"If an automated interest rate determination is made based upon FICO tiers, how would one apply this?" Stein said. If you're going to provide a product that operates in these regulated areas, including finance and banking, you have to affirmatively provide an assessment that shows that you operate within the bounds of the law."īut Stein argued that there are practical difficulties to applying the blueprint's directives to lending, such as the clause that consumers should be able to opt out and have access to a person who can quickly consider and remedy problems. I see the federal government moving towards a put up or shut up environment. "You can get away with simply providing hypotheticals. "We've existed in a regulatory environment where you can rely on claims of magic without actually having to put your money where your mouth is and provide an assessment about how your system actually works," he said.
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The federal government is starting to require companies to prove that the AI software they're using isn't discriminatory, Metcalf said. Regulators and consumer advocates have warned lenders that they still have to comply with fair-lending laws when they use AI. One of the most controversial places banks use artificial intelligence is in loan decisions. "But I have serious reservations as to how this could be implemented in the financial services space," he said. The intent of the blueprint, setting some guardrails around the use of AI systems to ensure that credit decisions are not final and can be contested, is reasonable, said Marc Stein, founder and CEO of Underwrite.ai.
"Will we be able to follow suit? And if so, when? Or will we be subjected to the whims of the political winds?" she said. Lau noted that the EU has proposed legislation that governs the use of AI in special high-risk areas, including loan applications.
And even when anything is passed, having laws is one thing, reinforcing them is another." It will be up to lawmakers to propose new bills. More concerning is that this is nonbinding with no enforcement measures, like a toothless tiger. "That said, however, we are a bit late to the party, especially when even the Vatican has weighed in on the subject, not to mention the EU. "At least it sends a signal to the industry: Hey, we will be watching," said Theodora Lau, founder of Unconventional Ventures. Others worry that some of the rights will be too hard to implement. Some in the financial industry are skeptical about how effective this bill of rights will be. For instance, an appendix listing the types of systems the rights should cover includes "financial system algorithms such as loan allocation algorithms, financial system access determination algorithms, credit scoring systems, insurance algorithms including risk assessments, automated interest rate determinations, and financial algorithms that apply penalties (e.g., that can garnish wages or withhold tax returns)." The bill of rights specifically focuses on financial services a few times. This is the tip of the iceberg: Banks and fintechs use AI in many other areas including fraud detection, cybersecurity and virtual assistants. Banks' use of AI in facial recognition has also been singled out, and their use of AI in hiring has been questioned. Consumer Financial Protection Bureau Director Rohit Chopra warned recently that the reliance on artificial intelligence in loan decisions could lead to illegal discrimination. "You can really think of it as a tone-setting document," he said.īanks' and fintechs' use of AI has been called into question many times by regulators and consumer advocates, especially their use of AI in lending. The White House Office of Science and Technology Policy, which produced the document, doesn't write laws, but it does set strategic priorities that other government agencies will follow, he explained. "You can think of it as a preamble to future regulatory action," said Jacob Metcalf, program director of AI on the Ground for the nonprofit research group Data and Society.
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