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 further 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.