![]() Credit can provide new opportunities to start businesses, increase human and physical capital, and build wealth. People pay attention to credit practices because loans are a uniquely powerful tool to overcome discrimination and the historical effects of discrimination on wealth accumulation. In the era before computers and standardized underwriting, bank loans and other credit decisions were often made on the basis of personal relationships and sometimes discriminated against racial and ethnic minorities. Indeed, the term “redlining” originates from maps made by government mortgage providers to use the provision of mortgages to segregate neighborhoods based on race. ![]() Since there is a history of credit being used as a tool for discrimination and segregation, regulators pay close attention to bank lending practices. There are many reasons why credit is treated differently than the sale of goods and services. AI has the potential to alter credit practices in transformative ways and it is important to ensure that this happens in a safe and prudent manner. I discuss how AI alters the dynamics of credit denials and what policymakers and banking officials can do to safeguard consumer lending. In this paper, I review the history of credit and the risks of discriminatory practices.
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