Putting The AI In Algorithms: FTC Issues Guidance

The Federal Trade Commission has issued guidance on using artificial intelligence (AI) in algorithms.

Key Takeaways:

The use of AI tools should be transparent, explainable, fair and empirically sound, while fostering accountability.


  • Don't deceive consumers about how you use automated tools.

  • Be transparent when collecting sensitive data.

  • Be careful about how you get that data set. Secretly collecting audio or visual data – or any sensitive data – to feed an algorithm could also give rise to an FTC action.

  • If the Fair Credit Reporting Act (FCRA) applies: If you make automated decisions based on information from a third-party vendor, you may be required to provide the consumer with an “adverse action” notice. Specifically, you must provide consumers with certain notices under the FCRA.


  • If you deny consumers something of value based on algorithmic decision-making, explain why.

  • If you use algorithms to assign risk scores to consumers, also disclose the key factors that affected the score, rank ordered for importance.

  • If you might change the terms of a deal based on automated tools, make sure to tell consumers


  • Don’t discriminate based on protected classes.

  • Focus on inputs, but also on outcomes.

  • If you are using data obtained from others – or even obtained directly from the consumer – to make important decisions about the consumer, you should consider providing a copy of that information to the consumer and allowing the consumer to dispute the accuracy of that information.

Robust Data Models

  • If you provide data about consumers to others to make decisions about consumer access to credit, employment, insurance, housing, government benefits, check-cashing or similar transactions, you may be a consumer reporting agency that must comply with the FCRA, including ensuring that the data is accurate and up to date.

  • If you provide data about your customers to others for use in automated decision-making, you may have obligations to ensure that the data is accurate, even if you are not a consumer reporting agency. FULL ARTICLE

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