AI in Financial Services—Consumer Protection Challenges in the Age of Artificial Intelligence

**Alan Kaplinsky** (0:07)
Welcome to the award-winning Consumer Finance Monitor Podcast, where we explore important new developments in the world of consumer financial services and what they mean for your business, your customers and the industry. This is a weekly show brought to you by the Consumer Financial Services Group at the Ballard Spahr Law Firm. And I'm your host, Alan Kaplinsky, the founder and former practice group leader for 25 years, and now Senior Counsel of the Consumer Financial Services Group at Ballard Spahr. And I'm delighted to be moderating today's program. For those of you who want even more information about the topic that we're going to be discussing today, or for that matter, anything else in the world of consumer finance, don't forget our blog, which also goes by the same name as our podcast show, namely Consumer Finance Monitor. We've hosted our blog since 2011 So there's a lot of relevant industry content there. We also regularly host webinars on subjects of interest to those in the industry. So to subscribe to our blog or to get on the list for our webinars, please visit us at ballardspahr.com.
And if you like our podcast, please let us know about it. You can leave us a review on whatever platform you have used today to access our podcast show.
Also, please let us know if you have ideas for other topics that we should consider covering or guess that we should consider inviting as speakers on our program. So let me introduce our topic today. This is a topic we've been covering and in a lot of depth in the last couple of years, because it's becoming of increasing importance. And what I'm going to be talking about and what we're going to be talking about and when I introduce my guest, what my guest will be talking about is the use of artificial intelligence or we'll usually call it AI and what it means for consumers, markets and regulation. AI is already making decisions that affect people's financial lives every day, whether it's determining credit worthiness, flagging transactions as fraud, setting prices or even providing financial advice. But as powerful as these systems are, they're often, unfortunately, opaque, difficult to challenge, and in many cases, not designed with consumer protection as the primary objective. A recent report highlights a striking disconnect, while approximately 75% of Americans are concerned that AI and financial services could lead to bias or unfair treatment, only 8% believe that current laws protect them. That gap between technological innovation and meaningful accountability is exactly what we're going to explore today.
And I am pleased at this time to introduce a true expert in this area, namely Delicia Hand.
Delicia is a nationally recognized expert in digital civil rights, AI governance, and consumer protection. She serves in a leadership role at Consumer Reports, where she focuses on ensuring that emerging technologies, particularly AI, advance consumer welfare rather than undermine it. She is the author of an important new report by Consumer Reports titled AI and Consumer Finance, a Landscape Analysis of Market Forces, Evaluation Frameworks and Regulatory Gaps. The report examines how AI is transforming consumer finance and emerging from that transformation, and what policymakers, regulators, and industry participants should be doing about it. So, Delicia, a very warm welcome to our show.

**Delicia Hand** (5:26)
Alan, thanks for having me. We're very glad to be here.

**Alan Kaplinsky** (5:30)
Terrific. Well, I've got a lot of questions for you today that I know you're going to know the answers to, but there are the questions that I raised in my own mind, and I tried to put myself in the head of a consumer and what a consumer might be thinking of this phenomenon that we call AI.
And that's how I developed these questions. So my first question is, what prompted Consumer Reports to undertake this major study of AI at this particular moment? Sure.

**Delicia Hand** (6:12)
Well, honestly, the timing felt urgent, but it also built on years of work that we've been doing at Consumer Reports. We built probably about nine years ago now, something called the digital standard. And if it became clear that our everyday home products, our TVs, phones, et cetera, are connected and that there were some baseline privacy, transparency, security standards that needed to exist and didn't really. And so we've been doing that. I left the CFPB for over four years ago and saw that there was a real opportunity to build on that digital standard to think about what standards ought to exist for FinTech products. And so we got on the road and had been evaluating peer-to-peer apps, banking apps, Buy Now, Pay Later, all the latest app-driven FinTech products. And so when we evaluated banking apps around 2023, we kept running into the same issue, which is we had a sprinkling, a handful of questions about traditional machine learning issues, but we were in a moment where generative AI was emerging and being used, and AI was clearly embedded in how products and companies were making decisions, but there were no consistent consumer-centered standards to evaluate against it. And over the last couple of years, you've just seen that continue to evolve. So for us, it really became clear that we were in a moment of a lot of evolution.