Jay Esparza Castillo, a student at Chicago-Kent College of Law, has won the A Perfect Union Racial Justice writing competition with his paper titled "Fair Lending in the Age of AI: Regulations to Combat Discrimination in United States Credit Scoring Systems." In his work, Castillo explores how artificial intelligence could influence credit scoring systems and potentially lead to discriminatory lending practices.
Castillo explains that traditional credit scoring considers factors such as account numbers, usage, age, address, and credit length. However, with AI's rise, he notes that algorithms may also consider unconventional factors like social media usage and socioeconomic status. He warns that this level of precision might result in discrimination against certain consumers.
The paper uses ZestFinance as an example of a lender employing machine learning algorithms to analyze various data points per applicant. Castillo writes about how people could be approved or denied based on time spent reading loan terms and conditions. He compares AI's potential in credit scoring to software used in criminal justice for predicting re-offense likelihood.
Currently, major credit bureaus are not using AI for determining credit scores. However, Castillo is concerned about transparency issues within AI algorithms and scoring models possibly disadvantaging certain groups. He states that companies like FICO and TransUnion are refining scoring methods but sees it as a threat needing management.
Castillo critiques existing legislative efforts to control AI use but suggests new legislation addressing these concerns directly before they become problematic. He emphasizes the importance of ethical technology use through appropriate laws.
Despite facing personal challenges during his final semester at law school due to a benign brain tumor diagnosis and subsequent surgery recovery, Castillo completed his award-winning paper. Reflecting on his experience, he expresses gratitude for overcoming obstacles.
Currently clerking at Dinsmore’s Banking and Financial Services department with associate status pending Illinois Bar admission, Castillo continues to pursue his legal career aspirations.