ZestFinance, a developer of artificial intelligence software for consumer credit, launched ZAML Fair, a new  tool designed to reduce bias and discrimination in lending.

Several mortgage lenders have already tested the ZAML Fair algorithm, and based on those results, ZAML Fair would eliminate 70 percent of the gap in mortgage approval rates between Hispanic and white borrowers, according to the company. Also, ZAML would cut the even larger gap between black and white borrowers by more than 40 percent. And that is just by using the technology to tune up traditional credit models. This would put more than 172,000 minority families into new homes.

"The way lenders take bias out of their models today is by simply tossing out offending credit signals. That leaves a lot of performance on the table," said Douglas Merrill, founder and CEO of ZestFinance. "Banks

[caption id="attachment_11100" align="alignleft" width="299"] Douglas Merrill, CEO of ZestFinance[/caption]

shouldn't have to choose between fairness and accuracy, and ZAML Fair helps them optimize for both."

ZAML Fair is a new algorithm that lenders can use to tune models for maximum fairness by automatically reducing the impact of discriminatory credit data. ZAML Fair uses the transparency tools built into ZAML to rank credit signals by how much they lead to biased outcomes and then produces a new model with maximum fairness and accuracy.

ZAML Fair carefully reduces the influence of factors that drive disparity, including some common credit signals such as income and the traditional credit score. Lenders get a series of better models they can choose from at a fraction of the time and effort required by legacy techniques. ZestFinance was founded in 2009 by Merrill, a former CIO of Google, and a team of former Google employees.