Join us on LinkedIn Follow us on Twitter Like us on Facebook Follow us on Instagram
 
  OCTOBER RESEARCH STORE Already a subscriber? LOG IN
AddControlToContainer_DynamicNavigation6

New legislation seeks to outlaw discriminatory AI credit decisions

Email A Friend Printer Friendly Version
0 comments
Consumer Protection, Inside the Beltway, Legislation
Friday, September 27, 2024

New legislation aimed at regulating artificial intelligence (AI) could have major implications for mortgage lenders using automated tools in their credit decisions. The AI Civil Rights Act, introduced by Sen. Edward Markey (D-Mass.), would outlaw the use or distribution of AI-driven solutions that may perpetuate discrimination and bias.

The potential for unintended bias to influence AI decision engines has long been a concern for compliance and technology professionals in the real estate finance industry, as well as for lawmakers and civil rights advocates.

“Whether on the Senate floor or around the dining room table, artificial intelligence is the hottest topic of the year,” Markey said in a statement. “But these complex algorithms have a darker side as well — one that has real consequences for everyday people, especially marginalized communities. I am introducing the Artificial Intelligence Civil Rights Act to ensure that the AI Age does not replicate and supercharge the bias and discrimination already prevalent in society today.”

The bill, co-sponsored by Sen. Mazie Hirono (D-Hawaii), addresses growing concerns about the potential disparate impact of bias in AI systems used in credit evaluations, employment and other key sectors. If passed, the legislation would mean legal consequences for decisions resulting in disparate impacts based on protected characteristics, while also requiring independent audits to ensure fairness before and after deployment.

According to Markey’s statement, the AI Civil Rights Act would:

  • Regulate algorithms involved in consequential decisions, such as those that impact people’s rights, civil liberties and livelihoods, including employment, banking, health care, the criminal justice system, public accommodations and government services;
  • Prohibit developers and deployers from offering, licensing or using covered algorithms that discriminate based on protected characteristics or that cause a disparate impact;
  • Require developers and deployers of covered algorithms to complete independently audited pre-deployment evaluations and post-deployment impact assessments to identify, evaluate and mitigate any potential biased use or discriminatory outcomes;
  • Require developers and deployers to mitigate any harms identified by the pre-deployment evaluations and impact assessments and ensure that any covered algorithm performs reasonably well and is consistent with its publicly advertised purpose;
  • Increase transparency around the use of covered algorithms in consequential decisions, including providing individuals a right to appeal an algorithmic decision to a human decision-maker; and
  • Authorize the Federal Trade Commission (FTC), state attorneys general and private individuals to enforce the Act.

Markey stressed the bill is not an effort to stifle innovation with respect to AI.

“Make no mistake: we can have an AI revolution in this country while also protecting the civil rights and liberties of everyday Americans, we can support innovation without supercharging bias and discrimination, and we can promote competition while safeguarding people’s rights,” he added.

On the other side of the discussion about appropriate legal restrictions on AI tools is Sen. Patrick McHenry (R-N.C.).

In March, McHenry tried for a fourth time to get Congress to consider legislation to create “regulatory sandboxes,” allowing financial services providers to offer innovative products and services under an alternative compliance plan, which would apply to developing AI tools. McHenry asserted his bill would “give entrepreneurs an opportunity to test legal and regulatory waters before taking new products and services to market” and “help ensure the United States continues to lead the world in financial innovation.”

Federal regulators put companies on notice in May 2023, releasing a joint statement saying discriminatory outcomes driven by innovative technology solutions, including AI tools, would not be tolerated. The statement was signed by the Consumer Financial Protection Bureau (CFPB), FTC, the Civil Rights Division of the U.S. Department of Justice, and the Equal Employment Opportunity Commission. The agencies expressed the need for a heightened emphasis on transparency concerning how automated systems make credit determinations.

Shortly after the CFPB published guidance on using AI in credit decisions in August last year, Garris Horn LLP Senior Partner John Levonick told Dodd Frank Update the move could be viewed as the bureau “setting the stage for the successful use of emerging technology.” The Biden administration issued guidance to all federal agencies on regulating AI innovations in November.  

