House Financial Services Committee Members Issue Letter to Regulators Requesting Priorities on AI
On November 29, 2021, two House Financial Services Committee members, chairwoman Maxine Waters (D-CA) and Bill Foster (D-IL), sent federal regulators a letter requesting specific oversight on the implementation of artificial intelligence in the financial services industry to ensure the prevention of algorithmic bias.
This letter stems from the three hearings held by the Task Force on Artificial Intelligence—which is run by the Committee, with Foster at the head—on artificial intelligence (AI) and machine learning (ML) and machine learning in May, July, and October of 2021.
The predominant focus of the letter is the argument that the historical data that would be utilized as inputs for AI and ML has the potential to contain longstanding biases that could potentially create models that discriminate against protected classes. To prevent this discriminatory behavior, the letter advocates for heightened regulatory scrutiny. Specifically, the letter requests the following areas of oversite for AI and ML use in the financial sector:
Transparency and Explainability. To ensure the transparent and explainable use of these technological advancements, the letter urges the regulators to ensure that human review of the automated decision systems, such as AI or ML, is utilized to prevent any failures in transparency or accountability regarding discriminatory system outputs. Additionally, regulators are being pushed to provide "clear and robust" guidelines to institutions and implement rulemaking to disclose pertinent information on their AI modeling, data sets, and methodologies.
Oversight and Enforceability. Regulators must ensure that financial institutions are in strict compliance with “all consumer, investor, and housing laws, including the Dodd-Frank Wall Street Reform and Consumer Protection Act, Fair Credit Reporting Act, Fair Debt Collection Practices Act, Equal Credit Opportunity Act, Fair Housing Act, Gramm-Leach Bliley, and other relevant statutes.” The use of “regtech” monitoring and compliance systems is recommended as a means to ensure said compliance. Additionally, regulators are reminded of their level of responsibility concerning the proper and fair implementation of these systems.
Safeguarding Consumer Privacy. Financial institutions that elect to utilize AI or ML must safeguard consumer information and investor data and must do their utmost to prevent cyberattacks that could implicate this information.
Promoting Fairness and Equity in AI Usage. At a bare minimum, financial institutions must ensure that they are “extra vigilant in proactively addressing algorithmic bias” and must hold every piece of alternative or additional data against a microscope to ensure the same. Additionally, financial institutions who utilize AI “must be encouraged to do more to promote racial and gender equity.”