Enforcement Agencies Warn on Potential AI Discrimination: What’s at Stake for Financial Services and Fintech Companies Developing and Deploying AI Tools

Webinar | May.05.2023 | 3:30pm - 4:30pm (Eastern Standard Time)

Virtual

Please join members of Orrick’s Artificial Intelligence & Machine Learning team to discuss financial services implications stemming from the joint statement issued last week by the Consumer Financial Protection Bureau (CFPB), the Department of Justice (DOJ), the Federal Trade Commission (FTC) and the Equal Employment Opportunity Commission (EEOC) warning that the use of artificial intelligence (AI) “has the potential to perpetuate unlawful bias, automate unlawful discrimination, and produce other harmful outcomes.”

The agencies also stated that their existing legal authorities apply to AI and other “innovative technologies,” and identified skewed data and datasets, opaque and complex models, and tool exploitation as potential discrimination sources. While not mentioned in the statement, the agencies are likely to focus on differential outcomes rather than a discriminatory process, drawing upon disparate impact and pattern-or-practice theories to assess AI tools.

This update will cover the explicit text of the statement (drawing on the team’s deep experience in fairness regulation and AI tools) and read between its lines to look at the potential risk implications for financial services and fintech companies developing AI or using AI to offer products and services.

CLE Credits Available: Y

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Contacts

John Coleman Partner, Financial & Fintech Advisory, Strategic Advisory & Government Enforcement (SAGE)

Washington, D.C.

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D:+1 202 349 8006
E: [email protected]

Practice:

Financial & Fintech Advisory
Strategic Advisory & Government Enforcement (SAGE)
Fintech

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John Coleman Partner

Washington, D.C.

Prior to joining Orrick, John was a partner at Buckley LLP, which he joined after 15 years in federal government service as a litigator and advisor to senior policymakers, most recently as Deputy General Counsel for Litigation and Oversight at the Consumer Financial Protection Bureau. He joined the CFPB soon after its creation in 2010 and was one of a core group of attorneys tasked with interpreting the authorities granted to the agency by the Consumer Financial Protection Act of 2010 and establishing the procedures by which the agency exercises those authorities. He was the first person to appear in court on behalf of the CFPB and was involved in every significant litigation matter in the agency’s history prior to his departure. As Deputy General Counsel, he managed the team of attorneys responsible for representing the Bureau in litigation, including appellate matters, and before congressional oversight bodies.

John served every director or acting director in the CFPB's history during his tenure at the CFPB, advising them and senior officials in the Division of Supervision, Enforcement, and Fair Lending on a range of complex legal and policy matters, including those arising in the course of examinations, investigations and enforcement actions. He also advised the Director and senior officials in the Division of Research, Markets, and Regulations with respect to rulemakings, and represented the agency in all rulemaking challenges.

Prior to joining the CFPB, John was a trial attorney in the Federal Programs Branch of the Department of Justice’s Civil Division, representing federal agencies and officials in high-profile civil litigation, including cases brought under the U.S. Constitution, the Administrative Procedure Act and federal antidiscrimination laws.

Following law school, he served as a law clerk for the Honorable T.S. Ellis III, of the United States District Court for the Eastern District of Virginia.

Annette Hurst Partner, Intellectual Property, Trademark, Copyright & Media

San Francisco

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D:+1 415 773 4585
E: [email protected]

Practice:

Technology & Innovation Sector
Intellectual Property
Trademark, Copyright & Media
Artificial Intelligence (AI)

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Annette Hurst Partner

San Francisco

Annette is an experienced trial lawyer who has tried copyright, trade secret, trademark, patent and business tort claims. As a risk analyst and problem solver with deep proficiency in the software industry, Annette is a go-to counselor and speaker regarding the legal issues surrounding access and use of datasets in the development of machine learning algorithms. She was named “Litigator of the Week” by The American Lawyer for her work as co-lead counsel on the Mattel/MGA case. Chambers USA ranks her in Band 1 for Trademark, Copyright & Trade Secrets, with clients reporting that she is “smart, creative and terrific at oral argument” and “a very well-known authority in copyright law, a great advocate and a great trial lawyer.” Chambers reports: “Clients agree that Annette Hurst is ‘a very powerful and experienced trial lawyer for copyright cases, and a good team leader who is reliable before judges,” and “Peers consider Annette Hurst a ‘remarkably intuitive’ lawyer who ‘brings unique perspectives to soft IP cases.” Since 2018, The Legal 500 has recognized Annette as a “Leading Lawyer” in copyright law, and she was named “Female Litigator of the Year West” by Benchmark Litigation in 2013. Annette has been repeatedly named one of the top 75 IP litigators in California by The Daily Journal.

