ABA, CBA Urge HFSC Democrats to Federalize AI Regulation

The American Bankers Association ("ABA") and the Consumer Bankers Association ("CBA") urged House Financial Services Committee ("HFSC") Democrats to adopt a nationally harmonized, risk-based federal framework for regulating AI in financial services that preempts state laws.

In comment letters responding to HFSC Democrats' request for information on AI risk and modernization, both associations argued that a patchwork of state AI laws would raise compliance costs and slow deployment.

The ABA said federal standards should serve as a baseline and should not duplicate or conflict with banks' existing enterprise risk management obligations. It argued that (i) existing privacy laws such as the Gramm-Leach-Bliley Act, when properly applied and enforced, generally address AI risks; (ii) banks are supervised for compliance while other entities offering similar financial products are not, creating an uneven competitive landscape; and (iii) extending these safeguarding obligations to all financial services providers, regardless of charter type, would better protect consumers and reduce data leakage and breach risk.

The CBA recommended principles-based, technology-neutral frameworks applied equally across all market participants. It asked Congress to set a clear federal AI standard for both developers and deployers that expressly preempts conflicting state and local requirements as applied to federally regulated banking organizations.

The CBA also urged policymakers to work with industry to build a practical validation framework for non-deterministic AI models to ease supervisory friction created by forcing them into traditional model validation approaches and to build on prudential regulators' SR 26-2 guidance on model risk management. It further called on Congress to amend the Bank Service Company Act to clarify federal banking agencies' examination and information-access authority over critical third-party service providers.