Setting aside for a moment the fact that your financial history includes your home loan which includes your home as collateral which is located in your zipcode, suppose that the model got more accuracy by looking at the zipcode. Isn't that all the defense that's needed? What is meant, exactly, by "defense?"

AFAIK the credit information in your file does not include zip code as part of the home loan accounting.

Defense means 'what are you going to say when the feds come knocking and want proof you are not discriminating against a protected class?'

As a practical matter it isn't too hard to come up with a legal defense for that, of course. Lots of plausible deniability here. IMO most of this effort is by people trying to help prevent computer nerds from becoming (or staying, as we may already be there) complicit in discrimination by race while hiding behind algorithms as if they are somehow infallible.

This part doesn't make sense to me:

want proof you are not discriminating against a protected class

If black people are poorer on average, then even if the system takes only takes personal history in account, black people will inevitably get worse credit rating on average. It just follows from the premise, unless banks participate in some form of race-based redistribution which I find distasteful. How's it supposed to work in your opinion?