when to do it. We’re doing it,” this executive said.

Seven out of ten Americans say they would move their financial accounts from their current firm to a financial institution that has more inclusive lending practices.

Finally, Fairer Lending is Attainable

What’s exciting is that lenders now have the power to use technology to generate fairer lending decisions. The U.S. credit reporting system is a marvel of data warehousing and analytics, but the data itself is encoded with the effects of generations of discrimination and economic oppression. We have to mitigate this bias using advanced technologies that we at Zest are developing today. Today, Zest-built lending models can increase a lender’s approval rate by up to 20% with no added risk (or cut losses in half). Zest-built models can also shrink the disparity in approval rates between whites and people of color by substantial margins. Every model that lenders build using our software can and will be fairer than the ones they used before. It’s time to replace 30-year old scoring techniques with better math and more data. We can end racism in lending if we do this right.

As the electoral season limps to its inevitable conclusion, I’ve stopped doom-scrolling and started spending a lot more time getting up to speed on the work of people trying to stitch the country together. We need to start listening carefully to people we don’t agree with, arrive at some common facts, and looking past petty differences. If you want to feel better, head over to the #ListenFirst Coalition and get involved with some of their 325+ members. It’s so easy to support the work of folks like Pearce Godwin at the National Conversation Project, or Justine Lee and Tina Triang, who started Make America Dinner Again in the wake of the 2016 election after they realized they didn’t know anyone who voted for Trump. They’re now up to more than a dozen chapters nationwide of people having bipartisan, frank conversations about real issues over dinner (now virtual).

I believe people are inherently good. This is reflected again and again in our 2020 survey. Consumers want to work with banks and credit unions that support their communities by safely broadening credit access to deserving people. This has been our mission at Zest since 2009.

The last time I checked, this is not an everyone-for-themselves country. Despite the withering attacks from the President, support for Black Lives Matter is still at 55% nationally. We have to do more to ensure incentives are in place to widen access to affordable credit (especially home mortgages). Credit is one of the primary tools we’ve got to close the 10-to-1 racial wealth gap in this country. The financial system is still failing a stubbornly large portion of Americans and it doesn’t have to be that way.

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