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House Financial Services chair backs regulatory sandboxes while flagging AI risks in lending
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Summary
Rep. French Hill, chair of the House Committee on Financial Services, said artificial intelligence can help detect fraud and improve compliance but must include human oversight; he urged federal agencies to use regulatory sandboxes as Congress examines AI oversight.
The House Committee on Financial Services is holding renewed scrutiny of artificial intelligence in financial services, and Rep. French Hill, the committee's chair, told an interview that AI can aid fraud detection and compliance but must be deployed with human oversight.
Hill said he served on a House-wide artificial intelligence task force and participated in Financial Services roundtables. "We found that artificial intelligence can really help financial services identify customers, serve customers more effectively, stop fraud, do a better job on compliance, take big complex tasks and sort them quicker using artificial intelligence," Hill said.
The interview's host pressed on potential harms, asking whether AI might fail to account for special circumstances in housing and mortgage decisions and whether automated systems could be harsher than human loan officers. Hill acknowledged those concerns, saying regulators must keep a human in the loop. "With every instance, there's a human in the loop to make sure that that use of artificial intelligence, those models that are being used are being done in compliance with federal law, fair lending laws, or AML BSA laws," he said.
Hill also warned about algorithmic errors in current systems. "We all know that in experience experimenting with AI even as a consumer, we see hallucinations. We see radically, incorrect outcomes and information that's generated by AI machine learning," he said, adding that the technology is improving and can be effective when used as a human tool.
On regulatory strategy, Hill said he supports using sandboxes so federal regulators'including bank supervisors, the Securities and Exchange Commission and exchanges'can experiment with AI alongside market participants and learn how best to apply the tools for compliance.
The interview focused on oversight and did not report any formal legislative action or votes; the transcript does not specify the hearing date. Hill framed the discussion around balancing AI's potential to improve fraud prevention and compliance with the need to guard against unfair or incorrect outcomes in lending and other consumer-facing decisions.
