CFPB issues crucial guidance on AI use in lending decisions

In a significant move addressing the evolving landscape of lending practices, the Consumer Financial Protection Bureau (CFPB) has issued new guidance on compliance with the Equal Credit Opportunity Act’s (ECOA) adverse action notice requirements concerning the use of artificial intelligence (AI) by lenders in their credit decision-making process. This guidance underscores lenders’ need to provide precise and detailed reasons for adverse actions taken against consumers, even when AI algorithms are involved. Lenders are increasingly incorporating AI into their credit decision processes, and the CFPB’s recent guidance serves as a critical reminder of the need for precision in adverse action notices.

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