Q: Does the credit union need to disclose to its members that it uses AI in underwriting?
A: No; there is no disclosure requirement to inform members of the use of AI in underwriting, or other internal use, or used in other context that is outside of gathering consumer information. However, if an applicant is denied credit based on an AI decisioning tool or complex algorithm, the “statement of reasons” for denial must be both accurate and specific to the information that led to the denial or restriction of credit.
Source: Consumer Financial Protection Circular 2023-03
Q: Do you have any insight on how we can satisfy the IRS written statement requirement for tax year 2025? We are having issues identifying how to go about VIN verification with these loans, to determine if final assembly was in the United States.
A: The IRS provided a VIN Decoder through National Highway Traffic Safety Administration (NHTSA). The decoder will be able to tell the applicant whether the vehicle’s final manufacture was within the U.S.
The information on the written statement should match the information return. According to the first paragraph on page 3 of the IRS Transitional Guidance, the written statement should contain all the information on the return, which includes:
The written statement also needs to include the contact information for your credit union (name of contact person, direct phone, email), in case there is additional information needed.
Q: What are the expectations for implementing the New Vehicle Loan Interest Deduction?
A: The IRS has issued temporary guidance only at this time. Permanent guidance and regulations are pending, but in order to be considered in compliance for tax year 2025, lenders must communicate the total amount of interest received from each covered buyer. This may take many forms, including:
The IRS has confirmed that it will not impose penalties on lenders for a failure to file information returns and provide payee statements if they satisfy their reporting obligations as described in the transitional guidance.
For more information, email Heather Line.
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