Bill Text: NJ S4279 | 2026-2027 | Regular Session | Introduced
Bill Title: Provides disparate impact based on automated decision system as cause of action for certain consumers.
Sponsorship: Partisan Bill (Democrat 1)
Status: (Introduced) 2026-05-14 - Introduced in the Senate, Referred to Senate Commerce Committee [S4279 Detail]
Download: New_Jersey-2026-S4279-Introduced.html
Sponsored by:
Senator TROY SINGLETON
District 7 (Burlington)
SYNOPSIS
Provides disparate impact based on automated decision system as cause of action for certain consumers.
CURRENT VERSION OF TEXT
As introduced.
An Act concerning the use of artificial intelligence when screening certain applications and supplementing Title 10 of the New Jersey Statutes.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. The Legislature finds and declares that:
a. Automated and algorithmic decision-making systems, including artificial intelligence and predictive analytics, are increasingly used in mortgage lending, credit underwriting, tenant screening, rental pricing, and real estate related financial determinations.
b. These systems, while often facially neutral, may replicate or amplify discriminatory outcomes, including disparate impacts on protected classes, through data selection, proxy variables, model structure, or deployment practices.
c. The "Law Against Discrimination," P.L.1945, c.169 (C.10:5-1 et seq.), prohibits discrimination against protected classes in housing and lending industries in the State.
d. The New Jersey Office of the Attorney General recognized disparate impact discrimination in the housing and lending spaces in N.J.A.C.13:16-1.1, et seq.
e. Recent federal actions have reduced or eliminated disparate impact enforcement under federal housing and credit laws, increasing the importance of State-level protections.
f. The Legislature therefore determines that it is in the public interest to regulate the use of automated decision making in these areas to:
(1) ensure transparency, accountability, and fairness in the use of automated systems affecting access to housing and credit;
(2) clarify the application of existing State civil-rights law to automated systems; and
(3) preserve innovation while preventing discriminatory outcomes prohibited under State law.
2. As used in this act:
"Automated decision system" means a computational process, including one derived from machine learning, artificial intelligence, statistical modeling, or data analytics, that is used in whole or in part, to deny, approve, price, rank, or condition access to housing, mortgage credit, rental housing, or related financial services affecting a natural person.
"Covered entity" means a person, lender, housing provider, screening company, creditor, servicer, insurer, or agent that uses or deploys an automated decision system in connection with a housing‑related or credit‑related decision concerning a person in the State.
"Disparate impact" means the result of a policy or practice that actually or predictably results in a disproportionately negative effect on members of a protected class.
"Protected class" means an employee who has one or more characteristics, including race, creed, color, national origin, nationality, ancestry, age, marital status, civil union status, domestic partnership status, affectional or sexual orientation, genetic information, pregnancy, sex, gender identity or expression, disability, or atypical hereditary cellular or blood trait of any individual, or liability for service in the armed forces, for which subsection f, g, h, i, or k of section 11 of P.L.1945, c.169 (C.10:5-12) prohibits discrimination.
3. a. A covered entity or a covered entity's agent, third-party vendor, model developer, or external data source shall not use an automated decision system in a manner that results in a disparate impact on a protected class. Use of an automated decision system in this manner shall constitute a violation of the "Law Against Discrimination," P.L.1945, c.169 (C.10:5-1 et seq.).
b. An individual aggrieved by a violation of this act may bring suit in Superior Court challenging a covered entity or a covered entity's agent, third-party vendor, model developer, or external data source's use of an automated decision system, and shall demonstrate
a violation by proving that the use of the automated decision system results in a disparate impact on a protected class.
c. A covered entity shall have an affirmative defense against liability by demonstrating that:
(1) the challenged use is for a substantial, legitimate, nondiscriminatory purpose; and
(2) no less discriminatory alternative practice or system is available that would serve that interest.
d. A covered entity is liable for the actions of its agent, third-party vendor, model developer, or external data source that is found to have used an automated decision system in a manner that violates the provisions of this act.
4. a. A covered entity that uses an automated decision system shall, at reasonable intervals and no less than once every two years, conduct an algorithmic impact assessment evaluating, in a form and manner as prescribed by the Director of the Division on Civil Rights in consultation with the Attorney General, whether use of the system results in a disparate impact on a protected class.
b. A covered entity shall maintain a record of algorithmic impact assessments conducted pursuant to this section and make the record available to inspection by the Director of the Division on Civil Rights or the Attorney General upon request.
c. Nothing in this section shall require disclosure of proprietary source code or trade secrets.
d. The Division on Civil Rights or the Attorney General may impose a fine of not less than $5,000 on a covered entity who violates the provisions of this section
5. a. A covered entity shall provide clear notice to an individual when an automated decision system is used in a housing or credit decision affecting that individual.
b. An individual adversely affected by a decision made by an automated decision system shall have the right to request meaningful human review of the decision.
c. The Division on Civil Rights or the Attorney General may impose a fine of not less than $5,000 on a covered entity that:
(1) fails to provide requisite notice, pursuant to subjection a of this section, of the use of an automated decision system in a housing or credit decision; or
(2) denies meaningful human review of the decision when requested.
6. a. All rights, remedies, defenses, and procedures available under the "Law Against Discrimination," P.L.1945, c.169 (C.10:5-1 et seq.) shall apply to this act.
b. In addition to any existing remedies or penalties provided for by law, a covered entity that violates the provisions of section 3 of this act shall be subject to the penalties provided pursuant to section 2 of P.L.1983, c.412 (C.10:5-14.1a), in an amount as determined by the director.
7. This act shall take effect 30 days after the date of enactment.
STATEMENT
This bill provides individuals with a way to challenge the use of automated decision systems in the lending and housing sectors by allowing them to claim the use of the technology results in a disparate impact on members of a protected class.
Artificial intelligence and predictive analytics are increasingly common tools used to automate decision making processes in housing and lending spaces. There is a risk these systems will perpetuate historic discrimination in these industries because the data used to train artificial intelligence systems also reflects these patterns and have a disparate impact on protected classes. The federal government reduced regulatory oversight to guard against disparate impacts which causes disservice to consumers as they may not have the resources to challenge their discrimination claims on disparate impact grounds.
The bill codifies disparate impact as a cause of action for consumers in this State by allowing affected customers to file a challenge in Superior Court. The bill also provides an affirmative defense for a covered entity or covered entity's agent by allowing them to demonstrate the challenges use is for a substantial, legitimate nondiscriminatory purpose and no alternative practice is available to further the interest. The bill also holds a covered entity liable for the actions of its agent, third-party vendor, model developer, or external data source found to be in violation of the bill. The bill requires a covered entity to conduct algorithmic assessments and keep records of the assessments. The bill also requires a covered entity provide notice to an individual if an automated decision system was used to make a determination for them and gives the individual the right to request human review of the decision. Violators of the bill are subject to various penalties established by the bill or provided in the current law.
