Regulatory Issues in Credit Cards: Preparing for the World of AI

In the credit card industry, there are two types of regulations. Prudential regulations address anti-money laundering (AML), capital adequacy, operational resilience, safety and soundness, securitization oversight, and third-party risk. Consumer protections cover billing disputes, credit reporting, debt collection, fair lending, pricing, privacy, Truth in Lending, and unfair or deceptive practices. Underwriting, servicing, marketing, collections, and vendor management are areas primed for AI use, but issuers must be wary of concerns about black-box models, fairness, privacy, and explainability. Issuers should involve compliance, legal, credit policy, model governance, and operations ahead of legislators and regulators, who are considering the implications of AI for fairness, transparency, and risk.

Key questions discussed in this report: 

• What types of regulations are there?
• What can states do compared to the federal government?
• How come issuers based in one state can export their rates to another?
• Did fairness regulations precede credit card account growth?
• Where does AI fit on the regulatory road map and how should issuers prepare? 

Companies Mentioned: 

Bank of America, Capital One, Chase, Citi, Discover, FIS, FNBO, First Data, Fiserv, Giesecke+Devrient, Goldman Sachs, IDEMIA, Marquette National Bank, Mastercard, Thales, Visa