A pair of bills have been introduced in the House of Representatives by Rep. Maxine Waters [D-Calif.] that aim to provide regulators with more transparency about how companies in the financial services industry are using artificial intelligence. The bills were introduced days before the House Financial Services Committee holds a hearing on “How Technology is Shaping the Future of Finance.”
Driving the news: One of the bills, H.R. 10263, titled the “Responsible AI Disclosure Act of 2024,” would require federal financial regulators like the Federal Reserve, Consumer Financial Protection Bureau, and others to carry out a comprehensive study on the use of AI in their respective sectors. The study would focus on standardized descriptions for AI systems provided by vendors and the practices for training these models, particularly in understanding the delineation between synthetic and genuine data.
- Regulators would be required to issue a report to Congress detailing their findings and making recommendations on whether existing rules should be updated to enhance transparency.
- The bill also empowers regulators to require companies to disclose how they train AI models, including the data sources and methods used, and whether synthetic data was involved in the training process.
The big picture: The financial services industry, including banks, credit unions, fintechs, and debt collectors, increasingly relies on AI for various functions, from assessing creditworthiness to customer service automation. With such reliance comes the responsibility to ensure AI is used ethically and transparently.
- Rep. Waters has been a vocal advocate for increased oversight of AI, particularly concerning its impact on consumers, noting that AI could exacerbate inequities if not properly managed.
- A significant component of the bill is the requirement for public disclosures, aiming to help consumers understand how decisions are made about their financial futures.
What they’re saying: “Consumers deserve to know how AI is being used to make decisions that impact their lives, whether it is for approving a loan or determining credit risk,” said Rep. Waters. “By requiring companies to disclose this information, we can ensure a level of transparency that protects consumers and fosters responsible innovation.”
What’s next: The House Financial Services Committee will hold a hearing on December 4 titled “Innovation Revolution: How Technology is Shaping the Future of Finance,” where these bills will likely be discussed alongside testimony from leaders in the fintech space. The hearing aims to address both the benefits and the risks that emerging technologies, including AI and blockchain, bring to the financial ecosystem.
