As banks and financial service providers increasingly adopt AI-driven products, they must find a balance between efficiency and legal and regulatory risks. While AI tools bring promising advancements, they also raise concerns about discrimination, unfairness, and lack of transparency. Regulators have begun to focus on these issues, with recent guidance from the Consumer Financial Protection Bureau, Equal Employment Opportunity Commission, Department of Justice’s Civil Rights Division, and Federal Trade Commission. To navigate these risks, banks must understand their AI tools and be able to explain them, particularly when used for credit decisions. Failure to do so may lead to legal and regulatory issues. The recent executive order from the Biden administration and the FTC’s summit on AI further emphasize the need for companies to hold themselves accountable for protecting consumers when applying AI.
Banks Must Defend AI Tools
Banks will need to be able to explain their AI tools well enough to defend them.
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