The Consumer Financial Protection Bureau (CFPB) flagged risks Tuesday regarding expanded use of chatbots by financial institutions, specifically for customer service purposes.

The agency said it has received numerous complaints from frustrated customers attempting to dispute transactions or resolve account issues, only to get stuck in endless “doom loops” caused by customer service automation.

“To reduce costs, many financial institutions are integrating artificial intelligence technologies to steer people toward chatbots,” said CFPB Director Rohit Chopra in a press release. “A poorly deployed chatbot can lead to customer frustration, reduced trust, and even violations of the law.”

The agency noted many chatbots are marketed as “artificial intelligence” but have limited capabilities compared to more advanced generative AI technology. Regardless, the CFPB’s analysis spotlighted the need for such emerging technologies to be properly vetted and assessed before implementation.

In 2022, more than 98 million individuals—approximately 37 percent of the U.S. population—engaged with a bank’s chatbot. That number is projected to grow to 110.9 million users by 2026, said the CFPB in citing data from Insider Intelligence.

The agency highlighted three issues with automating customer service inquiries in the financial services industry, including:

  • Noncompliance with consumer financial protection laws. Financial institutions run the risk chatbots will provide inaccurate information, fail to recognize consumers invoking federal rights to dispute transactions, or fail to protect consumers’ privacy and data.
  • Diminished customer service and trust. Automation can lead to repetitive loops of unhelpful jargon or inability to access a human customer service representative.
  • Harm to consumers. Consumers can often be misled to select the wrong product or service, leading to junk fees or other penalties.

The agency shared anonymous consumer complaints regarding the highlighted issues, with one example detailing how a chatbot could “only pull in the same answers from the [frequently asked questions] page, none of which were helpful to my situation.”

In another example, a consumer was forced to pay late fees after a virtual assistant put them in an “endless loop with no way out.”

Another consumer’s mortgage company was unable to reach a human representative for two weeks after their credit report was “wrongfully … frozen,” leading to a prolonged refinance process.

The CFPB encourages whistleblowers to come forward regarding violations of federal consumer financial laws.

Jeff Dale is Managing Editor, Editorial Projects and Analytics, at Compliance Week. He previously served as Compliance Week's Digital Editor and has worked as a copy editor at the Boston Herald and city editor at The Hour Publishing Co. in Norwalk, Conn.View full Profile

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