On September 19, 2023, the Consumer Financial Protection Bureau (CFPB) issued a Consumer Protection Circular, “Adverse Action Notification Requirements and the Proper Use of the CFPB’s Sample Forms Provided in Regulation B” (Guidance), concerning lenders’ obligations when using artificial intelligence (AI) and other complex technologies to make consumer credit decisions.
In the press release, the CFPB reminds lenders that they must provide specific, accurate reasons when taking an adverse action against a consumer under the Equal Credit Opportunity Act (ECOA) and implementing Regulation B. The Guidance emphasizes the importance of this requirement in light of increased use of advanced algorithms in credit underwriting. It further cautions that a creditor may only use sample adverse action notice forms and the associated checklist of reasons if they adequately reflect the actual reasons for taking an adverse action.
