The National Institute for Standards and Technology has released the first version of a voluntary framework to help incorporate trustworthiness considerations into the design, development, use, and evaluation of AI products, systems, and services. The framework and various supplemental materials were developed after more than 18 months of public engagement. Comments are due February 27, 2023.

The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency released a guide for community banks on conducting diligence of financial technology companies. Drawing on existing guidance that articulates risk management expectations for third-party relationships, the guide highlights areas where required diligence processes can be adapted to reflect constraints related to doing business with early or expansion stage companies.

FinRegLab’s forthcoming research will help to inform the extent to which current laws and regulations are able to be satisfied in light of the emergence of more complex underwriting models, how well tools to develop and monitor those models perform in identifying effective ways to pursue greater inclusion and fairness, and considerations for policy and market developments that can support the safe, inclusive, and nondiscriminatory adoption of machine learning.

FinRegLab CEO Melissa Koide testified in the Task Force’s hearing on “Equitable Algorithms: How Human-Centered AI Can Address Systemic Racism and Racial Justice in Housing and Financial Services.”

We recognize the breadth of urgent issues facing the Consumer Financial Protection Bureau and the nation at this time, but believe that resolving critical questions about access to financial data would substantially benefit consumers, small businesses, and financial services providers in helping to recover from the Covid-19 pandemic, address longstanding racial wealth gaps, and make U.S. financial systems more generally inclusive, competitive, and responsive to customer needs.

The Consumer Financial Protection Bureau has issued an advisory opinion concerning the establishment of special purpose credit programs to meet the needs of underserved groups consistent with the Equal Credit Opportunity Act. It is the Bureau’s first action following on a Request for Information about ECOA issues earlier in 2020.

The CFPB issued a no-action letter template to the Bank Policy Institute recognizing terms for a standardized, small-dollar credit product, including those designed to function as “guardrails.” The template is intended to ease approval of plans by individual regulated entities to offer a product based on these standardized terms, subject to submission and approval of further information specific to each lender. Underwriting based on the applicant’s cash-flow data is specified among the essential terms set forth for the standardized product.

U.S. prudential regulators recognize the roles that both innovative technologies and data sources such as deposit account activity can play in providing responsible small- dollar loans to consumers and small businesses who do not meet supervised institutions’ traditional underwriting standards.

U.S. regulatory agencies recognize alternative data – and in particular cash flow data – can expand access to credit and produce benefits for consumers

The growth and use of data is increasing exponentially in the American economy and specifically within its financial systems. This data has the potential to benefit consumers and the broader economy in myriad ways.