Financial Services Law Developments: 5/5/24

Wednesday, May 8, 2024

FYI: Massachusetts AG Provides Guidance on Intersection of Artificial Intelligence and Existing State Laws

The Massachusetts Office of Attorney General ("AGO") recently issued an Advisory on the development, supply, and use of artificial intelligence ("AI"). The Advisory provides guidance in the context of the Massachusetts Consumer Protection Act,[1] Anti-Discrimination Law,[2] Data Security Law,[3] and associated regulations.

The AGO defines AI as: "A machine-based system that can, for a given set of human-defined objectives, make predictions, recommendations or decisions influencing real or virtual environments. Artificial intelligence systems use machine- and human-based inputs to perceive real and virtual environments; abstract such perceptions into models through analysis in an automated manner; and use model inference to formulate options for information or action."

For this definition, the AGO cites Executive Order 14110, "Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence," though the definition originates from the National Artificial Intelligence Initiative, 15 U.S.C. § 9401(3).

The AGO provides the following list of acts or practices that could be "unfair and deceptive" under the Massachusetts Consumer Protection Act:

Falsely advertising the quality, value, or usability of AI systems;
Supplying an AI system that is defective, unusable, or impractical for the purpose advertised;
Misrepresenting the reliability, manner of performance, safety, or condition of an AI system;
Offering for sale or use an AI system in breach of warranty, i.e., the system is not fit for the ordinary purposes for which such systems are used, or is unfit for the specific purpose for which it is sold where the supplier knows of such purpose;
Misrepresenting audio or video content of a person for the purpose of deceiving another to engage in a business transaction or supply personal information as if to a trusted business partner, as in the case of deepfakes, voice cloning, or chatbots used to engage in fraud; or
More broadly, failing to comply with "Massachusetts statutes, rules, regulations or laws, meant for the protection of the public's health, safety or welfare."

In the context of Massachusetts' Anti-Discrimination Law, the AGO warns against "deploying technology that discriminates against residents on the basis of a legally protected characteristic," including "algorithmic decision-making that relies on or uses discriminatory inputs and that produces discriminatory results, such as those that have the purpose or effect of disfavoring or disadvantaging a person or group of people based on a legally protected characteristic."

The AGO also advises that developers, suppliers, and users of AI remain subject to Massachusetts' data breach notification laws and the regulations setting forth the standards for the protection of personal information.

As Congress and state legislatures grapple with how to regulate AI without deterring innovation, the Advisory illustrates how state attorneys general can rely on existing laws to address many potential issues.

. . .

[1] Mass. Ann. Laws ch. 93A, § 2; 940 Code Mass. Regs. 3.00 et seq.; 940 Code Mass. Regs. 5.00 et seq.

[2] Mass. Ann. Laws ch. 151B, § 4.

[3] Mass. Ann. Laws ch. 93H; 201 Code Mass. Regs. 17.00, et seq.

Ralph T. Wutscher
Maurice Wutscher LLP
20 N. Clark Street, Suite 3300
Chicago, Illinois 60602
Direct: (312) 551-9320

Mobile: (312) 493-0874
Email: rwutscher@MauriceWutscher.com

Admitted to practice law in Illinois

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The Editor's Bio

Ralph T. Wutscher
Maurice Wutscher LLP
20 N. Clark Street, 33rd Floor
Chicago, Illinois 60602
Direct: (312) 493-0874
RWutscher@MauriceWutscher.com
https://www.MauriceWutscher.com/

Ralph Wutscher's practice focuses primarily on representing depository and non-depository mortgage lenders and servicers, as well as mortgage loan investors, distressed asset buyers and sellers, loss mitigation companies, automobile and other personal property secured lenders and finance companies, credit card and other unsecured lenders, and other consumer financial services providers. He represents the consumer lending industry as a litigator, and as regulatory compliance counsel.

Ralph has substantial experience in defending private consumer finance lawsuits, including cases ranging from large interstate putative class actions to localized single-asset cases, as well as in responding to regulatory investigations and other governmental proceedings. His litigation successes include not only victories at the trial court level, but also on appeal, and in various jurisdictions. He has successfully defended numerous putative class actions asserting violations of a wide range of federal and state consumer protection statutes. He is frequently consulted to assist other law firms in developing or improving litigation strategies in cases filed around the country.

Ralph also has substantial experience in counseling clients regarding their compliance with federal laws, and with state and local laws primarily of the Midwestern United States. For example, he regularly provides assistance in connection with portfolio or program audits, consumer lending disclosure issues, the design and implementation of marketing and advertising campaigns, licensing and reporting issues, compliance with usury laws and other limitations on pricing, compliance with state and local “predatory lending” laws, drafting or obtaining opinion letters on a single- or multi-state basis, interstate branching and loan production office licensing, evaluations and modifications of new or existing products and procedures, debt collection and servicing practices, proper methods of responding to consumer inquiries and furnishing consumer information, as well as proposed or existing arrangements with settlement service providers and other vendors, and the implementation of procedural or other operational changes following developments in the law.

Ralph is a member of the Governing Committee of the Conference on Consumer Finance Law. He is also the immediate past Chair of the Preemption and Federalism Subcommittee for the ABA's Consumer Financial Services Committee. He served on the Law Committee for the former National Home Equity Mortgage Association, and completed two terms as Co-Chair of the Consumer Credit Committee of the Chicago Bar Association.

Ralph received his Juris Doctor from the University of Illinois College of Law, and his undergraduate degree from the University of California at Los Angeles (UCLA). He is a member of the national Mortgage Bankers Association, the American Bankers Association, the Conference on Consumer Finance Law, DBA International, the ACA International Members Attorney Program, as well as the American and Chicago Bar Associations.

Ralph is admitted to practice in Illinois, as well as in the United States Court of Appeals for the Seventh Circuit, the United States District Courts for the Northern and Southern Districts of Illinois, and the United States District Court for the Eastern District of Wisconsin, and has been admitted pro hac vice in various jurisdictions around the country.