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Lender Disputes Accusations of Discrimination Based on College

A financial-technology company accused of discriminating against prospective borrowers based on the college they attended is disputing the analysis, saying it contains “inaccuracies and misunderstandings.”

Upstart Network Inc., an online lending platform, said a Wednesday report by the Student Borrower Protection Center used flawed methodology and cherry-picked examples to make its case. The study was based on a single person applying for a loan 26 times over two and a half months, a period when the person’s creditworthiness and the lender’s underwriting model materially changed, Upstart said.

The Student Borrower Protection Center is a Washington-based nonprofit made up of former officials from the Consumer Financial Protection Bureau. Its study claims that Upstart would charge a graduate from historically black Howard University more than it would a similar New York University graduate. Upstart co-founder Paul Gu said the conclusion is wrong and the authors selected the three results out of 26 that best fit their needs.

“We started this company to expand access to credit because the current system leaves too many people out,” Gu said. “We expected fire from industry incumbents and entrenched interests. It’s definitely disheartening that it’s coming from people who share the same goals.“

The nonprofit’s report caused a stir in Washington. Representative Ayanna Pressley, a Massachusetts Democrat, questioned CFPB Director Kathy Kraninger about the report during a congressional hearing on Thursday. Kraninger said the Upstart examples from the report are “problematic.”

Upstart, which regularly reports loan-application data to the CFPB, said its own analysis shows that the hypothetical Howard alum cited in the report was quoted a lower interest rate than alumni of other schools more times than not.

Seth Frotman, who leads the nonprofit, defended the report. He said Upstart’s online lending tool consistently showed higher rates for borrowers from historically black colleges and that additional tests in recent days showed similar results.

Bloomberg News