- Key insight: A bill from House Financial Services Committee Chairman French Hill, R-Ark., would let bankers and regulators alike use AI more freely.
- Forward look: The bill would need bipartisan support, which it has in its sponsors, although some Democratic lawmakers are skeptical of letting financial firms skirt consumer protection rules.
- What's at stake: The debate is taking place amid a larger conflict over states' ability to issue consumer protections as some types of AI are more widely used.
WASHINGTON — House Republicans promoted the idea of artificial intelligence sandboxes for financial companies, including banks, as lawmakers consider more broadly how to address the rapidly growing sector.
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Congress, in the meantime, is considering a number of AI-centric proposals. The House Financial Services Committee is considering a bill that would, with a waiver, let certain AI projects go ahead "without expectation of enforcement actions" from regulators.
"Just as Congress navigated the uncertainties of the Internet in the '90s, we must view AI as an opportunity, not a threat, applying lessons of that era to today's technological landscape," House Financial Services Committee Chairman French Hill, R-Ark., said at a hearing in which the bill was noticed. "Identifying gaps and obstacles in our regulatory frameworks will help Congress create an AI landscape where innovation can flourish without unnecessary barriers, while ensuring robust consumer protections, and risk-based, technology-neutral regulation."
The legislation is bipartisan, introduced by Hill and Rep. Ritchie Torres, D-N.Y., alongside companion legislation from Sens. Mike Rounds, R-S.D., and Martin Heinrich, D-N.M., in the Senate. Generally, lawmakers of both parties want some kind of AI legislation, although Democratic lawmakers have been more skeptical about allowing the private sector to bypass consumer protections to experiment.
"I'm concerned that some of the regulatory proposals before this committee not only fail to include adequate guardrails, but they also invite financial services industry in adopting AI to choose which consumer protection and investor protection and safety and soundness regulations that they would like to avoid, which is reckless and dangerous," said Rep. Stephen Lynch, D-Mass., at the hearing.
Ahead of the hearing, a group of consumer rights organizations spoke out in a letter against the law, citing violations of consumer protection laws.
"The financial industry has already been deploying AI within the bounds of federal laws and regulations across its business lines from customer service to automated underwriting to securities trading to risk management and more," the groups, led by Americans for Financial Reform, wrote. "These legal and regulatory regimes are designed to protect people and the financial system from predatory practices, market manipulation, and economic instability. There is no justification for allowing companies to deploy AI systems that would otherwise violate federal laws and pose risks to people and the economy. Nor does the use of AI, however trivial, justify broad waivers of our consumer and investor protection laws."
Bank groups, for their part, are generally supportive of letting their members experiment more broadly with AI.
"The financial services sector has a robust risk management framework for deploying AI safely and soundly, which can be a model for nonbank industries," the American Bankers Association said in a statement to the committee. "Prudential regulators are already taking steps to foster adoption, and Congress can lend its considerable weight and moral authority behind this development."
