On September 19, 2023, the Consumer Financial Protection Bureau (“CFPB”) issued its latest circular regarding use of artificial intelligence in connection with offering financial services. CFPB circulars are policy statements advising parties with respect to the CFPB’s authority to enforce federal consumer financial law and generally focus on answering specific questions presented. Circular 2023-03 is relatively narrow in its specific scope: adverse notification requirements and the proper use of the CFPB’s sample forms provided in Regulation B for lenders using artificial intelligence or complex credit models (the “Circular”). The Circular provides guidance on whether creditors may rely on the CFPB sample forms codified in Regulation B to satisfy adverse action requirements under the Equal Credit Opportunity Act (“ECOA”) when using artificial intelligence or complex credit models in credit decisions. The CFPB advises that creditors may not rely on the checklist of reasons in the sample notification forms to satisfy obligations under ECOA if those reasons “do not specifically and accurately indicate the principal reason(s) for the adverse action” and that creditors that “simply select the closest, but nevertheless inaccurate, identifiable factors from the checklist” are not in compliance with the law. Creditors also may not rely on “overly broad or vague reasons to the extent that they obscure the specific and accurate reasons relied upon.”
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