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Discrimination in lending can occur either in face-to-face decisions or in algorithmic scoring. We provide a workable interpretation of the courts' legitimate-business-necessity defense of statistical discrimination. We then estimate the extent of racial/ethnic discrimination in the largest consumer-lending market using an identification afforded by the pricing of mortgage credit risk by Fannie Mae and Freddie Mac. We find that lenders charge Latinx/African-American borrowers 7.9 and 3.6 basis points more for purchase and refinance mortgages respectively, costing them $765M in aggregate per year in extra interest. FinTech algorithms also discriminate, but 40% less than face-to-face lenders. These results are consistent with both FinTech and non-FinTech lenders extracting monopoly rents in weaker competitive environments or profiling borrowers on low-shopping behavior. Such strategic pricing is not illegal per se, but under the law, it cannot result in discrimination. The lower levels of price discrimination by algorithms suggests that removing face-to-face interactions can reduce discrimination. Further silver linings emerge in the FinTech era: (1) Discrimination is declining; algorithmic lending may have increased competition or encouraged more shopping with the ease of platform applications. (2) We find that 0.74-1.3 million minority applications were rejected between 2009 and 2015 due to discrimination; however, FinTechs do not discriminate in loan approval.

No abstract

We extend our thanks to the staff of the City of Oakland, whose foresight in implementing the survey used in this paper and their countless hours of work on it are a testament to the desire to support the people and small businesses of Oakland. Particular thanks go to Marisa Raya. We also want to thank the SafeGraph and HomeBase companies who have generously shared their data to for research related to COVID-19's impact on U.S. businesses. Finally, we thank Annette Vissing-Jorgensen for feedback and the Berkeley Center for Law and Business for support. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

We extend our thanks to the staff of the City of Oakland, whose foresight in implementing the survey used in this paper and their countless hours of work on it are a testament to the desire to support the people and small businesses of Oakland. Particular thanks go to Marisa Raya. We also want to thank the SafeGraph and HomeBase companies who have generously shared their data to for research related to COVID-19's impact on U.S. businesses. Finally, we thank Annette Vissing-Jorgensen for feedback and the Berkeley Center for Law and Business for support. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Across two studies we aimed to measure empirically the extent of non-readership of clickthrough agreements (CTAs), identify the dominant social representations that exist about CTAs, and experimentally manipulate these representations in order to decrease automatic non-reading behavior and enhance contract efficiency. In our initial questionnaire study (Study 1), as predicted, the vast majority of participants reported not reading CTAs and the most prevalent social representations of CTAs contributing to non-readership included: they are too long and time-consuming, they are all the same, they give one no choice but to agree, they are not important, the companies are reputable, and they are irrelevant. Manipulating these representations on a simulated music web site (Study 2) revealed an increase in readership.Additionally, CTA comprehension and CTA rejection rates were both increased significantly by manipulating the length representation. These results demonstrate support for the influence of social representations on CTA readership, provide evidence against the common "limited cognition" perspective on non-readership, and suggest that presenting CTAs in a short, readable format can increase CTA readership and comprehension as well as shopping of CTA terms. Word count: 179Blind Consent? A Social Psychological Investigation of Non-Readership of Click-Through AgreementsEvery day, individuals using the Internet are confronted with a choice: to accept or not accept the terms of click-through agreements ("CTAs"). Used by on-line vendors to set forth the legal relationship between a vendor and its consumers (Kunz, Del Duca, Thayer, & Debrow, 2001), CTAs are ubiquitous in the on-line world. Requiring but a simple click of "I agree" to be formed, CTAs are commonly used to establish the terms of use of a website, the terms upon which a consumer may download and use a software program, or the terms upon which a consumer may shop on-line. Additionally, CTAs often include other "boilerplate terms" such as the right of a vendor to collect and disseminate a consumer's personal information and restrictions on the manner in which a consumer may bring future legal grievances against a vendor (Marotta-Wurgler, 2007). According to anecdotal evidence and limited survey research (Hillman, 2006a;Becher and Unger-Aviram, 2008), individuals overwhelmingly make the choice to accept-but not read-CTAs, thereby blindly consenting to their terms.Since the advent of the CTA, consumers have made a number of legal challenges against the enforceability of these contracts on the basis that they never read-let alone agreed-to their terms. The vast majority of these challenges have been unsuccessful (Lemley, 2006). While courts acknowledge that consumers do not read CTAs, they find the agreements validly formed contracts given that legal doctrine requires merely that consumers "assent" to the formation of a contract. Consequently, whether or not a consumer actually reads the contract is largely irrelevant. So long as a consumer manifests...

No abstract

Across two studies we aimed to measure empirically the extent of non-readership of clickthrough agreements (CTAs), identify the dominant social representations that exist about CTAs, and experimentally manipulate these representations in order to decrease automatic non-reading behavior and enhance contract efficiency. In our initial questionnaire study (Study 1), as predicted, the vast majority of participants reported not reading CTAs and the most prevalent social representations of CTAs contributing to non-readership included: they are too long and time-consuming, they are all the same, they give one no choice but to agree, they are not important, the companies are reputable, and they are irrelevant. Manipulating these representations on a simulated music web site (Study 2) revealed an increase in readership.Additionally, CTA comprehension and CTA rejection rates were both increased significantly by manipulating the length representation. These results demonstrate support for the influence of social representations on CTA readership, provide evidence against the common "limited cognition" perspective on non-readership, and suggest that presenting CTAs in a short, readable format can increase CTA readership and comprehension as well as shopping of CTA terms. Word count: 179Blind Consent? A Social Psychological Investigation of Non-Readership of Click-Through AgreementsEvery day, individuals using the Internet are confronted with a choice: to accept or not accept the terms of click-through agreements ("CTAs"). Used by on-line vendors to set forth the legal relationship between a vendor and its consumers (Kunz, Del Duca, Thayer, & Debrow, 2001), CTAs are ubiquitous in the on-line world. Requiring but a simple click of "I agree" to be formed, CTAs are commonly used to establish the terms of use of a website, the terms upon which a consumer may download and use a software program, or the terms upon which a consumer may shop on-line. Additionally, CTAs often include other "boilerplate terms" such as the right of a vendor to collect and disseminate a consumer's personal information and restrictions on the manner in which a consumer may bring future legal grievances against a vendor (Marotta-Wurgler, 2007). According to anecdotal evidence and limited survey research (Hillman, 2006a;Becher and Unger-Aviram, 2008), individuals overwhelmingly make the choice to accept-but not read-CTAs, thereby blindly consenting to their terms.Since the advent of the CTA, consumers have made a number of legal challenges against the enforceability of these contracts on the basis that they never read-let alone agreed-to their terms. The vast majority of these challenges have been unsuccessful (Lemley, 2006). While courts acknowledge that consumers do not read CTAs, they find the agreements validly formed contracts given that legal doctrine requires merely that consumers "assent" to the formation of a contract. Consequently, whether or not a consumer actually reads the contract is largely irrelevant. So long as a consumer manifests...