Stressing the importance of maintaining a fair, competitive, and transparent financial marketplace amid the rise of artificial intelligence (AI) and other emerging technologies, the Consumer Financial Protection Bureau (CFPB) published its response to the Treasury Department’s request for comment on the potential risks and opportunities presented by emerging technologies like AI in the financial sector.
The bureau’s comment letter, addressed to Treasury Secretary Janet Yellen, was authored by CFPB General Counsel Seth Frotman and CFPB Chief Technologist Erie Meyer, both of whom also serve as senior advisors to CFPB Director Rohit Chopra.
The letter emphasized the bureau’s commitment to monitoring products that rely on AI for potential violations of federal consumer protection laws, which the agency is tasked with protecting.
“As technology continues to advance across all segments of society, we have seen the rapid adoption of new technologies in the consumer financial marketplace, including both the entrance of technology-focused firms and the use of emerging technologies by established players such as large banks,” the advisors wrote. “Technologies marketed as AI are just one aspect of that larger trend. Technological innovation has been a key driver for improving the lives of people in the United States. For innovation to flourish in a way that benefits consumers, however, it is crucial that companies compete on the merits of their products or services, rather than by exploiting legal loopholes or engaging in regulatory arbitrage.”
In service of its mission to protect consumers against undue harm from emerging technologies, the letter described how the bureau plans to utilize its existing enforcement authority with respect to AI while fostering a competitive marketplace in which all companies and products are treated with the proper amount of scrutiny.
The letter listed three key findings about AI through its regulatory work in recent years, which form the basis for its supervisory approach:
- “Although institutions sometimes behave as if there are exceptions to the federal consumer financial protection laws for new technologies, that is not the case. Regulators have a legal mandate to ensure that existing rules are enforced with respect to all technologies, including those marketed as new or novel. This is what Congress has instructed regulators to do, and what is required to prevent consumer harm.
- “Ensuring that all market participants comply with the rules fosters innovation. When regulators uniformly enforce rules, firms are discouraged from investing in legal evasion to make law-breaking their competitive advantage and instead are incentivized to invest in developing innovative products and services that benefit consumers.
- “Innovation is also fostered by clear regulatory requirements that do not unfairly advantage incumbent businesses or afford special treatment to individual firms. Establishing clear, straightforward rules encourages firms to invest in better products and services, rather than in finding legal gray areas, taking advantage of incumbent-favoring loopholes, or seeking out special treatment.”
Additionally, the letter references Chopra’s stated opinion that “there is no ‘fancy new technology’ carveout to existing laws” and the CFPB’s position on emerging technologies like AI is clear: “firms must comply with consumer financial protection laws when adopting emerging technology. If firms cannot manage using a new technology in a lawful way, then they should not use the technology.”