As reported in an April 8, 2016 article in Auto Finance SubPrime News, Senator Tom Cotton (R-AR), at the Senate Banking Committee’s CFPB hearing on April 7, 2016, took direct aim at CFPB Director Richard Cordray. He pressed the Director with questions about “…how the CFPB determined the amount of consumers harmed by auto financer’s Ally’s practices and how these borrowers would be able to secure restitution from the pool of $80 million included in Ally’s settlement with the bureau.”

The article continued:

Cotton asked, “Did the Department of Justice recommend that you had to opt-in under penalty?’ “We worked with the Justice Department,” Cordray replied “This is routinely required on federal forms,” Cotton retorted.” “We’re not doing something different than the Department of Justice in this case. We’re working together. We’re on the same page,” Cordray said. Cotton then questioned, “Did you personally decline the Department of Justice’s recommendation that a penalty of perjury would be attached to such a statement?” Cordray retorted, “I don’t believe I did. I’d be happy to have my staff follow up with you.

The research methodology to determine those who suffered disparate impact continues to be suspect from a variety of sources and researchers in light of the fact that the veracity of the data continues to remain questionable.

In a panel at the ABA’s Business Law Section Spring Meeting this week, “Is Fair Lending Enforcement Fair For All”, panelists addressed various viewpoints for why the actions are or are not properly addressing discrimination. The discussion included views on the USSC decision on the FHA’s Inclusive Communities, as well as a lively debate centered on the CFPB’s research methodology to determine discrimination.

Reasonable citizens and consumers observing these recent CFPB actions may be concerned that the federal government might not apply fair standards for all citizens equally. Furthermore, a reasonable person might surmise that if the government is going to utilize research to award financial remuneration to individuals based on race, they should use methods which can specifically, effectively and efficiently identify those impacted individuals.

While $80 million to 325,000 yet to be identified specific minority individuals by the CFPB makes great headlines – the average $246.16 payment per person – should be guaranteed by the Bureau to be 100% accurate and not containing any fraudulency through opt-in clauses for penalty of perjury by recipients seeking remuneration.

Accurate methodology matters when claims of discrimination and disparate impact are asserted.

Mark Dobosz