Page 12 - MIADA-Q2 2023

THE CARLAWYER ©

The CARLAWYER ©

By Eric Johnson, Partner in the law firm of Hudson Cook, LLP, Editor in Chief of CounselorLibrary.com’s Spot Delivery®

statement detailing the Consumer they will use their enforcement authorities
Financial Protection Act’s prohibition to protect civil rights, fair competition,
on abusive acts or practices in consumer consumers, and equal opportunity. The
financial markets and summarizing past agencies have previously expressed concern
enforcement of the prohibition. The policy about the use of automated systems and AI.
statement notes that, under the CFPA, For example, the CFPB published a circular
there are two abusiveness prohibitions. commenting on the use of technology
An abusive act or practice: (1) materially to make credit decisions, noting that the
interferes with the ability of a consumer fact that the technology used to make a
to understand a term or condition of a credit decision is too complex, opaque,
consumer financial product or service; or or new is not a defense to violation of
Here’s our monthly article on selected (2) takes unreasonable advantage of: (a) federal law. Similarly, the FTC issued a
legal developments we think might interest a lack of understanding on the part of the report evaluating the use and impact of
the auto sales, finance, and leasing world. consumer of the material risks, costs, or AI. Both the DOJ and the EEOC have also
This month, the developments involve the conditions of the product or service, (b) worked on and continue to work on issues
Office of the Comptroller of the Currency, the inability of the consumer to protect related to automated systems and AI. In
the Consumer Financial Protection Bureau, the interests of the consumer in selecting the joint statement, the agencies highlight
the Federal Trade Commission, the Federal or using a consumer financial product or that automated systems and AI “have the
Reserve Board, Federal Deposit Insurance service, or (c) the reasonable reliance by the potential to produce outcomes that result
Corporation, and the National Credit consumer on a covered person to act in the in unlawful discrimination.” The agencies
Union Administration. As usual, our article interest of the consumer. In its press release, note that discrimination can arise from the
features the “Case(s) of the Month” and our the Bureau notes that “the policy statement following sources: (1) Data or datasets. This
“Compliance Tip.” Note that this column will assist consumer financial protection source of potential discrimination comes
does not offer legal advice. Always check enforcers in identifying wrongdoing, from data or datasets that can be skewed
with your lawyer to learn how what we report and will help firms avoid committing by unrepresentative datasets, datasets that
might apply to you or if you have questions. abusive acts or practices.” The Bureau also incorporate historical bias, and datasets
notes that “[p]olicy statements provide that contain other errors; (2) Model opacity
FEDERAL DEVELOPMENTS background information about the laws the and access. When automated systems
CFPB administers and articulate how the become “black boxes” and do not work
On March 30, the Office of the CFPB will exercise its authorities, but they in a transparent and clear way, it becomes
Comptroller of the Currency announced do not impose new legal requirements.” The harder for users, businesses, and developers
the establishment of its Office of public will have until July 3, 2023, to submit to know whether the systems are fair; and
Financial Technology to, among other comments on the policy statement. (3) Design and use. This source of potential
things, enhance the OCC’s knowledge discrimination comes from a developer’s
of technological changes in the banking On April 25, officials from the Federal failure to understand the context in
industry, including fintech platforms, bank- Trade Commission, Consumer Financial which automated systems and AI will be
fintech partnerships, and digital assets. Protection Bureau, Department implemented. Developers may be designing
of Justice, and Equal Employment a system on the basis of flawed assumptions
On March 31, the Consumer Financial Opportunity Commission issued a about its users, relevant context, or the
Protection Bureau issued its Consumer joint statement addressing the agencies’ underlying practices or procedures it may
Response Annual Report highlighting the enforcement efforts related to the replace.
consumer complaints it received in 2022. increased use of automated systems
The report analyzes complaint data across and artificial intelligence (“AI”). The On April 26, the Consumer Financial
multiple consumer financial products and joint statement explains that, as the use Protection Bureau, Federal Reserve
services, multi-year complaint trends, and of automated systems and AI becomes Board, Federal Deposit Insurance
how companies responded to consumer increasingly common in a range of Corporation, National Credit
complaints. applications, including in financial services, Union Administration, Office of the
these tools have the potential to perpetuate Comptroller of the Currency, and state
On April 3, the Consumer Financial bias, discrimination, and other harmful bank and state credit union regulators
Protection Bureau issued a policy outcomes. The agencies emphasize that issued a joint statement to remind

12 | MSIADA MISSISSIPPI DEALER Q2 2023