House Financial Services Committee forms AI working group

Al Drago/Bloomberg

Leaders of the House Financial Services Committee have created a bipartisan working group on artificial intelligence to explore the impact of AI across the financial services and housing industries.

As a continuation of the progress made by the legislative body's task force on AI, committee Chairman Patrick McHenry, R-N.C., and ranking member Maxine Waters, D-Calif., announced Thursday that the newly debuted council will aid in reviewing and implementing the directives from President Biden's executive order on AI.

"I'm proud to announce the creation of this bipartisan artificial intelligence working group, as I've long called on both this Committee and Congress to move quickly to investigate the ways in which this technology may embed historic inequities in the financial services and housing markets through the use of data that reflect underlying bias or discrimination," Waters said.

The 12-person committee, led by Digital Assets, Financial Technology and Inclusion subcommittee Chairman French Hill, R-Ark., and subcommittee ranking member Stephen F. Lynch, D-Mass., will delve into how AI is affecting the development of new products and services, fraud prevention, compliance efficiency and the enhancement of supervisory and regulatory tools. 

Subsequent focal points also include how existing regulations pertain to the use of AI as well as how legislators can ensure new laws address the likely benefits and risks of AI. 

"As AI rapidly advances, it is important that we examine its use, need for potential changes in U.S. laws and/or the regulatory framework for both effective oversight and ensuring global competitiveness," Hill said.

AI has continued to see rapid adoption across the financial services industry. Fifth Third, Mastercard, Ally Bank, Synchrony and many others are testing and deploying tools powered by traditional and generative AI as regulators struggle to understand — and govern — the full scope of the technology.

One of the concerns shared by policymakers is the potential for misuse. The executive order called for developers of qualifying AI models that are trained on broad datasets, are self-supervised and exhibit high performance levels at tasks "that pose a serious risk to security, national economic security [or] national public health or safety" to provide the government with records of training sessions and cybersecurity test results for the systems.

Trade organizations that advocate on behalf of the tech firms specializing in developing these models and other tools powered by iterations of AI are well aware of these concerns, and are receptive to collaborating with the working group to better inform regulators on the pros and cons of the technology.

Phil Goldfeder, chief executive of the American Fintech Council, emphasized the importance of bipartisan engagement when it comes to drafting realistic policy solutions.

"Responsible fintech companies are already utilizing AI to create access to financial services for families long forgotten by traditional finance. … As we have in the Senate, our members are eager to engage with this new working group to develop sound policy to benefit American consumers," Goldfeder said.

But experts with banking and credit union trade groups argue that the same level of scrutiny placed on their members should extend to the regulators in turn.

In a previous interview with American Banker, Andrew Morris, senior counsel for research and policy at the National Association of Federally-Insured Credit Unions (now known as America's Credit Unions), explained that more clarity into how regulators like the Consumer Financial Protection Bureau are employing AI tools can help executives gain a better understanding of compliance standards.

"Some of the principles around procurement and government transparency around use of AI can be helpful in that regard, and that may shine a light on how an agency like the CFPB is prioritizing its work in the absence of human decision making at every level, which I think is important from a fairness perspective," Morris said.

As use cases continue to increase, industry advocates remain eager to collaborate with regulators toward future innovation standards and consumer safeguarding.

"We are pleased to see the House Financial Services Committee create this working group and look forward to working with them as we explore the future of AI-driven innovation and consumer protection," said Penny Lee, president and CEO of the Financial Technology Association.