Algorithms Regulatory Frameworks & Compliance 2

Question 1

Under the EU AI Act, which risk category applies to algorithms used in credit scoring decisions that affect individuals?

Accepted Answer

High risk

Answer

Credit scoring algorithms fall under the high-risk category because they can significantly impact individuals' access to financial services.

Question 2

Which U.S. regulation requires financial institutions to provide adverse action notices when an algorithm denies a loan application?

Accepted Answer

Equal Credit Opportunity Act (ECOA)

Answer

ECOA requires creditors to provide specific reasons for adverse credit decisions, which applies to algorithmic lending decisions.

Question 3

What does 'algorithmic accountability' primarily require organizations to demonstrate?

Accepted Answer

That decisions made by algorithms can be explained and audited

Answer

Algorithmic accountability means organizations must be able to explain how automated systems make decisions and allow for auditing of those decisions.

Question 4

Which principle in GDPR directly limits how long data used to train algorithms can be retained?

Accepted Answer

Storage limitation

Answer

GDPR's storage limitation principle requires that personal data not be kept longer than necessary for its stated purpose.

Question 5

A sorting algorithm is used to prioritize job applicants. Under U.S. law, which legal theory applies if the algorithm disproportionately screens out a protected class?

Accepted Answer

Disparate impact

Answer

Disparate impact theory applies when a facially neutral practice (like an algorithm) has a disproportionately negative effect on a protected group.

Algorithms Practice Test

Algorithms Practice Test

Algorithms Regulatory Frameworks & Compliance 2