In a circular published September 19, 2023 (Consumer Financial Protection Circular 2023-03, link here ), the Bureau of Consumer Financial Protection (CFPB) notified creditors of their obligations to provide specific and accurate reasons for adverse action notices sent pursuant to the Equal Credit Opportunity Act (ECOA) and its Regulation B. These obligations arise even if the adverse actions were due to complex decision-making processes such as Artificial Intelligence (AI) algorithms.


ECOA and Regulation B require that when adverse action is taken against a credit applicant, the applicant must be provided with a statement listing the reasons for the adverse action. In this circular, the CFPB reminded creditors that the statement of reasons must be specific and must indicate the principal reasons(s) for the adverse action. While the sample forms in Regulation B for the adverse action notice provide a sample, general checklist of reasons, the CFPB explained that these sample, general reasons may not suffice to provide a credit applicant a sufficient adverse action notice if the applicant’s creditworthiness was evaluated through a complex decision-making process such as an AI algorithm.


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