Artificial intelligence is rapidly transforming consumer financial services. AI systems now influence decisions involving credit underwriting, fraud detection, customer service, pricing, marketing, and even personalized financial advice. While these technologies promise greater efficiency and innovation, they also raise profound questions about transparency, fairness, accountability, and consumer protection. 

In today’s episode of the award-winning Consumer Finance Monitor Podcast, our host, Alan Kaplinsky (founder, chair for 25 years and now Senior Counsel of the Consumer Financial Services Group at Ballard Spahr LLP) is joined by Delicia Hand, a nationally recognized expert on digital civil rights, AI governance, and consumer protection who leads AI policy initiatives at Consumer Reports. The discussion centers on Consumer Reports’ recently released report, AI and Consumer Finance: A Landscape Analysis of Market Forces, Evaluation Frameworks, and Regulatory Gaps, and examines how AI is reshaping consumer finance while exposing important gaps in existing regulatory frameworks. 

Among the many topics discussed are: 

• Why approximately 75% of consumers express concern that AI could result in bias or unfair treatment in financial services, while only 8% believe current laws adequately protect them. 

• Whether the rapid adoption of AI is being driven more by competitive pressures than by demonstrated consumer benefits. 

• Consumer Reports’ proposed framework for evaluating AI systems used in financial services, including twelve key dimensions designed to assess whether AI systems adequately protect consumers. 

• The growing use of AI in credit underwriting and lending, including both its potential to expand access to credit and its potential to perpetuate existing biases. 

• The increasing use of algorithmic and personalized pricing and the consumer protection concerns raised by AI-driven pricing models. 

• The risks associated with consumers relying on general-purpose AI systems as financial advisors despite the absence of traditional fiduciary obligations or regulatory oversight. 

• Privacy concerns arising from AI systems that access consumers’ financial account information through data aggregation services. 

• The need for meaningful consumer redress mechanisms when AI systems make mistakes, including access to human review and effective dispute resolution. 

• The absence of a comprehensive federal framework governing AI in financial services and the unresolved questions surrounding accountability among AI developers, financial institutions, and other participants in the AI supply chain. 

The conversation also explores a number of emerging issues that are likely to become increasingly important as AI continues to evolve, including AI “sycophancy”—the tendency of some AI systems to tell users what they want to hear rather than what they need to hear—dynamic pricing, explainability, governance, and the appropriate balance between innovation and consumer protection. Throughout the discussion, Ms. Hand emphasizes that while AI presents enormous opportunities to improve financial services, financial institutions should ensure that AI governance keeps pace with technological innovation by understanding how their AI systems operate, conducting meaningful oversight, and building robust consumer protections before regulators require them. 

As Alan notes during the podcast, AI is no longer a futuristic concept. It is already embedded throughout the consumer financial services ecosystem. The challenge for policymakers, regulators, financial institutions, and technology developers is to ensure that these powerful technologies are deployed in ways that promote fairness, transparency, accountability, and consumer trust rather than simply speed, efficiency, and competitive advantage. 

This episode will be of particular interest to banks, fintech companies, financial services providers, compliance professionals, regulators, and attorneys seeking to understand the rapidly evolving legal and policy landscape governing the use of artificial intelligence in consumer finance. 

We invite you to listen to the podcast below