Artificial intelligence. Source: Shutterstock
Credit union trade organizations NAFCU and CUNA, sent letters to the NCUA on Thursday concerning how credit unions can use artificial intelligence (AI) in the delivery of financial services for members, and at the same time urged federal regulators to work with credit unions on this issue.
The letters sent by both groups were in response to a request for information filed by regulators, including the NCUA, in March, as regulators are looking for insights into financial institutions' use of AI and machine learning.
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"Credit unions are leveraging AI to support a variety of operational needs to better deliver safe and affordable services to their members," NAFCU's Senior Counsel for Research and Policy Andrew Morris wrote. "Common business functions that integrate AI solutions include underwriting, risk management, marketing and automation of customer service operations."
CUNA said credit unions' use of AI remained "in its nascent stages" with all but the largest credit unions, and its early deployment has been for use in member support applications.
"As the regulators seek to understand the use of AI by financial institutions, we agree that the focus of financial institutions should be developing appropriate governance, risk management and controls over AI, or more specifically where technology using AI could create novel risks," CUNA's letter stated. "We believe that AI doesn't necessarily need to be categorized as a new risk by regulators, but rather that agencies should focus on products or services where the use of AI might change processes or products significantly enough that the incremental risks might be difficult to understand."
NAFCU added it would like regulators to support efforts that allowed credit unions to create a pilot program that provided safe harbor for specific AI applications. The organization also recommended "that the NCUA form a working group of credit union industry stakeholders to pursue targeted solutions to leverage AI."
CUNA made three overarching recommendations to the NCUA and other regulators:
1. Encouraged the NCUA, as it gains regulatory experience with AI, to focus efforts on areas where it can help credit unions understand and manage risk.
2. Encouraged the NCUA to look for ways to leverage other financial regulators' efforts in understanding the AI driven products and services offered by vendors.
3. Suggested regulators also consider the impact of AI and ML models on customer disclosure requirements.
Both NAFCU and CUNA pledged to continue to work with the regulatory agencies to ensure credit unions are able to innovate and use new AI technologies to better serve their members.
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Michael Ogden
Editor-in-Chief at CU Times. To connect, email at [email protected]. As Editor-in-Chief of CU Times since 2016, Michael Ogden has led the editorial team in all aspects of content strategy and execution, including the creation of the publication’s exclusive and proprietary research database of the credit union industry’s economic landscape. Under Michael’s leadership, CU Times has successfully shifted to an all-digital editorial product with new focuses on the payments, fraud, lending and regulatory beats. Most recently, he introduced a data-focused editorial product for subscribers that breaks down credit union issues into hard data, allowing for a deeper and more factual narrative for readers. In 2024, he launched the "Shared Accounts With CU Times" podcast, which offers a fresh, inside-the-newsroom perspective through interviews with leaders from the credit union industry and the regulatory world. He dives into pressing credit union issues, while revealing the personalities working behind-the-scenes to push the credit union world forward. His background includes years as a radio and TV anchor/reporter and a public relations and digital/social media manager, where he covered the food and music industries, as well as cooperatives and credit unions. Over the years, he has launched numerous exclusive video and podcast series, including a successful series of interactive backstage interviews with musicians at music festivals, showcasing his social media and live streaming production skills.
