U.S. Lawmakers Introduce Bipartisan Bill to Study AI's Impact on Financial Services and Housing

Patrick McHenry, Maxine Waters Introduce Bill to Regulate AI in Financial Services - Decrypt

Lawmakers are taking a closer look at the influence of artificial intelligence (AI) in critical sectors with the introduction of the AI Act of 2024, a bipartisan bill seeking to assess AI's impact on financial services and housing. Reps. Maxine Waters (D-CA) and House Financial Services Committee Chair Patrick McHenry (R-NC) introduced the bill, directing federal regulators to examine how artificial intelligence is changing these sectors and identify existing regulation gaps. "AI is already impacting mortgage lending and credit scoring, among other things," Waters said in the bill introduced Monday, pointing to the need for a comprehensive understanding of AI's applications and potential risks. McHenry called the legislation "a small, but critical, step forward to empower the financial system to realize the numerous benefits artificial intelligence can offer for consumers, firms, and regulators." The bill requires federal agencies such as the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), and the Securities and Exchange Commission (SEC) to assess artificial intelligence's role in fraud detection, mortgage underwriting, credit scoring, and tenant screening. Regulators are asked to assess whether AI-driven processes comply with anti-discrimination laws and how smaller institutions, like community banks and credit unions, can adopt AI technology effectively. McHenry's accompanying resolution noted artificial intelligence is already modifying markets, with applications in market surveillance, mortgage underwriting, and real estate management. However, it also warned of potential downsides, such as biased decision-making, increased reliance on third-party tools, and vulnerabilities to cyberattacks. The resolution suggests the Committee on Financial Services evaluate whether existing privacy laws are sufficient as AI systems increasingly depend on consumer data. The bill requires federal agencies to submit findings within 180 days and provide recommendations for regulatory or legislative action. It also mandates public consultations to gather stakeholder input to ensure transparency. The bill builds upon the work of the Committee's Bipartisan AI Working Group, which has been evaluating the advantages and risks of artificial intelligence and the effectiveness of current laws in regulating its adoption. "This is about building on years of work to ensure AI is used responsibly and to the benefit of all Americans," Waters said. "I look forward to passing these bills and continuing to work in a bipartisan manner on this important issue next Congress." Last June, Reps. Ted Lieu (D-Calif.), Anna Eshoo (D-Calif.), and Ken Buck (R-Colo.) also introduced a bipartisan bill "Bill H.R.4223" to establish a federal commission on AI. "AI is doing incredible things for our society. But it could also do great harm if unregulated," Rep. Ted Lieu tweeted while announcing the bill.

House lawmakers propose studies on AI in financial services, housing

Top lawmakers in the United States have introduced a bill that would require federal regulators to conduct studies on how artificial intelligence impacts the financial services and housing industries. Congresswoman Maxine Waters introduced a bill directing several federal financial regulators to study the present and potential benefits and risks of AI in the two industries, which was co-sponsored by House Financial Services Committee Chair Patrick McHenry. The pair have also supported each other in a resolution acknowledging the increasing use of AI in the finance and housing markets, according to a Dec. 2. statement from the House Financial Services Committee. Under the Waters-sponsored "AI Act of 2024'' -- key regulators like the Federal Reserve and the Federal Deposit Insurance Corporation would have to report how banks implement AI to detect and deter money laundering, cybercrime and fraud. AI is already impacting mortgage lending and credit scoring, among other things, Waters said, explaining the need for a more comprehensive AI reporting regulatory framework. AI-powered research is also being used for market surveillance purposes and tenant screening, McHenry's resolution stated. McHenry added: "These bills are a small, but critical, step forward to empower the financial system to realize the numerous benefits artificial intelligence can offer for consumers, firms, and regulators." His resolution suggested the House Financial Services Committee should consider whether to reform privacy laws as data use becomes more AI-driven. McHenry said he would also like to see the US remain a leader in AI development and utilization. Related: Crypto user convinces AI bot Freysa to transfer $47K prize pool Waters and McHenry's measures build on the House Committee's Bipartisan AI Working Group, which was established on Jan. 11, 2024. Republican members in that group include French Hill, Young Kim, Mike Flood, Zach Nunn and Erin Houchin, while the Democrat members include Stephen Lynch, Sylvia Garcia, Sean Casten, Ayanna Pressley and Brittany Pettersen. The group's formation followed US President Joe Biden's executive order on Oct. 30 to establish a "Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence." Magazine: A bizarre cult is growing around AI-created memecoin 'religions': AI Eye

