Will Regulators’ Warnings Chill Lenders’ Use of AI?

SOURCE: American Banker

The Consumer Financial Protection Bureau recently issued a fresh warning to lenders that use artificial intelligence in lending decisions, saying they must be able to explain how their models decide which borrowers to approve and provide clear reasons to consumers who are declined.

None of this is new: Fair-lending laws and credit reporting laws have been on the books for 50 years, and there was no reason to think they wouldn’t apply to newer lending software. But in the way that the CFPB and all the national bank regulators have been repeatedly issuing such warnings, they seem to be signaling closer scrutiny of the way banks and fintechs use such software.