As a member of the fintech community and lover of all things big data, I find this interesting and useful as a way for subprime lenders to give a chance to borrowers that may have little credit history. While I understand that birds of a feather tend to flock together, there is heated debate over whether this is just another page in the United States’ long and storied history of discriminatory lending. Bank redlining practices denied many people of color the opportunity to apply for mortgages and buy their homes and forced racial segregation in cities across the country that persists to this day. Federal laws passed in the 1970s made these practices illegal and further protected the poor from discriminatory credit reporting and lending practices. But these laws narrowly define lenders and creditors in ways that don’t apply so neatly in an era of big data.
As a data junkie I really love going down the rabbit hole and seeing how you can make smarter decisions in finance with new technology. As a personal that grew up in a very small town of 2,000 where there was little viable work, I have friends from all walks of life that are truly amazing people, leaving me to wonder if their lives are about to get harder.
In short: You could be denied a loan simply because your friends have defaulted on theirs. It’s the kind of digital redlining that critics of “big data” collection have been warning of for years.
While none of us have a crystal ball, this will be an interesting show to watch!