The Consumer Financial Protection Bureau (CFPB) issued a statement in collaboration with federal partners, including the Federal Trade Commission (FTC) and the Department of Justice (DOJ), emphasizing that advanced technology and automated systems are not excuses for lawbreaking behavior. The statement aims to promote responsible use of technology and ensure that companies comply with federal consumer financial laws and regulations.

As technology continues to advance, companies are increasingly relying on automated systems to perform a variety of functions from underwriting loans to collecting debt. While automation can improve efficiency and accuracy, the federal partners are concerned that it can also lead to unintended consequences if not properly monitored.

The federal partners believe that they have seen a rise in lawbreaking behavior by companies that use advanced technology and automated systems. The concern is that companies may use these systems to discriminate against certain groups of consumers or engage in other illegal practices, such as charging unauthorized fees or misrepresenting loan terms.

The statement from the CFPB and its partners is an important reminder that technology is not a substitute for compliance with the law. Companies must use technology responsibly and ensure that their automated systems are designed and monitored to prevent illegal behavior. By doing so, companies can improve efficiency and accuracy while also promoting consumer protection and compliance with federal laws and regulations.

Takeaways

• Companies are required to comply with federal consumer financial laws and regulations regardless of whether they use manual or automated processes.
• The statement also emphasizes the importance of ensuring that automated systems are designed and monitored to prevent discrimination and other illegal behavior.
• Companies must ensure that their systems are transparent and explainable and that they are regularly tested for potential biases or errors.
• Companies are encouraged to use technology to improve compliance and consumer protection. Companies can use automated systems to monitor for and detect illegal behavior, identify areas of risk, and improve transparency and accuracy in their operations.

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For financial services providers, guidance includes a CFPB circular confirming that federal consumer financial laws and adverse action requirements apply regardless of the technology being used. The circular also made clear that the fact that the technology used to make a credit decision is too complex, opaque, or new is not a defense for violating these laws.

The announcement reflects the CFPB and its federal partners' commitment to ensuring that companies are held accountable for any illegal behavior regardless of the technology or systems that they use. The agencies have the authority to enforce federal consumer financial laws and regulations and will take action against companies that engage in illegal behavior, whether through manual or automated processes.

The statement from the CFPB and its federal partners highlights the importance of responsible use of technology and the need for companies to comply with federal consumer financial laws and regulations regardless of the technology or systems that they use. Companies must ensure that their automated systems are transparent, explainable, and designed to prevent discrimination and other illegal behavior. By doing so, companies can improve compliance and consumer protection while also benefiting from the efficiencies and accuracy of automated systems.