New York. In response to growing concerns about the increasing power of artificial intelligence (AI) systems such as ChatGPT, the nation’s financial watchdog is taking proactive steps to ensure that companies adhere to the law when utilizing AI technologies. The impact of AI is already pervasive, influencing various aspects of our financial lives, including credit ratings, loan terms, bank account fees, as well as affecting hiring, housing, and working conditions.
Ben Winters, Senior Counsel for the Electronic Privacy Information Center, welcomed a recent joint statement on enforcement issued by federal agencies as a positive initial move. He emphasized that the notion of AI being entirely unregulated is inaccurate, stating, “Just because you use AI to make a decision, that doesn’t mean you’re exempt from responsibility regarding the impacts of that decision. This is our opinion on this. We’re watching.”
Over the past year, the Consumer Finance Protection Bureau (CFPB) has imposed fines on banks for mismanaging automated systems that led to wrongful home foreclosures, car repossessions, and lost benefit payments due to their reliance on new technology and flawed algorithms. Regulators emphasize that there will be no “AI exemptions” to consumer protection, citing these enforcement actions as illustrative examples.
Rohit Chopra, Director of the Consumer Finance Protection Bureau, disclosed that the agency is strengthening its internal capabilities by bringing on board data scientists and technologists to better address AI-related challenges. The agency remains vigilant in identifying potentially illegal activities.
Other federal agencies, including the Federal Trade Commission, the Equal Employment Opportunity Commission, and the Department of Justice, are also redirecting their resources and personnel to scrutinize new technologies and identify potential negative impacts on consumers’ lives.
Chopra emphasized the importance of transparency in AI decision-making, stating, “One of the things we’re trying to make crystal clear is that if companies don’t even understand how their AI is making decisions, they can’t really use it.” He added that fair lending laws are being closely examined to ensure that AI does not result in discriminatory practices.
Under the Fair Credit Reporting Act and Equal Credit Opportunity Act, financial providers are legally obligated to explain any adverse credit decisions, a requirement that extends to housing and employment decisions. Regulators argue that algorithms that produce decisions that are too opaque to explain should not be employed.
EEOC Chair Charlotte Burrows underscored that enforcement actions will be taken against AI hiring technology that screens out job applicants with disabilities and “bossware” that illegally surveils workers. Algorithms that dictate how and when employees can work in ways that violate existing law are also being scrutinized.
OpenAI’s top lawyer, Jason Kwon, suggested an industry-led approach to AI regulation, emphasizing the need for industry standards and a process for updating them.
Sam Altman, the head of OpenAI, called for government intervention to mitigate the risks associated with powerful AI systems and suggested the formation of a U.S. or global agency to license and regulate the technology.
Although there is no immediate indication that Congress will enact comprehensive new AI regulations, societal concerns have prompted tech CEOs, including Altman, to engage with the White House to address the implications of these technologies.
Winters, from the Electronic Privacy Information Center, encouraged the agencies to conduct further research and publish information about AI markets, industry practices, major players, and data usage, similar to past efforts related to consumer finance products and technologies. He believes that such transparency would be highly beneficial.
In summary, regulators are taking a proactive stance to ensure that AI technologies are used responsibly and ethically to protect consumers and workers, emphasizing the importance of transparency, fairness, and compliance with existing laws.
Carlo Juancho FuntanillaFrontend Developer, WordPress, Shopify
Contributing Editor
AMA ACLC San Pablo
