Banks face liability over use of AI chatbots, report finds

If you use AI chatbots to handle customer financing questions, your business might be on the hook for legal trouble. A new report from former regulators warns that companies cannot hide behind 'bot errors' to escape consumer protection laws. If a chatbot gives a customer wrong information about loan terms, interest rates, or payment schedules, the business is legally responsible for that misinformation. The report highlights that replacing human agents with AI does not change your legal obligations. Regulators are looking closely at how these tools interact with borrowers. They are specifically concerned about 'hallucinations' where AI makes up facts or promises discounts that don't exist. For retailers and lenders, this means that an automated chat session is now considered a formal disclosure. If the bot misses a mandatory legal warning or misquotes a fee, it is treated the same as if a human employee lied to the customer. You should audit your automated tools immediately. Ensure there is a clear way for customers to reach a human if the AI fails. Do not assume your software provider carries all the risk. In the eyes of the CFPB and state AGs, the merchant or lender providing the service is the one responsible for the harm caused to the consumer.

Source: American Banker — Top News

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