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On April 26, an association of Texas state banking organizations and a Texas minority depository institution filed a joint complaint against the CFPB in Texas federal court seeking to invalidate a recently finalized agency rule requiring lenders to gather and report data on loan applications from minority, LGBTQ+, and women-owned small businesses (see previous blog post detailing this rule here). The CFPB rule requires that small business lenders must collect and report on the following data points:…

Continue Reading Lawsuit Challenges CFPB Reporting Rule for Small Business Lending

On April 25, the CFPB, FTC, EEOC, and Civil Rights Division of the DOJ issued a joint statement outlining the agencies’ collective commitment to monitor the development and use of automated systems and artificial intelligence and enforce their respective authorities where such systems produce outcomes that result in unlawful discrimination. The joint statement explains that potential discrimination in automated systems can come from different sources, including:…

Continue Reading Federal Regulators Remain Focused on AI-based Discrimination

Today, the CFPB has issued the small business lending final rule to implement changes to the Equal Credit Opportunity Act made by Section 1071 of the Dodd-Frank Act to require financial institutions to compile data regarding certain business credit applications and report that data to the CFPB (we previously discussed Section 1071 rulemaking in prior blog posts here and here). According to the CFPB, Section 1071’s purposes are “facilitating enforcement of fair lending laws and enabling the identification of business and community development needs and opportunities for women-owned, minority-owned, and small businesses.” While the final rule includes almost 900 pages of rulemaking, highlights include the following:…

Continue Reading CFPB Issues Small Business Lending Rule

On February 3, the U.S. District Court for the Northern District of Illinois issued an opinion and order dismissing with prejudice the CFPB’s complaint for violations of the ECOA against a mortgage lender and its owner violated for engaging in discriminatory marketing and applicant outreach practices. In particular, the CFPB alleged fair lending violations based on comments made by the company on a local radio station that the CFPB alleged discouraged prospective minority applicants from submitting mortgage loan applications to the lender. The Bureau’s allegations relied on the ECOA’s implementing regulation, Regulation B, which prohibits creditors from making any statements “to applicants or prospective applicants that would discourage on a prohibited basis a reasonable person from making or pursuing an application.”…

Continue Reading District Court Dismisses CFPB Redlining Action Against Nonbank, Limits ECOA’s Reach

On July 27, the CFPB and DOJ proposed a settlement with a nonbank mortgage lender for its discriminatory “redlining” lending practices against minority families living in the greater Philadelphia area. If approved by the court, the mortgage lender would be required to pay more than $22 million in civil penalties, and would be the CFPB’s first nonbank mortgage redlining settlement.
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Continue Reading CFPB, DOJ Propose $22 Million Penalty Against Nonbank Mortgage Lender for Illegal Redlining

On May 9, the CFPB released an advisory opinion affirming that ECOA and its implementing rule, Regulation B, protect not only those persons actively seeking credit, but also those who have sought and received credit.  The CFPB stated in the opinion that “[d]espite this well-established interpretation, the Bureau is aware that some creditors fail to acknowledge that ECOA and Regulation B plainly apply to circumstances that take place after an extension of credit has been granted, including a revocation of credit or an unfavorable change in the terms of a credit arrangement.”  In addition, the Bureau states that it is “aware that some creditors fail to provide applicants with required notifications that include a statement of the specific reasons for the adverse action taken or disclose an applicant’s right to such a statement.” …
Continue Reading CFPB Affirms that ECOA Protects Consumers After Receiving Credit

On March 22, HUD announced the delivery of the Interagency Task Force on Property Appraisal and Valuation Equity (PAVE) Action Plan to President Biden.  The PAVE Action Plan outlines actions that are intended to substantially reduce racial bias in home appraisals, and to promote generational wealth creation through home ownership.  According to the Task Force’s executive summary, “[o]n average, homes in majority-Black neighborhoods are valued at less than half of those in neighborhoods with few or no Black residents.”  The PAVE Task Force is composed of thirteen federal agencies and offices. …
Continue Reading Interagency Task Force Unveils Action Plan to Address Racial Discrimination in Home Appraisals

In a significant move, the CFPB announced on March 16 a revision to its supervisory operations to address discrimination outside of the traditional fair lending context, with future plans to scrutinize discriminatory conduct that violates the federal prohibition against “unfair” practices in such areas as advertising, pricing, and other areas to ensure that companies are appropriately testing for and eliminating illegal discrimination.  Specifically, the CFPB updated its Exam Manual for Unfair, Deceptive, or Abusive Acts or Practices (UDAAPs) noting that discrimination may meet the criteria for “unfairness” by causing substantial harm to consumers that they cannot reasonably avoid.
Continue Reading Regulation by Definition: CFPB Broadens Definition of “Unfairness” to Rein in Discrimination

On February 23, eight federal agencies including the CFPB, FDIC, OCC, Federal Reserve Board, NCUA, HUD, DOJ, and FHFA issued an interagency statement to remind creditors of the ability under the ECOA and Regulation B to establish special purpose credit programs (SPCPs) to meet the credit needs of specified classes of persons. According to an accompanying blog, the CFPB stated that “lenders are permitted to design and implement SPCPs to extend credit to a class of persons who would otherwise be denied credit or would receive it on less favorable terms, under certain conditions.”
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Continue Reading Federal Agencies Issue Interagency Statement on Special Purpose Credit Programs Under ECOA, Regulation B

The CFPB and DOJ, in cooperation with the OCC, filed a complaint and proposed consent order last week in the Western District of Tennessee against a national bank alleging that the bank violated the Fair Housing Act (FHA), the Equal Credit Opportunity Act (ECOA) and its implementing regulation, Regulation B, and the Consumer Financial Protection Act of 2010 (CFPA).  Specifically, the joint complaint alleges that the bank:
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Continue Reading CFPB, DOJ and OCC Take Action Against National Bank for Alleged Redlining