The U.S. House of Representatives’ Committee on Financial Services held a hearing, “AI Innovation Explored: Insights into AI Applications in Financial Services and Housing,” on July 23. The hearing focused on the development, implementation, and regulation of artificial intelligence (AI) and its applications in the financial services and housing sectors.
The witnesses included Lisa Rice, president and CEO of the National Fair Housing Alliance; John Zecca, executive vice president and global chief legal, risk, and regulatory officer at NASDAQ; Ondrej Linda, director of personalization AI at Zillow; Elizabeth Osborne, chief operations officer of Great Lakes Credit Union; Frederick Reynolds, deputy general counsel for regulatory affairs and chief compliance officer at FIS Global; and Vijay Karunamurthy, chief technology officer at Scale AI.
Chairman Patrick McHenry (R-NC) opened the hearing by stating that at its best, AI can enhance progress, but that its novelty and risk have delayed adoption in the economy. He noted that the financial services sector is a clear entry point for AI’s mainstream use in the economy due to the number of regulations in the industry. Chair McHenry spoke of the importance of not rushing AI-related legislation, arguing that it is important to get it right rather than be first.
Ranking Member Maxine Waters (D-CA) followed up by referencing a report that she, Chairman McHenry, and Representatives French Hill (R-AR) and Stephen Lynch (D-MA) released through a bipartisan AI working group. The report made clear that regulators must enforce existing laws, including anti-discrimination laws, to ensure that the benefits of AI are broadly shared. Representatives Waters and Lynch raised concerns about the possibility of AI perpetuating discrimination, sharing examples of people of color disproportionately being denied mortgages through AI software, but noting that Congress and private companies can take action to remove these barriers.
In their opening statements, the witnesses remarked on the power of AI to enhance the financial services and housing sectors while tempering this excitement with an acknowledgement of the need for regulation and responsible execution. Karunamurthy noted AI’s potential to deliver tremendous benefits for society, but only when deployed safely and responsibly. He also raised the need for a comprehensive and thorough gap analysis to identify areas where increased regulations are needed. Linda shared similar statements, also noting AI’s potential to reduce legacy access burdens in the housing market. Rice cautioned the committee of the dangers AI holds for perpetuating bias and misinformation, noting that “AI is the new civil rights frontier.”
When questioned by Ranking Member Waters on the potential for AI to perpetuate discrimination, Rice expressed that, particularly with tenant screening selection systems, AI often uses data that can result in biased outcomes (or disparate impact). These systems pull data from criminal records, credit scores, and eviction histories – data that may not necessarily be predictive of whether or not a tenant will be a “good tenant” or pay rent on time, but data that heavily disadvantages communities of color. Rice noted the importance of passing and implementing legislation and regulation to protect tenant rights and reduce disparate impact.
Representative Joyce Beatty (D-OH) asked Linda about what steps the government and corporations must take to ensure responsible use of AI. In response, Linda noted the importance of proportional, flexible, and risk-based regulation and the private and public sectors coming together while putting customers at the center.
Representative Ayanna Pressley (D-MA) noted that AI algorithms “exist in a larger context of biases that have plagued our communities for centuries” and cautioned against blind faith in these systems. Rice noted that it is important to create pre-processing, processing, and post-processing models that evaluate the efficacy and equity of AI-based systems.
Watch a recording of the hearing at: https://tinyurl.com/2f7t83pk
Read the Committee Memorandum and the witnesses’ testimonies at: https://tinyurl.com/3wjxpfwm