• The CFPB has published Circular on consumer financial protection 2022-03 and an attendant Press release detailing the agency’s position on applying anti-discrimination laws to consumer lenders relying on so-called “black box” credit models that use complex algorithms or artificial intelligence to assess creditworthiness.
  • Specifically, the circular addressed the application of the Equal Credit Opportunity Act (ECOA) and Regulation B to credit decisions made using black box models. ECOA and Regulation B require creditors to provide consumers with a “specific” statement that “indicates[s] the primary reason(s) for the adverse action. Adverse actions may include, but are not limited to, declining a credit application, terminating an existing credit account, changing the terms of an existing account, or refusing to increase a credit limit.
  • In the circular, the CFPB asserted that a creditor cannot justify non-compliance with ECOA/Regulation B adverse action notification requirements on the basis that the technology it uses to take such decisions is too complex or opaque to understand. Companies can still be held liable for failing to provide specific and specific reasons for adverse action, and according to the CFPB, a creditor’s lack of understanding of their black box credit model is not a adequate defense against liability for non-compliance with ECOA and Regulation B