Federal Agencies Issue Joint Statement on AI – Not an Excuse for Unlawful Discrimination
May 5, 2023
By Susan Chance, courtesy of SBAM-approved partner ASE
There is a lot of talk about artificial intelligence (AI) these days. Some AI programs are becoming so sophisticated that it can be difficult to tell if the person talking to you on screen is real or an AI created person.
In efforts to streamline processes and make business more efficient and cost effective, the number of companies adopting AI is growing. The new technology can seem exciting and a way to show that a company is keeping up with the times. However, caution should be used when using AI in employment decision making.
Algorithms can lead to discriminatory practices whether intentional or not. Because this is a problem that can affect the lives and livelihood of so many people, the following government agencies are standing together to ensure that AI activities in employment are upholding the laws that each of them governs:
- The Civil Rights Division (CRD) of the United States Department of Justice (DOJ)
- The Consumer Financial Protection Bureau (CFPB)
- The Federal Trade Commission (FTC)
- The U.S. Equal Employment Opportunity Commission (EEOC)
CFPB Director Rohit Chopra stated that, “Today’s joint statement makes it clear that the CFPB will work with its partner enforcement agencies to root out discrimination caused by any tool or system that enables unlawful decision making.”
FTC Chair Lina M. Khan said, “We already see how AI tools can turbocharge fraud and automate discrimination, and we won’t hesitate to use the full scope of our legal authorities to protect Americans from these threats,” “Technological advances can deliver critical innovation—but claims of innovation must not be cover for lawbreaking. There is no AI exemption to the laws on the books, and the FTC will vigorously enforce the law to combat unfair or deceptive practices or unfair methods of competition.”
CFPB has already taken the following actions to protect consumers as pointed out in the joint statement:
Black box algorithms: In a May 2022, circular the CFPB advised that when the technology used to make credit decisions is too complex, opaque, or new to explain adverse credit decisions, companies cannot claim that same complexity or opaqueness as a defense against violations of the Equal Credit Opportunity Act.
Algorithmic marketing and advertising: In August 2022, the CFPB issued an interpretive rule stating when digital marketers are involved in the identification or selection of prospective customers or the selection or placement of content to affect consumer behavior, they are typically service providers under the Consumer Financial Protection Act. When their actions, such as using an algorithm to determine who to market products and services to, violate federal consumer financial protection law, they can be held accountable.
Abusive use of AI technology: Earlier this month, the CFPB issued a policy statement to explain abusive conduct. The statement is about unlawful conduct in consumer financial markets generally, but the prohibition would cover abusive uses of AI technologies to, for instance, obscure important features of a product or service or leverage gaps in consumer understanding.
Digital redlining: The CFPB has prioritized digital redlining, including bias in algorithms and technologies marketed as AI. As part of this effort, the CFPB is working with federal partners to protect homebuyers and homeowners from algorithmic bias within home valuations and appraisals through rulemaking.
Repeat offenders’ use of AI technology: The CFPB proposed a registry to detect repeat offenders. The registry would require covered nonbanks to report certain agency and court orders connected to consumer financial products and services. The registry would allow the CFPB to track companies whose repeat offenses involved the use of automated systems.
These agencies are taking the potential for AI to create discriminatory practices very seriously. Employers should do the same.