Report: CFPB monitoring developments in fair lending technology

The Consumer Financial Protection Bureau has expanded its expertise in data science and analytics to identify fair lending violations as technologies such as artificial intelligence are more widely used in financial products, the agency said Thursday in its annual fair lending report to Congress. The agency said that in 2022, much of its fair lending supervision efforts focused on mortgage origination and pricing, small business and agricultural lending, and policies and procedures regarding geographic and other exclusions in underwriting. But the CFPB also noted that it has bolstered staffing resources as advanced algorithmic technologies such as AI are increasingly used throughout the entire life cycle of financial services products.

“The CFPB is keenly focused on the risks that these technologies present to individual consumers, small businesses, communities and the market as a whole,” the agency said. “Big tech platforms, with their vast consumer surveillance and data harvesting infrastructure, have the potential to undermine fairness and competition.… Indeed, vast troves of sensitive data available about consumers that institutions using more traditional methods would never have used in a credit decisioning context are now fueling highly complex, black box algorithms.”

The CFPB pointed to a circular it published last year stating that creditors must follow the law and provide statements of specific reasons to applicants against whom adverse action is taken, regardless of the technology they use. The agency also said that digital marketers acting as service providers can be held liable by it or law enforcement for committing unfair, deceptive, or abusive acts or practices as well as other consumer financial protection violations.