The Consumer Financial Protection Bureau issued a warning this week that lenders cannot use artificial intelligence to avoid providing justification for denying credit to customers. This is just the latest instance of the government attempting to balance AI and law.
New guidelines for lenders regarding how to utilize AI and other modelling when evaluating credit applications were released by the CFPB. Creditors are using the technology to create sophisticated algorithms for decision-making, which has witnessed a remarkable increase in use in recent years.
According to the agency, the models are frequently fed a lot of data, including some that might have come through surveillance.
According to the regulatory body, creditors cannot, therefore, refuse credit or take unfavorable action by invoking a general word like “purchasing history”; rather, they must reflect specific behaviors that prompted the action, even if they enrage or upset consumers if they are not directly related to their finances.
They must provide precise justifications for denials so that customers can avoid discrimination and make better judgements.
According to a statement from CFPB Director Rohit Chopra, technology promoted as artificial intelligence is boosting the data used to make lending decisions and also growing the range of probable reasons why credit is denied.
Creditors are required to provide a detailed justification for their denial. Artificial intelligence is not given a unique exception, he claimed.
Similar steps have been taken by the agency to limit or clarify the use of algorithms, especially by landlords when renting out properties to tenants. Additionally, it has released a rule to prevent what it refers to as possible “digital redlining” in the mortgage market through the application of black-box models.
The guidelines demonstrate how government agencies and regulators are starting to deal with the realities of the contentious technology. Last week, senators discussed technology regulation at meetings with tech titans, union leaders, and specialists in artificial intelligence.
Sen. Elizabeth Warren, D-Mass., who had a key role in the development of the CFBP, criticized the session for its lack of transparency.
Warren said: she doesn’t see why the press isn’t allowed at this meeting. The majority of individuals have stated that while we need innovation, we also need to ensure public safety.
A number of politicians from both chambers have sponsored legislation to control the advancement of artificial intelligence in response to worries about its potential effects on personal data privacy, public safety, and the job market.