Biden admin warns lenders there is ‘no special exemption’ for AI when denying credit

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Sen. Mike Braun, R-In., provides insight on growing fears over the technology on The Evening Edit.

The Consumer Financial Protection Bureau this week warned that creditors cannot use artificial intelligence to be exempt from giving reasons for denying consumers credit — marking the latest instance of government grappling with how AI coincides with regulation.

The CFPB announced new guidance to lenders for the way in which they use artificial intelligence and other modeling when considering credit applications. The technology, which has seen a dramatic uptick in use in recent years, is being used by creditors to develop complex algorithms to make decisions.

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Signage is seen at the Consumer Financial Protection Bureau (CFPB) headquarters in Washington, D.C., U.S., May 14, 2021. (REUTERS/Andrew Kelly / Reuters)

The agency said the models are often fed large amounts of data, including some information that may have been gained via surveillance. 

The regulatory agency said that creditors cannot therefore deny credit or take adverse actions by pointing to broad term like «purchasing history» — instead they must reflect specific behaviors that led to the move, even if it upsets or angers customers if it not directly linked to their finances.

When issuing a denial, they must give specific reasons so that consumers’ can make better decisions, and also be protected from discrimination.

«Technology marketed as artificial intelligence is expanding the data used for lending decisions, and also growing the list of potential reasons for why credit is denied,» CFPB Director Rohit Chopra said in a statement. 

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