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.
Continue Reading CFPB, DOJ Propose $22 Million Penalty Against Nonbank Mortgage Lender for Illegal Redlining
On May 26, the CFPB published a circular affirming that federal anti-discrimination laws require companies to explain to consumers the specific reason a credit application was denied, even if the creditor is relying on complex algorithms.
Continue Reading CFPB Affirms Compliance with ECOA Adverse Action Notice Requirements
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.”
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:
Continue Reading CFPB, DOJ and OCC Take Action Against National Bank for Alleged Redlining
On September 1, the CFPB issued a Notice of Proposed Rulemaking (NPRM) to implement Section 1071 of the Dodd-Frank Act, which amended the Equal Credit Opportunity Act (ECOA) to require financial institutions to collect and report data regarding credit applications made by women-owned, minority-owned, and small businesses (we previously discussed the proposed rule in an earlier Consumer Finance & FinTech Blog post here). The proposed rulemaking is an expansive 918 pages and the CFPB provides both a summary and table of contents to assist industry participants in their review and comments.
Continue Reading CFPB Issues Proposed Rule Under Section 1071 of Dodd-Frank to Collect Small Business Lending Data
The U.S. District Court for the Northern District of California recently issued an order setting September 30 as the deadline for the CFPB to issue a notice of proposed rulemaking (NPRM) on small business lending data based on Section 1071 of the Dodd-Frank Act. Section 1071 amended the Equal Credit Opportunity Act to require financial institutions to collect, maintain, and report to the CFPB data on credit applications made by women-owned, minority-owned, and small businesses. Such data includes the race, sex, and ethnicity of the principal owners of the business, and would be used to facilitate enforcement of fair lending laws and to help better identify the business and community development needs of these types of entities. The order follows a complaint that was filed in 2019 alleging the wrongful delay by the CFPB in adopting regulations to implement Section 1071. The deadline comes as a result of a stipulated settlement agreement reached in 2020, which established a timetable for the CFPB to engage in Section 1071 rulemaking.
Continue Reading CFPB To Issue Data Collection Regulations for Small Business Lenders in September