Reducing Racial Disparities in Consumer Credit: Evidence from Anonymous Loan Applications

Using a unique experiment of anonymizing online loan applications, we find that anonymous loan applications reduce racial disparities in access to credit. With names on applications, ethnic minority applicants are 10.6% less likely to receive online loan offers than otherwise identical ethnic majority applicants; anonymizing applications eliminates such disparities. Anonymization merely delays revealing race until applicants visit the lender in-person for the required identity verification before loan origination. Yet, racial disparities in loan origination also decrease. We do not find significant racial gaps in loan performance before or after anonymization. Furthermore, accurate statistical discrimination is unlikely to explain our results.