On September 19, the Consumer Financial Protection Bureau (CFPB) issued guidance to lenders using artificial intelligence and other complex models. The guidance indicates lenders must use specific and accurate reasons when taking adverse actions against consumers.

This means, according to CFPB’s press release, that creditors cannot simply use sample adverse action forms and checklists if they do not reflect the actual reason for the denial of credit.

“Technology marketed as artificial intelligence is expanding the data used for lending decisions, and also growing the list of potential reasons for why credit is denied,” said CFPB Director Rohit Chopra. “Creditors must be able to specifically explain their reasons for denial. There is no special exemption for artificial intelligence.”

The press release indicates creditors that simply select the closest factors from the checklist of sample reasons are not in compliance with the law if those reasons do not sufficiently reflect the actual reason for the action taken. Creditors must disclose the specific reasons, even if consumers may be surprised, upset, or angered to learn their credit applications were being graded on data that may not intuitively relate to their finances.

You can read the entire guidance here.