House Financial Services Committee leaders eye AI regulatory push

Top lawmakers on the House Financial Services Committee are using the stretch run of this congressional term to address the impact artificial intelligence has on the finance and housing sectors.

Reps. Patrick McHenry, R-N.C., and Maxine Waters, D-Calif., the chair and ranking member of the committee, respectively, announced Monday the introduction of a resolution to acknowledge the rising use of AI in financial services and in the housing industry, as well as a bill that calls on financial regulatory agencies to study the benefits of the technology within the sector.

The resolution and bill are the culmination of nearly a year of work from the committee’s bipartisan AI working group and come just days before a hearing that will explore how the technology is framing the future of finance.

“Artificial intelligence holds the promise to revolutionize our financial system,” McHenry said in a statement. “As firms increasingly leverage AI, lawmakers and regulators tasked with oversight of the financial services industry must constantly evaluate the risks and benefits this technology poses. These bills are a small, but critical, step forward to empower the financial system to realize the numerous benefits artificial intelligence can offer for consumers, firms, and regulators.”

The resolution, introduced by McHenry and co-sponsored by Waters, spells out the House Financial Services Committee’s responsibilities when it comes to AI, covering everything from how housing market participants leverage the technology for underwriting and tenant screening to scrutinizing how financial institutions’ use of AI could increase herding behavior in the markets.

The committee, McHenry and Waters write in the resolution, will make sure financial regulatory agencies are carrying out their enforcement powers and have the right tools to do so as AI usage in the sectors proliferates. They’ll also consider reforms to data privacy laws “given the importance of data, especially consumer data, to AI,” collaborate with regulators on AI’s impact on the workforce and do what they can to make sure the United States leads globally on the development and use of AI in the industries.

“Artificial intelligence is growing rapidly, and people across America are already seeing its use in our nation’s housing and financial services sectors, with impacts on mortgage lending, credit scoring, and more,” Waters said in a statement. “Our committee will continue to collaborate closely with the federal government to identify the risks and benefits of AI and to explore further legislation needed to protect people and our communities.”

The Analysis and Improvement Act of 2024 — or the AI Act of 2024 — would require the Federal Reserve, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, the Consumer Financial Protection Bureau and the National Credit Union Administration to deliver a report to the House Financial Services Committee that examines a variety of AI-related issues in the agencies’ respective sectors.

Those issues include the use of AI in home valuation, loan underwriting and servicing, how banking institutions use AI to identify fraud, money laundering and cybercrime, and how AI is used in debt collection and foreclosures. There are also callouts in the bill for how AI can mitigate bias and discrimination in banking services, how the technology can level the playing field between small and large financial institutions, and how it can benefit cybersecurity risk management.

The bill would also require the Securities and Exchange Commission to produce a report on AI’s risks and benefits to the markets and have the Treasury Department study the technology’s ability to secure the country’s financial system from national security threats. 

Another provision of the bill calls on the Department of Housing and Urban Development, the Federal Housing Finance Agency, the Rural Housing Service of the Department of Agriculture and the CFPB to report on the risks and benefits of AI on housing and mortgage regulators.

“I look forward to passing these bills and continuing to work in a bipartisan manner on this important issue next Congress,” Waters said.