A conversation between New York State Department of Financial Services Superintendent Adrienne A. Harris and NCRC Chief Policy Counsel Eden Forsythe at the Just Economy Conference on March 26, 2025. They discussed the future of AI and the Community Reinvestment Act at both the federal and state of New York levels.
Adrienne A. Harris, Superintendent, New York State Department of Financial Services
Eden Forsythe, Chief Policy Counsel, NCRC
Transcript:
NCRC video transcripts are produced by a third-party transcription service and may contain errors. They are lightly edited for style and clarity.
Harris
I originally started my career in a white shoe law firm in New York, before coming to the Obama Treasury Department and then overseeing the financial services portfolio in the Obama White House. Spent some time teaching grad school at the University of Michigan before then coming into this…. Awesome, blue. Some go blue, folks, some Wolverines in here sounds like and as you said, I came into this post about three and a half years ago, now.
Forsythe
That’s great. Is there something most surprising about the job?
Harris
Oh, gosh, every day brings a new challenge and surprise. I think you know, for me, traditionally, the the office had really been focused on enforcement, which is incredibly important, and we’ve brought about 117 enforcement actions in my time. But for me, enforcement really is the last resort. We want to write strong rules and have those on the books. So to that, you know, to that end, we’ve done now 59 regulations across all the areas that we cover, about 100 pieces of guidance, 117 enforcement actions. And then we’ve really been building the department so that it can be a modern regulator and oversee an industry that moves very quickly. So in my time, we’ve hired about 550 people. We’ve promoted 450 of our teammates, and then we’ve been really, really focused on kitchen table issues. And so every year, alongside our enforcement actions, I’ve been very, very focused on restitution for consumers. So in my three and a half years there, we’ve now gotten about $650 million back to New Yorkers, so real money in people’s pockets, and I’m really proud of that.
Forsythe
So speaking of regulations, you know, we had our Hill Day here yesterday, and so one of the things that we learned during our Hill Day is the Senate and House is looking at doing some voting on repealing one of the rules that has to do with overdraft. And I think New York currently is in the process of working on those rules. Talk to us a little bit about how you think about the tensions and the framework and especially in the current environment.
Harris
Yeah, I mean, so we had a mandate from the legislature to write overdraft rules. And so those rules are currently in the proposal phase. But essentially what we did is, because we regulate such a diversity of institutions, from G sibs on the one hand, to very, very small community banks on the other, we really tried hard to write a rule that could fit those different business models. So for instance, we said no overdraft fees over $20, no overdraft fees larger than the purchase itself. You can’t charge more than three overdraft or NSF fees in a day. You can’t charge an overdraft fee for an electronic transaction that was instantly declined. Right? We really tried to be specific and look at all the ways overdraft fees and non-sufficient fund fees get get charged to so to make sure that we were addressing all the ways that happens to consumers. So as I said, the rule is currently in its comment period. We’re really looking forward to feedback from the public and from all of our stakeholders, and hopefully move to finalize that rule in short order.
Forsythe
And then, do you think the current federal landscape change or influence your current work at all?
Harris
No, I mean, we, you know, we obviously work very closely with with the federal government, be it folks in Congress, on both sides of the aisle, with our federal regulatory counterparts, with our international counterparts, but for us, you know, our mandate in New York is very clear. It’s set by the governor and the state legislature, and we execute accordingly.
Forsythe
Interesting, yeah, well, I want to jump into something that is near and dear to folks here, the Community Reinvestment Act, right? It’s this is the other CRA. For a lot of folks here in Washington, CRA stands for something else, usually the Congressional Review Act. But for us here, it is always the Community Reinvestment Act. Yeah? New York, of course, fills in the gaps in the federal regulation. Talk to us a little bit about how that has affected New Yorkers, and your thinking on that issue, yeah?
Harris
So New York is one of, I think maybe seven states that have a state level CRA. We had it on the books, of course, when I came in for banks. But as this crowd will know well, the majority of mortgages are written by nonbank entities, and so for us, it was important to fill that gap and apply CRA protections to the nonbank mortgage industry as well. It’s obviously a little bit different, right? They don’t have a deposit base. So when there are where, whereas there are investment requirements on the banking side, those things don’t apply the same way when you have a nonbank mortgage lender. We had to think a little bit differently about the assessment area, because they don’t always have the physical footprint that a bank might have. Those rules are also in the proposal phase, but given that the majority of residential mortgages are made by non bank lenders that felt like a really important gap to fill. And then we have a great unit, the Consumer Examination Unit inside DFS, that does examinations for all kinds of consumer protection laws, including the Community Reinvestment Act, to examine our institutions to make sure they’re giving credit across communities as they should, and in a nondiscriminatory manner. And I think similar to the federal rules, right? We give grades to our institutions. We require remediation where appropriate, because we want to make sure that all New Yorkers get the credit they need to live healthy, robust financial lives.
