Massachusetts Attorney General: Earnest Operations LLC assurance of discontinuance (AI underwriting, fair lending)

Summary

On July 10, 2025, Massachusetts Attorney General Andrea Joy Campbell announced a $2.5 million settlement with Earnest Operations LLC, a Delaware-based student loan company, through an assurance of discontinuance filed in Suffolk County Superior Court. The AG alleged that Earnest's algorithmic underwriting models created fair lending risks for Black, Hispanic and non-citizen applicants. According to the AG, Earnest did not test the models for disparate impact, used a school 'Cohort Default Rate' variable that disadvantaged Black and Hispanic applicants, applied a 'Knockout Rule' that automatically denied applicants based on immigration status, and sent inaccurate adverse action notices. Earnest agreed to pay $2.5 million, drop both the variable and the knockout rule, adopt AI governance and written policies, and report regularly to the AG. The allegations were resolved by settlement without a court finding.

Key dates

1. July 10, 2025Filed
2. July 10, 2025Resolved
3. October 16, 2026Checked against sources
4. October 21, 2026Checked against sources

Developments are added when the record is reviewed. Next review: October 16, 2027.

Evidence

Each passage is quoted from its source. The quoted passages are re-checked against the live pages every month.

1. Attorney General Andrea Joy Campbell today announced that her office has reached a $2.5 million settlement with Earnest Operations LLC (Earnest), a Delaware-based student loan company

   Supports: Parties, amount, date

   The AGO alleged that Earnest failed to take reasonable measures to mitigate fair lending risks in its underwriting practices, including failing to test its models for disparate impact

   Supports: Allegations

   The settlement, reached via an assurance of discontinuance filed in Suffolk County Superior Court

   Supports: Form and forum of settlement

   Earnest will also discontinue use of both the “Cohort Default Rate” variable and “Knockout Rule” based on immigration status.

   Supports: Remedial terms

   AG Campbell Announces $2.5 Million Settlement With Student Loan Lender For Unlawful Practices Through AI Use, Other Consumer Protection Violations Massachusetts Attorney General's Office (release dated 7/10/2025) Primary source