“The subtext is that the CFPB is affirmatively providing guidance on how to successfully use AI by defining what are not acceptable practices (i.e. exclusive use by the lender, through the use of AI, of only the templated denial reasons in the model forms),” Levonick said. “The best thing for emerging technology companies is to have a clear understanding of the regulatory rails defining how the technology is required to perform for their clients for the financial institutions to adopt successfully and confidently.”

The CFPB was integral in the formation of the Global Financial Innovation Network (GFIN), established in 2018 to facilitate dialogue between regulators and innovators regarding emerging technological developments, including AI tools.

In 2019, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, the Securities and Exchange Commission and the Commodity Futures Trading Commission joined GFIN along with 46 other authorities all over the world.

The AI Civil Rights Act is endorsed by the Lawyers’ Committee for Civil Rights Under Law, The Leadership Conference on Civil and Human Rights, Free Press Action, UnidosUS, NAACP,  American Civil Liberties Union, Electronic Privacy Information Center, Public Citizen, Access Now, Asian Americans Advancing Justice – AAJ, Brennan Center for Justice, Fight for the Future, National Disability Rights Network, Common Cause, National Center for Transgender Equality, The Trevor Project, National Council of Negro Women, Encode Justice, NETWORK Lobby for Catholic Social Justice, Accountable Tech, the National Hispanic Media Coalition, Color of Change, and Writers Guild of America, East.  

Today's other top stories
Senate passes budget package, industry welcomes borrower-friendly provisions
Real estate lenders welcome nixing of ‘retaliatory’ taxes on foreign investors
FHFA directs GSEs to incorporate crypto assets into mortgage risk assessments
MBA supports eliminating HUD multifamily green housing proposal
Regulatory Roundup: Agencies release CRA assessment data, April home price index


COMMENT BOX DISCLAIMER:
October Research is not responsible for the comments posted on its websites by readers. We will do our best to remove comments that include profanity or personal attacks or other inappropriate comments.
Comments:

Be the first to leave a comment.

Leave your comment
Please enter a comment.
CAPTCHA Validation
CAPTCHA
Code:
Please enter the word displayed in the image above. Please enter the word displayed in the image above.
: 
Please enter your name.
: 
Please enter your email address.
This field must contain a valid email address.
Your Email is for reporting purposes only. It will NOT be displayed.
Popularity:
This article has been viewed 3040 times.

Monthly Newsletter

Dodd Frank Update July 2025

Cover Story:

Former CFPB attorneys say state CFPA rights are for the courts to decide


News by Topic   News by Edition   News by Agency   News by Industry   In-depth Reports   Events
Banking
Case Law
Conference Coverage
Consumer Protection
Data Privacy
Financial Stability
Industry Spotlight
Legislation
Nonbank Financial
The TRID Journey
 
Dodd Frank Update June 2025
Dodd Frank Update July 2025
Archives
 
CFPB NCUA
CFTC OCC
FDIC OFR
FHFA SEC
FRB States
FSOC Treasury
FTC  
 
Appraisal
Broker-Dealer
Community Banks & Credit Unions
Land Title
Mortgage
Payday Lending
 
2025 State of the Industry
CRA and Affordable Housing
2025 State of the Industry
Who's My Regulator?
Fair Lending
Mortgage Technology
Marketing Compliance for Lenders
Archives
 
National Settlement Services Summit (NS3)
Women's Leadership Summit (WLS)
Webinars

Library   About   Subscribe   Other Publications
Data Privacy Vault Court Actions
Keys to Real Estate podcast Enforcement Documents
Blog - Tuesdays with Mary Guidance Documents
1071 Compliance Guide White Papers
eClosing Solutions Showcase Position Papers
Executive Interview Series Legislation
Lender Associations Regulations
The Dodd-Frank Act Reports, Studies and Surveys
Dodd-Frank Summary & History Federal Register Notices
 