Forsythe
Now we’re following that really closely.
Harris
yeah, so we’re excited about it so we encourage people to make comments on that as well.
Forsythe
I want to switch gears for a second and talk to you a little bit about about AI, right? That’s a topic that has come up a lot in the last couple of years. We increasingly talk about, you know, the efficiencies of AIS. We now do legal I now do legal research with AI, right? That’s, that’s, I don’t even think that was a thing law school.
Harris
I wish it was a thing in law school.
Forsythe
Probably would have made law school a little easier, right?
Harris
It would have made it a lot easier.
Forsythe
One of the things I’m really curious on how you think about some of the tensions between efficiency and consumer protection, and how you think about this very dynamic field. Well, on the one hand, there’s clearly need for regulation. On the other hand, you want to see a growth and innovation.
Harris
Yeah, absolutely. I mean, I think, you know, one of the things that’s so special about New York, because it’s the financial capital. We really do think a lot about how you protect consumers and markets and at the same time, how you can be good for business. And as a regulator, right, I have to. in New York, our mandate is, is both of those things. So I have to find that balance of making sure we’re protecting consumers in markets. We’re guarding against risk, but we’re we’re not doing it in a way that drives business out of out of New York. I think for AI, it’s so big, right? Everybody’s talking about AI and agentic AI and generative AI. And so for us, we really wanted to take an approach that was specific to some of the industries we regulate, and within that some of the activities they conduct. So for instance, last year, we did guidance on insurance underwriting and pricing and AI. And there’s other things in insurance we could have tackled, and we probably will tackle customer service and claims management, but we thought, let’s start with this narrow slice. Even with guidance, just like with our rule making, we very often put them out for public comment as well, because we think that’s important to be engaging our stakeholders that way. But what we effectively said to the industry is, doesn’t really matter what technology you’re using, this applies to AI. The framework of nondiscrimination applies when you are using AI, and so we expect you to understand the algorithms that you’re using. And obviously, insurance is sort of a tricky space, because it is a business of discrimination in the sort of truest sense of the word, and that it’s risk based, right? So we don’t allow unfair discrimination, but there is price discrimination according to risk, right? Everybody, anybody who has, like a 16 year old driver in their household understands what happens to your insurance premium when you add them to the policy. Yeah, some nods I see. So for us, it was, how do you prevent this unfair discrimination if there’s AI in pricing and underwriting? And we said, these principles of unfair discrimination still persist, and we expect industry to be able to understand and explain the algorithm, to test the algorithm, to make sure that there isn’t disparate impact. Industry came back and said, Well, how could we possibly test and we said, well, here’s how. There’s plenty of statistical methodologies that we expect you to use. It will not be okay to say, well, we hired a vendor, right? It’s a third party that does the algorithmic work. It’s not us. We expect the industry to be accountable for the parties that it works with and the vendors that they contract with. So there really is and there’s governance requirements that we put in place. So we really want to make sure we’re holding them accountable for the fairness of the technology that they’re using. But in a different context, we did, we also did guidance for AI and cyber security, and that was a place where I think we really tried to show the balance of the benefit and the risk. On the one hand, AI really strengthens the threat vector of cyber security, right? Or of cyber incidents. Gone are the days where you have to be a nation state to perpetrate a large cyber security crime. Now you can be an individual in your garage with the help of AI and really do some real damage, and we wanted to highlight that for our regulated entities, but also highlight ways that they could use AI as part of their defenses to protect their own infrastructure but also protect their consumer, right? So I think that’s another example where we took a narrow slice. And then we’re looking at ways that we can use AI as a regulator, right? And use these tools to help us protect consumers, help us preserve the safety and soundness of the institutions we regulate. I will say one small example; I’ll give a second example. We’re piloting a chat bot now. So if you’re a consumer and you go to the DFS website, right, it might take you a while to hunt around and find the rules that you’re looking for or the guidance or whatever consumer alert you might be interested in. But if you have a large language model based chat bot and you’re a consumer, you can come to the website and use your plain language, whatever language that may be, and ask the website a question and get a plain language answer. That’s a really powerful thing if you’re a consumer. And similarly, we’re now working on a project with the State University of New York where we’re looking at mortgage data, insurance data and weather data to start to think about how climate really impacts disadvantaged communities, communities of color, and other things, when we think about mortgage insurance and what climate change is going to do to a lot of those areas, so…
Forsythe
So it sounds like you’ve done a lot of outreach in this area and thought a lot about the issue. Yeah, are there themes or issues or subsets of issues that have surprised you that it was
Harris
No, I don’t think so. I you know, in general, when we, when we’re talking to industry about this, right, there’s always, there’s plenty of sort of bad behavior, and we work very quickly to address that, I think in general, people are trying to move slowly and carefully in the sector, but we so we want to make sure that we’re providing the proper guardrails, and again, reminding people about the existing regulatory frameworks and that they still apply, even in the case of AI usage.
