Staff Writer
According to the top US bank regulator, lenders must make sure that automated credit scoring systems don’t reinforce prejudice and discrimination.
According to Michael Barr, the Vice Chair for Supervision at the Federal Reserve, the bank is improving its supervision of artificial intelligence. The technology, he continued, might improve lending access if utilized responsibly.
According to Barr, AI might use data “at scale and at low cost to expand credit to people who otherwise can’t access it,” he said in prepared remarks at the National Fair Housing Alliance conference in Washington on Tuesday.
Although these technologies offer a great deal of potential, they also run the risk of breaking fair lending laws and sustaining the very inequalities that they may help to eliminate.
Machine learning and other forms of artificial intelligence, according to Barr, may accentuate biases or flaws in data or may produce inaccurate predictions. “There are also risks that the data points used could be correlated with a protected class and lack a sufficient nexus to creditworthiness,” the author added.
Earlier this week, Gary Gensler, the chairman of the Securities and Exchange Commission, issued a warning against the application of AI in finance.
He stated on Monday that businesses must be mindful of the possibility that their use of AI may violate securities laws. According to Gensler, countries would likely need to update legislation in order to protect the stability of the global financial system.
