November 24, 2021 - The Federal Trade Commission has issued limited guidance in the area of artificial intelligence and machine learning (AI), but through its enforcement actions and press releases has made clear its view that AI may pose issues that run afoul of the FTC Act's prohibition against unfair and deceptive trade practices. In recent years it has pursued enforcement actions involving automated decision-making and results generated by computer algorithms and formulas, which are some common uses of AI in the financial sector but may also be relevant in other contexts such as health care. In FTC v. CompuCredit Corp., FTC Case No. 108-CV-1976 (2008), the FTC alleged that subprime credit marketer CompuCredit violated the FTC Act by deceptively failing to disclose that it used a behavioral scoring model to reduce consumers' credit limits. If cardholders used their credit cards for cash advances or to make payments at certain venues, such as bars, nightclubs and massage parlors, their credit limit might be reduced. The company, the FTC alleged, did not inform consumers that these purchases could reduce their credit limit, neither at the time they signed up nor at the time they reduced the credit limit.

AI is hungry for data. Training and testing the machine-learning tools to perform desired tasks consumes huge lakes of data. More data often means better AI. Yet gathering this data, especially data concerning people's behavior and transactions, can be risky. For example, In January of this year, the US FTC reached a consent order with a company called Everalbum, a developer of photography apps.

AI is hungry for data. Training and testing the machine-learning tools to perform desired tasks consumes huge lakes of data. More data often means better AI. Yet gathering this data, especially data concerning people's behavior and transactions, can be risky. For example, In January of this year, the US FTC reached a consent order with a company called Everalbum, a developer of photography apps.

AI is hungry for data. Training and testing the machine-learning tools to perform desired tasks consumes huge lakes of data. More data often means better AI. Yet gathering this data, especially data concerning people's behavior and transactions, can be risky. For example, In January of this year, the US FTC reached a consent order with a company called Everalbum, a developer of photography apps.

Late last year, San Francisco face-recognition startup Everalbum won a $2 million contract with the Air Force to provide "AI-driven access control." Monday, another arm of the US government dealt the company a setback. The Federal Trade Commission said Everalbum had agreed to settle charges that it had applied face-recognition technology to images uploaded to a photo app without users' permission and retained them after telling users they would be deleted. The startup used millions of the photos to develop technology offered to government agencies and other customers under the brand Paravision. Paravision, as the company is now known, agreed to delete the data collected inappropriately.