Forsythe
That’s really, that’s really interesting. One of the themes from this, from from us talking right now, what I’m picking up on is that being a regulator is not static. Sounds like you’re constantly reacting to different needs and challenges, right? To make it both efficient and responsive.
Harris
Yeah. I mean, I think we need to, obviously, there are always surprises, right? So we need to be reactive, but we also need to be forward looking. And I think for us, that’s what we really try to do, is anticipate where where industries are going, and make sure we’re keeping abreast of those developments so that we can be there to protect consumers, right? We recently, about two years ago, we got authority to regulate pharmacy benefit managers. There’s not a lot of regulation in that space. I think it’s maybe 11 states and nothing yet on the federal level. But this is an area, you know, an industry that purports to provide discounts on prescription drugs to consumers. But when you really dig in, you find that there’s a lot of rent seeking that happens there. And of course, prescription drugs are one of the fastest increasing costs in healthcare, and they’re one of the biggest contributors to increasing costs of healthcare. So if we can get at these middlemen, regulate them, oversee them, provide transparency to consumers that helps bring down the price of prescription drugs, helps bring down the price of health care, right? That’s important to do.
Forsythe
Speaking of future and AI so like in five, say, five years from now, perhaps even back right here, what are some of the things you think we’ll be talking about spaces?
Harris
I don’t know what we could be talking about tomorrow. It seems like things, things change so rapidly now we’re clearly still going to be talking about things like AI and cyber security five years from now, there’s a lot of consumer protection work that the states are doing, that New York is doing around homeowners insurance in the face of climate change. Typically, the insurance industry anticipates spending about $200 billion on natural on natural disaster / catastrophes in the US. The California wildfires were about a $50 billion catastrophe. So already, by January, a quarter of the expected damage we expect to see for the country for the whole year has already occurred. So clearly that insurance landscape is changing, and we need to make sure we’re thinking about that for homeowners, for renters, for drivers, as a regulator. You know the new things I think PBMs are still going to be around. We’re still going to be thinking about health care, obviously, the AI stuff, I think will just get faster and faster. And so it’s really important that we’re making sure that people feel protected and safe and that they can conduct their financial lives in a way that feels productive and safe for them.
Forsythe
We might still be talking about the Community Investment Act.
Harris
We might be talkingabout the Community Reinvestment Act at the federal level. Hopefully by then, our will be fully employed. Least in New York, with respect to our non bank lenders.
Forsythe
I’ll end, as our time is almost up, I’ll end us on a note that may be curious for the folks here in the room. Any recommendations for a book or TV series or anything, oh gosh, anything you’re watching?
Harris
That’s a tough one. I mean, is there anything on TV that’s not by Taylor Sheridan. Like, are there any shows that are not Taylor Sheridan shows? I don’t know somebody who grew up in the southwest. I find those sort of a feeling, but there’s a lot of them. Anybody who knows me knows I spend a lot of time watching HGTV. I find it really soothing to watch renovation shows. I don’t know why. I’ll check it out. Yeah, exactly. I wish I had a more like high minded recommendation for you all, but that’s how I relax anyway.
Forsythe
Well, I think that was the last question I had. And thank you so much for being here. This is the superintendent Agent Harris.
Harris
Thanks everyone.