Bipartisan bill would study AI's impact on banking, housing

A new bill with bipartisan support would commission studies on the use of artificial intelligence (AI) in the banking and housing sectors, where lawmakers have been sounding an alarm about algorithmic price fixing and commercial misconduct enabled by new technologies. The AI Act of 2024, backed by the top Democrat and Republican on the House Financial Services Committee, would look at how banks use AI in property valuations, loan underwriting, debt collection, mortgage issuance, and how fair they're being when it comes to extending credit using AI, among other business activities. Studies are to be commissioned from the Federal Reserve, the Securities and Exchange Commission, the Housing Department and other federal agencies. The bill will also look at how AI is being used by landlords, property managers and real estate agents. "Artificial Intelligence is growing rapidly, and people across America are already seeing its use in our nation's housing and financial services sectors, with impacts on mortgage lending, credit scoring, and more," Rep. Maxine Waters (D-Calif.), ranking member of the House Financial Services Committee, said in a statement. The new bill, which is paired with a separate House resolution and comes ahead of an AI hearing in the committee later this week, also looks at how AI is being used internally by banks and how they're incorporating it into security and data privacy policies. AI, which has grabbed the public's attention in recent years for its capacity to convincingly mimic human language, is increasingly being adopted across different commercial sectors. Some economists have compared its integration to the personal computing revolution of the 1990s, making predictions that range from productivity surges to new waves of job offshoring. "Artificial intelligence holds the promise to revolutionize our financial system," Rep. Patrick McHenry (R-N.C.), the retiring chair of the House Financial Services Committee, said in a statement announcing the legislation. The use of third-party algorithms that take proprietary data to make pricing recommendations has presented issues for lawmakers and courts in industries that range from real estate to frozen potato processing. In August, the Justice Department and attorneys general in half a dozen states filed an antitrust lawsuit against a software company, alleging it "enabled landlords to collude to raise rents" and accusing the company of "monopolizing the market with its rent-setting software." The new legislation follows the first period of elevated inflation in the U.S. in decades, in which Americans' sensitivity to the cost of living soared. Prices and the economy were the top issue for voters in the November election, according to many different polls. Vice President Harris campaigned on a promise to end "price gouging" in grocery stores, where many Americans felt price increases most acutely. Both the Federal Reserve of New York and the Federal Trade Commission (FTC) noted profit margin expansion in the grocery sector following the post-pandemic inflation.

HFSC Leaders Seek Federal Study of AI's Impact on Financial Services | PYMNTS.com

The House Financial Services Committee (HFSC) aims to play a role in the development of artificial intelligence (AI) as the technology impacts the financial services and housing industries. HFSC Chairman Patrick McHenry, R-North Carolina, and Ranking Member Maxine Waters, D-California, introduced bipartisan measures focusing on AI and its impact, the HFSC said in a Monday (Dec. 2) press release. One measure, introduced by McHenry and co-sponsored by Waters, is a resolution (H. Res. 1600) that acknowledges the growing use of AI in the financial services and housing industries, according to the release. "Artificial intelligence holds the promise to revolutionize our financial system," McHenry said in the release. "As firms increasingly leverage AI, lawmakers and regulators tasked with oversight of the financial services industry must constantly evaluate the risks and benefits this technology poses." The second measure, introduced by Waters and cosponsored by McHenry, is a bill (H.R. 10262) that directs federal financial regulators to study the benefits and risks of AI as it relates to the financial and housing markets, per the release. "Artificial intelligence is growing rapidly, and people across America are already seeing its use in our nation's housing and financial services sectors, with impacts on mortgage lending, credit scoring and more," Waters said in the release. "I am so proud to partner with Chair McHenry to introduce these two bipartisan bills, which continue the Committee's leadership in examining and understanding the impact this technology has on people." The resolution and the bill build upon the Committee's Bipartisan AI Working Group to evaluate the technology and how its adoption is impacted by current laws and regulations, according to the release. The working group, which was established by McHenry and Waters in January, released a report in July saying that artificial intelligence has the potential to expand access to credit, enhance fraud protection and improve customer service, but also presents challenges around data privacy, potential bias in algorithmic decision-making and the need to ensure AI systems comply with existing laws. When announcing the formation of the working group in January, McHenry and Waters said in a press release that it would investigate how the technology affects the development of new products and services, fraud prevention, compliance, supervisory and regulatory tools, and the financial services workforce.