Source: Katten

This article explores the growing use of artificial intelligence (AI) in consumer lending and the associated risks that lenders need to address. AI is increasingly being used to automate lending decisions, assess creditworthiness, and streamline the loan approval process. However, the use of AI in consumer lending raises several legal and ethical concerns, particularly around bias, transparency, and data privacy.

The article discusses the legal frameworks that lenders must navigate to ensure compliance with consumer protection laws, such as the Equal Credit Opportunity Act (ECOA). It also emphasizes the need for transparency in AI-driven lending decisions, requiring lenders to explain how AI algorithms assess creditworthiness and to ensure that these algorithms do not inadvertently discriminate against certain groups. By addressing these risks, lenders can harness the benefits of AI while safeguarding consumer rights and maintaining regulatory compliance.