CFPB Emphasizes that AI is not Above the Law

Cozen O'Connor
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  • The CFPB issued guidance for lenders on the use of artificial intelligence (AI) when determining whether or not to extend credit to consumers.
  • The guidance clarifies that creditors relying on AI or other complex credit models in making a credit determination are still subject to the requirements of the Equal Credit Opportunity Act (ECOA) and the Fair Credit Reporting Act (FCRA). In particular, creditors must provide applicants with specific and accurate reasons when an adverse action is taken against them. As such, creditors cannot use CFPB sample adverse action forms and checklists to feed AI models and then issue adverse actions based on the output, if doing so fails to accurately inform the consumers exactly why adverse actions were taken.
  • The adverse action notice requirements of the ECOA are intended to serve as a tool to prevent and identify discrimination by ensuring creditors affirmatively explain their decisions, and the CFPB guidance emphasizes that there is no exemption on these requirements as the use of AI in lending decision-making expands.
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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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