Bill > A00773

This bill amends banking law to regulate the use of "automated lending decision-making tools," which are defined as software using algorithms, artificial intelligence, or similar techniques to significantly automate or replace human judgment in lending decisions affecting individuals. These tools are distinct from basic computer functions like calculators or spreadsheets. A "lending decision" encompasses any determination impacting a loan or credit application, including approval, denial, or changes to terms, and can result in "adverse action" as defined by federal law. "Covered entities" are defined as state-licensed banks, foreign banking corporations, and licensed lenders, but exclude federally chartered institutions. The bill mandates that covered entities using these tools must annually engage an independent third party to conduct an "impact assessment" before any significant changes to the tool, and this assessment must be posted on the entity's website. This assessment evaluates the tool's objectives, effectiveness, algorithms, design, training data, and tests for accuracy, fairness, bias, discrimination, cybersecurity vulnerabilities, privacy risks, public health and safety risks, and potential misuse. It also details data usage and user control over personal information. If an assessment reveals discriminatory or biased outcomes, the covered entity must report it to the department within 30 days, and the department will then direct the entity to stop using the tool. Furthermore, applicants must be notified at least 24 hours before an automated tool is used to screen their loan application, informed about the criteria and data used, and, if denied, provided with the reason for denial within 24 hours. Applicants denied due to incorrect personal information have 30 days to correct it and appeal. The superintendent is granted powers to investigate violations and compel the production of relevant documents.

Business and Industry, Housing and Urban Affairs

https://www.nysenate.gov/legislation/bills/2025/A773