Annette’s community and professional activities include past service on the Northern District of California Patent Local Rules Committee, President of the Lafayette Elementary School PTA, and past membership on the Board of Directors of the Volunteer Legal Services Program and Board of Directors of the Bar Association of San Francisco for which she was chair of the Finance and Investments Committee. She also is a past member of the Board of Directors of the Legal Aid Society of San Francisco and the Board of Governors of the Association of Business Trial Lawyers, Northern California Chapter, as well as a past president of the Barristers Club.

Jeffrey Naimon Partner, Financial & Fintech Advisory, Strategic Advisory & Government Enforcement (SAGE)

Washington, D.C.

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D:+1 202 349 8030
E: [email protected]

Practice:

Financial & Fintech Advisory
Strategic Advisory & Government Enforcement (SAGE)
Fintech

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Jeffrey Naimon Partner

Washington, D.C.

He defends financial services companies facing complex examination or enforcement matters before the Consumer Financial Protection Bureau (CFPB), the Federal Trade Commission (FTC), and federal and state banking regulators, with a focus on fair lending, unfair, deceptive or abusive acts and practices (UDAAP), loan servicing, privacy and credit reporting, debt collection, servicemember protections and other consumer protection issues.

He assists banks and nonbanks (including fintech entities) structure, negotiate and operate a variety of partnerships, outsourcing programs and other third-party arrangements, including performing due diligence, negotiating transactions and advising on ongoing oversight protocols to meet regulatory expectations for third-party arrangements.

Jeff also assists in negotiating acquisition, capital markets and servicing transactions, advising on how best to structure the transaction to reduce risk and expedite deal closure, performing due diligence and assisting in obtaining the necessary change of control and other regulatory approvals.

Jeff is consistently recognized as a leading lawyer in Financial Services Regulation: Consumer Finance (Compliance) in Chambers USA, which praised him for his "extremely high intellect regarding compliance matters and negotiation skills. There's none better at arguing a disputed point." He is also a Fellow of the American College of Consumer Financial Services Lawyers.

He currently serves as the Co-chair of the Professional Development Task Force and previously served as Co-chair (2011-2013) and Co-vice Chair (2008-2010) of the Truth in Lending Subcommittee of the American Bar Association’s Consumer Financial Services Committee and has authored numerous articles on consumer financial services.

Prior to joining Orrick, Jeff was a partner at Buckley LLP.

Caroline Stapleton Partner, Financial & Fintech Advisory, Strategic Advisory & Government Enforcement (SAGE)

Washington, D.C.

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D:+1 202 461 2904
E: [email protected]

Practice:

Financial & Fintech Advisory
Strategic Advisory & Government Enforcement (SAGE)
Fintech

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Caroline Stapleton Partner

Washington, D.C.

Client-centered experiences are at the heart of Caroline’s practice. She has provided a wide variety of institutions, from fintech startups to multinational banks, with tailored, practical guidance that considers each company’s unique characteristics and strategic goals. Caroline draws on her prior experiences as an attorney at a federal prudential regulator and as the head of compliance at a consumer finance company to give clients a comprehensive picture of the legal risks and opportunities each new matter presents.

Her work on behalf of financial services providers has included:

Providing guidance regarding novel or complex regulatory questions, often in the context of developing new financial products and services
Performing compliance risk assessments of marketing, underwriting, pricing, origination, servicing and loss mitigation activities
Advising banks and supervised lenders with examinations by federal and state regulators, including responding to exam findings, CAMELS ratings, Matters Requiring Attention (MRA/MRIA) and enforcement referrals
Strategically responding to and defending enforcement actions by state and federal regulators, including the Consumer Financial Protection Bureau (CFPB), Office of the Comptroller of the Currency (OCC), Federal Deposit Insurance Corporation (FDIC), Federal Reserve Board and Department of Justice (DOJ), and, if necessary, negotiating favorable settlements
Developing strategies for bank partnership, state licensing and bank charter opportunities for consumer financial services providers
Conducting internal investigations of suspected misconduct or violations of an institution’s policies and/or regulatory requirements

In these and other representations, Caroline brings strong substantive knowledge of the key federal and state statutes and regulations governing the financial services industry. Her specific areas of focus include:

Fair lending and anti-discrimination laws, including the Fair Housing Act (FHA) and the Equal Credit Opportunity Act (ECOA)
Prohibitions on unfair, deceptive or abusive acts or practices (UDAP and UDAAP)
Technical regulatory compliance under federal and state laws governing loan marketing, disclosures, settlement practices, servicing and collection practices, consumer reporting and electronic payments
Federal preemption, including under the National Bank Act
Compliance management best practices and regulatory expectations, including third-party vendor and merchant oversight
Treatment and disclosure of confidential supervisory information (CSI)
State lease-to-own laws and regulations

Prior to joining Orrick, Caroline was senior counsel at Buckley LLP. She also has served as an attorney-advisor in the litigation division of the OCC, where she represented the agency in civil litigation, bank receivership preparation, employment disputes and other administrative contexts. Caroline also gained valuable in-house experience as the head of compliance and assistant general counsel of a Richmond-based consumer finance company.