08/19/2024

CFPB Wants to Set the Rules for How Banks Use AI

PYMNTS

The Consumer Financial Protection Bureau (CFPB) has staked out a clear position on using artificial intelligence (AI) in financial services: There are no exceptions to existing consumer protection laws for new technologies.

In am Aug. 12 comment letter to Treasury Secretary Janet Yellen, the CFPB outlined its approach to regulating AI and other emerging technologies in the financial sector. The agency emphasized that innovation must not come at the expense of consumer protection or fair competition.

“Although institutions sometimes behave as if there are exceptions to the federal consumer financial protection laws for new technologies, that is not the case,” the CFPB stated in its letter. “Regulators have a legal mandate to ensure that existing rules are enforced with respect to all technologies, including those marketed as new or novel.”

The agency’s position comes as financial institutions increasingly adopt AI and machine learning technologies for everything from customer service to fraud detection and credit underwriting. While these technologies promise increased efficiency and potentially better outcomes for consumers, they also raise concerns about fairness, transparency and compliance with existing regulations.