ARLINGTON, Va.–After the CFPB last week issued guidance about certain legal requirements that lenders “must adhere to when using artificial intelligence and other complex models,” NAFCU said it is looking to meet with the Bureau to get a better sense of direction around what it has in mind, as well as to offer feedback.
Ann Petros, VP-regulatory affairs with NAFCU, said a particular issue in the CFPB guidance has to do with the need for financial institutions to provide specific reasons for a denial when using AI or complex algorithms or models.
Petros said the direction provided by CFPB to date is “insufficient.”
According to the Bureau, the guidance describes how lenders must use specific and accurate reasons when taking adverse actions against consumers.
‘Especially Important’
“This means that creditors cannot simply use CFPB sample adverse action forms and checklists if they do not reflect the actual reason for the denial of credit or a change of credit conditions,” the Bureau said. “This requirement is especially important with the growth of advanced algorithms and personal consumer data in credit underwriting. Explaining the reasons for adverse actions help improve consumers’ chances for future credit, and protect consumers from illegal discrimination.”
Not Just Medical Debt
On a related issue, Petros said the CFPB’s announcement last week that it is beginning a rulemaking process to remove medical bills from Americans’ credit reports is “actually a bit misleading, because there's a lot more in that outline of proposals under consideration.”
That includes rules related to data brokers, credit headers and more, said Petros. related to data brokers credit headers and other items. She said NAFCU plans to engage with the Bureau on that, as well.
“Research shows that medical bills have little predictive value in credit decisions, yet tens of millions of American households are dealing with medical debt on their credit reports,” said CFPB Director Rohit Chopra.
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