CFPB Defends Regulatory Approach to AI

In response to a Treasury Department Request for Information ("RFI"), the CFPB described the agency's regulatory approach to AI opportunities and risks in the financial services industry. (See previous coverage.)

In its letter, the CFPB emphasized that companies using AI must comply with federal consumer financial protection laws, and that there is no exception for new technologies. The agency underscored that it seeks to ensure that AI is used to benefit consumers, and that it is on guard against AI being used to exploit legal loopholes or to engage in regulatory arbitrage.

The CFPB asserted that:

• "regulators have a legal mandate to ensure that existing rules are enforced with respect to all technologies, including those marketed as new or novel."
• "when regulators uniformly enforce rules, firms are discouraged from investing in legal evasion to make law-breaking their competitive advantage, and instead are incentivized to invest in developing innovative products and services that benefit consumers."
• "establishing clear, straightforward rules encourages firms to invest in better products and services, rather than in finding legal gray areas, taking advantage of incumbent-favoring loopholes, or seeking out special treatment."

The agency said it is monitoring the use of technologies like automated customer service, fraud screening and lending decisions to ensure compliance with laws like the Equal Credit Opportunity Act and Consumer Financial Protection Act. The CFPB said it found risks to consumers when firms rush to adopt new technologies without complying with the law, including potential discrimination, incorrect information and privacy risks. 

The CFPB said it is "focused on fostering innovation and competition that truly benefits consumers," specifically by: (i) "making clear that there is no exception to the federal consumer financial protection laws for new technology;" (ii) "ensuring regulations don’t stifle competition in pricing or favor incumbents;" (iii) "ensuring consistent treatment under the law for similar products and services;" (iv) "combatting anticompetitive practices;" and (v) "monitoring the market and ensuring accountability."