Buttigieg Worries Tech May Add Racial Bias to Credit Decisions

Emma Kinery, Bloomberg News

Pete Buttigieg, mayor of South Bend and 2020 presidential candidate, participates in a Moral Witness rally in Washington, D.C., U.S., on Wednesday, June 12, 2019. The Democratic National Committee will select 20 of the unprecedented 23 candidates for the party nomination to take part in the first Democratic presidential debates the forums July 26-27 in Miami. Photographer: Al Drago/Bloomberg , Bloomberg

(Bloomberg) -- Pete Buttigieg said the way credit scoring is done in the U.S. is fraught with inequality and he’s worried the process may get worse with systems based on artificial intelligence.

Buttigieg, a Democratic presidential candidate, was responding to a black business owner who asked about the denial of capital to African Americans during the Black Economic Alliance Forum held jointly with Black Entertainment Television in Charleston, South Carolina. The event, held Saturday, will be broadcast Sunday on BET.

“I’m very worried, living in an era where more and more of this is going to be done by algorithms and by big data, that we’re going to automate inequality by failing to be intentional about how some of these algorithms pick up structures and systems and attitudes and assumptions that were already racist in nature,” said Buttigieg, the mayor of South Bend, Indiana.

The good news, Buttigieg said, is that just as AI can perpetuate bias, it can also be used to highlight bias. Buttigieg was a consultant at McKinsey & Co. prior to entering public service.

“We need to look wholesale at how things like access to credit and scoring of credit work to break down racial bias in them,” he said. “The same tools that can perpetuate bias can also help us find it. They can help us analyze where these credit tools got it wrong.”

The candidate said credit tools should not “mistakenly and unfairly” classify a black businessman or entrepreneur with a black customer base as a higher credit risk.

He also called for building up community development financial institutions and using both federal incentives and a “culture of entrepreneurship” to encourage the largest financial institutions to put more capital into those CDFIs.

South Carolina is the first primary state on the 2020 Democratic calendar with a majority-black Democratic electorate, and it’s seen as the first real test of how the many candidates will fare with minority voters. Buttigieg, 37, has had trouble so far garnering support from black voters. He had only 1% of support among that demographic in the latest Economist/YouGov poll of Democrats released Wednesday, far short of his 8% support.

To contact the reporter on this story: Emma Kinery in Washington at ekinery@bloomberg.net

To contact the editors responsible for this story: Kasia Klimasinska at kklimasinska@bloomberg.net, Steve Geimann, Ros Krasny