CFPB Issues No Action Letter Related to Use of Artificial Intelligence Underwriting Model

On November 30, 2020, the Consumer Financial Protection Bureau (CFPB) granted a no-action letter​ to an online loan marketplace company for its artificial intelligence (AI) loan origination and underwriting platform.​

The company offers an AI-based underwriting model for banks, credit unions, and non-bank lenders to use in originating loans. Consumers provide information to start a loan request though the platform and are then matched to a creditor who offers a loan product to the consumer.  The platform uses AI to take consumer information and analyze the risk profile for each consumer for each credit offer and to furth​er improve underwriting accuracy and outcomes.  According to the company, the model aims to expand ​credit access to those with no or limited credit or work history. ​​

In its no action letter, the CFPB agreed that based on the representations made in the company’s application for a no-action letter, it will not issue supervisory findings or bring a supervisory or enforcement action against the company under section 701(a) of the Equal Credit Opportunity Act (ECOA)​, Section 1002.4(a)-(b) of Regulation B, or through its authority to prevent unfair, deceptive, ​or abusive acts or practices as it pertains to the company’s use of its AI model.