Frank Pasquale (Cornell Law) and Mathieu Kiriakos (U Sherbrooke) have posted “Contesting the Inevitability of Scoring: The Value(s) of Narrative in Consumer Credit Allocation” (Algorithmic Transformations of Power: Between Trust, Conflict, and Uncertainty, edited by C. Burchard and I. Spiecker (Nomos, forthcoming 2025).) on SSRN. Here is the abstract:
When firms allocate credit to consumers, credit scoring often seems both inevitable (how else could the decision be made?) and desirable (how else could the decision be objective and fair?). We challenge both assumptions, after exploring the power asymmetries generated by scoring. Evaluations of narrative accounts of creditworthiness are plausible in at least some scenarios, despite the volume of credit applications. Moreover, these alternative paths to credit reflect normative values (such as intelligibility and fair consideration) that are just as compelling as the objectivity and fairness attributed to scoring.
One of these values is trust. While quantitative assessments of reliability based on third-party data are designed to enable “trustless” transactions, qualitative accounts of creditworthiness depend on evaluators’ trusting the accounts of creditworthiness offered by those applying for credit. What this shift potentially loses in efficiency it has the potential to gain in mutual understanding, the alleviation of alienation, and opportunities for redemption. It also represents a democratization of power in financial relationships, requiring those with funds to lend to do a bit more to understand at least some of those applying for credit on their own terms, rather than forcing applicants into Procrustean beds of data analytics.