News: Rep. Maxine Waters (Calif.), the top Democrat on the House Financial Services Committee, will release a bill today aimed at improving the transparency of artificial intelligence products used in financial services.
The bill, which you can read here, would direct several federal regulators to study the use and origins of AI products being used by financial firms. Those agencies include the Federal Reserve, Federal Deposit Insurance Corp., Consumer Financial Protection Bureau, Office of the Comptroller of the Currency and the Securities and Exchange Commission.
The interagency study required by Waters’ bill would ask the regulators to establish recommendations for new standards and definitions for AI policy.
Another major focus is establishing how regulators and firms could “label” the use of AI products, including the origin of data used to train financial services AI and assessing how that data is used.
After that study is published, Waters’ bill would direct each agency to determine whether its existing authorities require regulated firms to submit additional information to the government about how AI models are being trained. That could include “the delineation and ratios of synthetic versus genuine data in the training of artificial intelligence models” and their data sources, according to the bill text.
Waters has been working with House Financial Services Committee Chair Patrick McHenry (R-N.C.) for some time on AI legislation, which started with an AI task force launched before the Covid-19 pandemic. This particular bill doesn’t have bipartisan support yet, but we don’t think it’s the last piece of AI-in-banking legislation we’ll see before the end of the 118th Congress.
Waters’ legislation plays into one of Democrats’ longest-running concerns about the use of artificial intelligence in the financial services world — the fear that AI trained on bad, biased or outdated data could make it easier for lenders to make bad lending decisions at scale and lock underprivileged Americans out of the financial system.
We’re not optimistic that this bill can pass during the remainder of the lame-duck session — there’s just not a lot of time left on the calendar — but lawmakers will convene next week to discuss it and other bills at a “Future of Finance” hearing scheduled for Dec. 4.
