Regulators will need to adapt their application of the Fair Housing Act and Equal Credit Opportunity Act to deal with technological change and other developments as the financial system evolves, Federal Reserve Vice Chair for Supervision Michael Barr said.
New Technologies: At an event in Washington, Barr said the digital economy has produced alternative data sources for creditworthiness while artificial intelligence offers potential to leverage the new data to expand access to credit. He warned, however, that these technologies also pose risks of violating fair lending laws and perpetuating disparities.
CFPB Report: In a recent report to Congress, the Consumer Financial Protection Bureau earlier this month indicated it will focus on the use of AI in loan underwriting and will take enforcement action if algorithmic underwriting models create a disparate impact on borrowers.