Earnest Operations AI failures

Massachusetts AG settled with Earnest for $2.5M over allegedly discriminatory AI loan underwriting

The Massachusetts Attorney General announced a $2.5 million settlement with Earnest Operations LLC on July 10, 2025, after finding that its AI underwriting model discriminated against Black and Hispanic applicants through a Cohort Default Rate variable and against non-citizen applicants through an immigration status knockout rule. Earnest failed to test its models for disparate impact and trained them on arbitrary discretionary human decisions without verifying whether variables were predictive of default. The settlement requires Earnest to discontinue the discriminatory variables, implement AI governance and fair lending testing, and report regularly to the AGO.

Confidence

High (multi-source, primary)