If you have a credit card, a car loan or almost any type of debt other than a mortgage, there’s a chance your name and address have been run through Elliott’s algorithm, a complex formula that crunches data from the Census Bureau.
But as it has become more widely used, Elliott’s work and the CFPB’s application of it have found their way into the middle of a fight between the federal consumer watchdog and politicians who want to scrap the agency. Some congressional Republicans have gone so far as to call the CFPB’s use of Elliott’s system “junk science.”
His algorithm is a tool that estimates the probability that someone is white, black, Asian or Hispanic based only on their address and last name. The CFPB has relied on it to accuse some of the country’s largest auto lenders, including the financing arms of Toyota and Honda, of discrimination.
Car dealerships often add an extra bit of interest, called a markup, on top of the rate charged by a lender, ostensibly to pay the dealership for its work arranging the loan. The CFPB, using Elliott’s system to look at tens of thousands of loans, has alleged that dealers charge larger markups to minority borrowers.