CFPB Publishes Issue Spotlight on Chatbots in Consumer Finance
The CFPB recently published an Issue Spotlight regarding the use of chatbots in consumer finance, explaining that the purpose of the report is to explain how chatbot technologies are used by financial institutions and the challenges faced by customers. Addressing the use of chatbots, the report focuses on customer challenges, technical limitations and associated security risks, and risks to financial institutions associated with the integration of deficient chatbots.
As described in the report, chatbots are computer programs that mimic elements of human conversation and process a user’s input with programming to produce an output. The benefits of chatbots include constant availability, immediate responses, and cost savings for financial institutions which require fewer customer service agents. However, the CFPB explains that financial institutions moving from simple, rule-based chatbots towards more sophisticated technologies can impede the effectiveness of the technology.
The CFPB found that a significant limitation of utilizing chatbot technology is the difficulty in recognizing and resolving peoples’ disputes, such as when people with limited English proficiency fail to provide the correct phrase to a chatbot with limited syntax. The CFPB states that chatbots can provide inaccurate, unreliable, or insufficient information citing that recent studies have suggested that chatbots can provide inaccurate information. Additionally, chatbots can fail to provide meaningful customer assistance, such as when automated responses fail to resolve the issue and lead customers in a continuous loop of repetition without access to a customer service agent. The report explains that multiple issues with chatbots can hinder access to timely human intervention.
Regarding technical limitations and security risks, the CFPB states that insufficient investment decisions by financial institutions can result in system reliability and downtime issues. Additionally, like any technology, bad actors can impersonate chatbots to steal consumers’ data. Similarly, financial institutions are responsible for safeguarding the information that customers provide to a chatbot, just like any other personally identifiable information provided to the entity.
The CFPB states that one risk to financial institutions in implementing this technology is the risk of noncompliance with federal consumer financial laws because the entity maintains its compliance obligation even if the technology fails. The report also addresses the potential risk to the entire financial services market if chatbots substantially replace customer service agents and people cannot access a human agent. Finally, the CFPB suggests that a reputation risk may exist for financial institutions that utilize a deficient chatbot that frustrates or even harms a customer.