Dodd Frank Update
Contact / Editors
Advertise
Request a Media Kit
Social Media
Are You An Expert?
Subscriber Agreement
 
Subscriptions
Free Email Updates
Try a Free Edition
 
The Title Report
The Legal Description
Valuation Review
RESPA News
Copyright © 2011-2025 Dodd Frank Update
An October Research, LLC publication
3046 Brecksville Road, Suite D, Richfield, OH 44286
(330) 659-6101, All Rights Reserved
www.doddfrankupdate.com | Privacy Policy
VISIT OUR OTHER WEBSITES
> The Legal Description
> RESPA News
> The Title Report
> Valuation Review
> NS3 The Summit
> Women's Leadership Summit
> October Research, LLC
> The October Store


Loading... Loading...
Featuring:
  • Delivery 3X a week plus breaking news as it happens
  • Comprehensive title insurance industry news
  • Recent acquisitions, mergers, real estate stats
  • Exclusive in-depth coverage of the industry's hottest stories
Featuring:
  • Delivery 2X a week plus breaking news as it happens
  • Comprehensive Dodd-Frank coverage
  • The latest information from the CFPB
  • Full coverage of Congressional hearings
  • Updates on all agency actions
  • Analysis of controversial provisions
  • Release of newest studies and reports
Sign up today and...
  • Be one of the first to know where NS3 is being held
  • Learn about NS3 speakers and sessions
  • Save on registration with Super-Early Bird rates
  • Discover the networking opportunities NS3 offers
  • Find out if CE credits will be offered for your area
  • And much more
Featuring:
  • Delivery 2X a week plus breaking news as it happens
  • Preview the latest RESPAnews.com Top Story
  • RESPA related headline news
  • Quote of the Week
Featuring:
  • Delivery 2X a week plus breaking news as it happens
  • Legal, regulatory and legislative information impacting the settlement services industry
  • News from HUD, Congress, state legislatures and other regulatory agencies
  • Follow the lobbying efforts of all the major national real estate services organizations.
Featuring:
  • Delivery 2X a week plus breaking news as it happens
  • The industry's only full-time newsroom
  • Relevant, up-to-date appraisal industry news
  • Covering the hottest stories and industry trends
NEWS BY TOPIC
EDITION
AGENCY
IN-DEPTH REPORTS
INDUSTRY
EVENTS
LIBRARY
EMAIL UPDATES
ABOUT
SUBSCRIBE
Banking
Case Law
Conference Coverage
Consumer Protection
Data Privacy
Financial Stability
Industry Spotlight
Legislation
Nonbank Financial
The TRID Journey
Current Edition
June 2025
May 2025
April 2025
Archives
CFPB
CFTC
FDIC
FHFA
FRB
FSOC
NCUA
OCC
OFR
SEC
States
Treasury
2025 State of the Industry
Real Estate Compliance Outlook
CRA and Affordable Housing report
Who's My Regulator?
Fair Lending
Marketing Compliance for Lenders
Archives
Appraisal
Broker-Dealer
Community Banks & Credit Unions
Land Title
Mortgage
Payday Lending
National Settlement
Services Summit (NS3)
Women's Leadership
Summit (WLS)
Webinars
2025 Economic Outlook Series
CFPB's Shake-Up & Its Impact on You
Data Privacy Compliance
Fintech Partner Compliance
Strategies post-NAR settlement
Industry and Regulatory Outlook
Securing Your Cyber Network
Compliant Marketing Tactics
2024 Economic Forecast Series
Webinar Archives
Data Privacy Vault
Keys to Real Estate podcast
Blog - Tuesdays with Mary
1071 Compliance Guide
eClosing Solutions Showcase
Executive Interview Series
Lender Associations
The Dodd-Frank Act
Dodd-Frank Summary
Court Actions
Enforcement Documents
Guidance Documents
White Papers
Position Papers
Legislation
Regulations
Reports, Studies and Surveys
Federal Register Notices
Proposals
Final Rules
GAO
Agency
Contact Us
Advertise
Request a Media Kit
Social Media
Are You An Expert?
Subscriber Agreement