Upstart Faces Scrutiny Over AI Bias in Lending Algorithms

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Upstart Holdings Inc. (NASDAQ: UPST), a fintech company specializing in AI-driven lending, has faced scrutiny over potential racial bias in its credit decisioning algorithms. Concerns arose after audits revealed that Black and Hispanic applicants were denied loans at higher rates than their white counterparts, despite similar credit profiles.​

Audit Findings and Disparities

In 2022, the law firm Relman Colfax, which monitors Upstart's fair lending practices, reported that the company's AI model approved Black applicants at lower rates than non-Hispanic white applicants. While the audit did not find evidence that variables in Upstart’s model functioned as proxies for race, national origin, sex, or age, it identified approval disparities for Black applicants. The report suggested that a less discriminatory alternative (LDA) model could reduce these disparities. However, Upstart disagreed with this recommendation, citing concerns about compromising model accuracy. Instead, the company proposed its own LDA, but the monitor did not validate its claims.