FTC Leverages Existing Laws to Crack Down on Biased AI Algorithms
The Federal Trade Commission regulates AI in lending and consumer decisions by applying older laws like the Fair Credit Reporting Act to ban biased and unexplainable algorithms. This approach marks the first concrete AI regulation effort by the U.S. government.
The Federal Trade Commission takes significant steps to regulate artificial intelligence by banning the use of biased and unexplainable algorithms in consumer decisions. The agency applies existing laws, such as the Fair Credit Reporting Act, the Equal Credit Opportunity Act, and the FTC Act, to oversee how businesses use AI in lending, employment, housing, and insurance. This action represents the first concrete effort by the U.S. government to actively regulate AI technology.
While these federal laws do not contain explicit language about artificial intelligence, the FTC enforces them by issuing strict guidance over the past two years. The agency clarifies that using racially biased algorithms constitutes a deceptive practice under the FTC Act. Furthermore, the FCRA requires consumer reporting agencies to provide transparency and notify individuals when an adverse action occurs, a rule the FTC now applies directly to automated decision-making systems.
Critics express a desire for even more comprehensive regulation as AI makes dramatic inroads into enterprise operations. In contrast to the United States' approach of adapting older legislation, Europe already regulates software and data use under the GDPR and recently proposed a wide-ranging framework specifically designed for AI. The FTC continues to lead the charge in America by ensuring companies do not deploy harmful AI models under the guise of modernization.