Real Estate

Fed banking regulator warns A.I. could lead to illegal lending practices like excluding minorities

Products You May Like

Michael Barr, vice chair for supervision of the board of governors of the Federal Reserve, testifies during a House Committee on Financial Services hearing on Oversight of Prudential Regulators, on Capitol Hill in Washington, DC, on May 16, 2023.
Mandel Ngan | AFP | Getty Images

The Federal Reserve’s top banking regulator expressed caution Tuesday about the impact that artificial intelligence can have on efforts to make sure underserved communities have fair access to housing.

Michael S. Barr, the Fed’s vice chair for supervision, said AI technology has the potential to get credit to “people who otherwise can’t access it.”

However, he noted that it also can be used for nefarious means, specifically to exclude certain communities from housing opportunities through a process traditionally called “redlining.”

“While these technologies have enormous potential, they also carry risks of violating fair lending laws and perpetuating the very disparities that they have the potential to address,” Barr said in prepared remarks for the National Fair Housing Alliance.

As an example, he said AI can be manipulated to perform “digital redlining,” which can result in majority-minority communities being denied access to credit and housing opportunities. “Reverse redlining,” by contrast, happens when “more expensive or otherwise inferior products” in lending are pushed to minority areas.

Barr said work being done by the Fed and other regulators on the Community Reinvestment Act will be focused on making sure underserved communities have equal access to credit.

Products You May Like

Articles You May Like

Megacap tech stocks make some room — here is where investors are branching out
Space stocks saw big gains this week in part due to ‘Trump-Elon trade’ rally, analysts say
Rocket Lab stock pops 25% after company reports strong revenue growth, first Neutron deal
Nederland waardeert en erkent maatschappelijke rol ondernemerschap
BlackRock expands its tokenized money market fund to Polygon and other blockchains