In an interesting development for legal professionals working with consumer credit, the Consumer Financial Protection Bureau (CFPB) issued a circular on September 19, 2023. The circular centers on the CFPB’s concerns about the methodologies used by creditors in reviewing a consumer’s credit application. The bone of contention being use of artificial intelligence and complex credit models which, according to CFPB, contravene the Equality Credit Opportunity Act (ECOA) and its implementing regulation, Regulation B.
The specifics of the circular indicate that the creditors’ deployment of the CFPB sample forms for adverse action notices in such circumstances of credit application reviews don’t adhere to the outlined statutes. This is a potential cause for concern, particularly for creditors who rely on these advanced methodologies to assess creditworthiness.
This move by the CFPB signifies a shift in regulatory focus concerning the relationship between creditors and consumers. More significantly, it underscores the need to correctly interpret and implement Notice protocols, particularly in the era where big data and AI are influencing decision-making processes.
Legal practitioners in the corporates, big and small, must pay careful attention to accrued obligations under ECOA and Regulation B – not only to stay compliant but to act in the best interests of their clients and consumers at large. Navigating the interplay between technology and legal compliance has become a nuanced task requiring competence and diligence.
For a detailed review of the circular here is the full text article by Adams and Reese LLP on JD Supra.