FEDERAL GOVERNMENT RELATIONS
Treasury Department Seeks Comment on AI Use in Financial Services
The Treasury Department Thursday issued a request for information on the use of artificial intelligence in the financial services sector. Specifically, the department is seeking public input on the current use of AI by financial institutions and other actors in the sector. It is also seeking comment on the opportunities and risks presented by developments and applications of the technology.
The request was released the same day the Financial Stability Oversight Council and Brookings Institution kicked off a two-day conference on AI and financial stability. In opening remarks at the conference, Treasury Secretary Janet Yellen said federal regulators are not “seeking to reinvent the wheel” when addressing AI risks. “That said, there are also new issues to confront, and this is a rapidly evolving field,” she said. “We have our work cut out for us and are pursuing a variety of initiatives to identify and address emerging risks.”
Read the request for information
CFPB Establishes Application Process for Open Banking Standard-Setting Bodies
The Consumer Financial Protection Bureau Wednesday issued a partial final rule establishing the qualifications that organizations must meet to become recognized standard-setting bodies under the bureau’s proposed financial data-sharing regulation, which would implement Section 1033 of the Dodd-Frank Act. According to the bureau, standard-setting bodies must display openness, transparency, balanced decision making, consensus, and due process and appeals. Under the partial final rule, the public may have the opportunity to provide input on applications.
The CFPB is currently in the process of finalizing the remaining portions of its proposed rulemaking to address electronic access to financial data by consumers and their agents. As part of the upcoming implementation, the CFPB expects to allow companies to use technical standards developed by standard-setting organizations recognized by the bureau. “Today’s rule kicks off the process for standard-setting organizations to seek formal recognition,” the CFPB said.
The rule also includes a mechanism for the CFPB to revoke the recognition of standard setters and a maximum recognition duration of five years, after which recognized standard setters will have to apply for re-recognition, according to the bureau. It also contains a “step-by-step” guide on the process to receive CFPB recognition, including contingent recognition with feedback from the bureau on necessary changes. There are also provisions on how loss of recognized status will be treated.
House Subcommittee Budgets $276 Million for CDFI Fund in Draft Appropriations Bill
The House Appropriations Subcommittee on Financial Services and General Government has budgeted $276.6 million for the Community Development Financial Institutions Fund in its draft fiscal year 2025 appropriations bill, according to the CDFI Coalition. The amount is roughly $48 million below the enacted level for the current fiscal year. Congress is currently drafting a budget for the upcoming fiscal year, with final amounts subject to change.
Last month, a group of 48 senators asked the Senate Appropriations Committee to set aside $325 million for the CDFI Fund. Also in April, the American Bankers Association and Independent Community Bankers of America joined three other associations in urging House and Senate lawmakers to support $341 million for the CDFI Fund, including a $40 million allocation for the Bank Enterprise Award program. “These monies are critically important: The $341 million will leverage up to 12 times its initial value in private capital and be channeled to local businesses, nonprofits and others to help vulnerable communities,” the associations said in a joint letter.
CFPB Warns Against Certain Terms in Financial Service Contracts
The Consumer Financial Protection Bureau Tuesday released a circular that warns against unlawful or unenforceable terms and conditions in contracts for consumer financial products or services. In a statement, the bureau said that many contracts include terms and conditions claiming to limit consumer rights and protections. One such term is a general liability waiver, “which purports to fully insulate companies from suits even though most states have laws that create hosts of exemptions to these waivers.”
Under the Dodd-Frank Act, “a representation or omission is deceptive if it is likely to mislead a reasonable consumer and is material,” according to the CFPB. The bureau said that its examiners have identified several violations in contract terms and conditions.
“For example, the CFPB found that a respondent bank engaged in a deceptive practice under the [Dodd-Frank Act] when it represented to consumers that because they signed a deposit agreement including broad language directing the bank not to contest legal process, consumers had waived their right to hold the bank liable for improperly responding to garnishment notices; in fact, regardless of the language in the account agreement, consumers had the right to challenge the garnishments,” it said.