5 Predictions For Banking Regulation In A Biden Presidency

Eric Mogilnicki is quoted in Law360 regarding bank regulation in a Biden presidency. Mr. Mogilnicki says with more banks and nonbank lenders seeking to deploy alternative data sources and machine learning in lending, the Biden administration will have a unique opportunity to address growing frictions between those new technologies and decades-old regulatory frameworks around consumer credit underwriting.

Unless that opportunity is seized, these frictions could impede the financial services industry's adoption of artificial intelligence in lending, cutting short its potential to make affordable credit available to a broader range of borrowers than has been possible with traditional underwriting techniques, according to Mr. Mogilnicki. “These new technologies are like the advent of the automobile, in that you need both highways to make them work and speed limits to make sure they work safely. I think there is an approach that will allow for innovation and consumer protection at the same time,” he adds.

Mr. Mogilnicki went on to say, “You would be disappointed in an AI system that turned out the same results in December as in January, because that system had a whole year to learn more about consumer habits and creditworthiness. But the current regulatory approach to credit models would consider AI to be a failure because it wasn't consistent over time. That's just one way of thinking that has to change if we're really going to embrace AI as a way to assess creditworthiness.” He adds, “Unlike so many things in Washington these days, this is a place where there doesn't have to be a partisan divide, and there are opportunities to find a solution that works for everyone.”