The Director of the Consumer Financial Protection Bureau (CFPB) has announced plans to propose new regulations, targeting the growing reliance on non-traditional data sources in the field of consumer finance. This decision stems from the concern over recent transformations in the way banks and finance companies approach the management of loans.
Previously, banks and finance companies used to rely heavily on traditional credit scores or reports to decide whether to grant a loan. However, this approach has seen significant changes over time. For quite some time now, these financial entities have turned to a variety of data from numerous providers in efforts to prevent consumer fraud and identity theft. This has led them to increasingly rely on data brokers and the data these brokers gather using artificial intelligence (AI).
The global trend of employing AI and non-traditional data sources in banking is not without its risks and challenges. Hence, the pivoting role of CFPB becomes particularly noteworthy. The bureau seeks to introduce frameworks to appropriately regulate this trend, and protect consumer interests.
For more detailed information on the CFPB’s proposed rules and their potential impacts in the field of consumer finance, visit JD Supra. The new regulations might provide further insights into balancing the need to leverage AI and big data benefits against the requirements for consumer privacy and financial data security.