BILL NUMBER: S8115B
SPONSOR: SANDERS
 
TITLE OF BILL:
An act to amend the banking law, in relation to the use of automated
lending decision-making tools to make lending decisions
 
PURPOSE:
This legislation establishes consumer protections and other requirements
relating to a bank's use of artificial intelligence in lending deci-
sions.
 
SUMMARY OF SPECIFIC PROVISIONS:
Section one: Amends the banking law by adding a new section 103-a.
Subdivision one: Definitions Subdivision two: Requires covered entities
using automated lending decision-making tools to conduct and publish an
annual impact assessment, including prior to any material changes to
such tool. The assessment must evaluate the tool's objectives, design,
algorithms, training data, and test for accuracy, bias, discrimination,
cybersecurity and privacy risks, misuse, and public safety issues. It
must also detail how personal data is used and stored, any user
controls, and how affected individuals are notified and informed of
their rights.
Subdivision Three: Requires covered entities to maintain impact assess-
ments and summaries for seven years and provide them to the superinten-
dent within seven days upon request.
Subdivision Four: Specifies that if an impact assessment reveals discri-
minatory or biased outcomes from an automated lending tool, the covered
entity must report it to the department within 30 days. Once reported,
the department shall order the entity to stop utilization of such tool.
Subdivision Five: Covered entities using automated lending tools must
notify applicants at least 24 hours in advance, explaining that such a
tool will be used, what criteria it assesses, the data it collects and
its sources, and the covered entity's data retention policy. Applicants
must be given the option to opt out or consent. If a loan is denied, the
reason must be provided within 24 hours, and applicants have 30 days to
correct any incorrect personal data and appeal the decision.
Subdivision Six: The superintendent shall have the authority to investi-
gate covered entities for potential violations, including examining
individuals under oath.
Subdivision Seven: If a covered entity's automated lending tool is found
to produce biased or discriminatory outcomes, the superintendent may
require additional or more detailed annual reports, or direct submission
of these reports to the department, as outlined by regulations.
Subdivision Eight: Severability clause. Section two: Effective date.
 
JUSTIFICATION:
The use of artificial intelligence (AI) has become increasingly common
across many sectors. In recent years, AI has become common in the lend-
ing field, aiding banks in providing mortgages and other loans. Unlike
the traditional application process, AI tools go beyond reviewing just a
person's credit score and their ability to pay, and the extent of the
information collected is not always clear to the applicant.
While such tools may provide a benefit to lenders in the processing of
loan applications, it is important that consumers are notified of the
use of such tools and have the opportunity to have their application
reviewed manually instead of an algorithmic program. Further, it is
important that borrowers understand the types of data being collected
and the retention of such information. This legislation Would require a
notice to consumers when automated decision tools are used in the lend-
ing process and gives them the ability to file an appeal if incorrect
information was collected. The bill would also require lending insti-
tutions to conduct an annual disparate impact analysis of any AI tools
being used and provides the New York State Attorney General's office the
authority to investigate any violations.
 
LEGISLATIVE HISTORY:
New bill.
 
FISCAL IMPLICATIONS:
None to the State.
 
EFFECTIVE DATE:
This act shall take effect in ninety days.