Joint investigations, cross-agency partnership, cooperation … terms all too familiar to regulatory and defense practitioners accustomed to collaboration among the alphabet soup of federal regulators. These terms may now be regularly used to describe the emergent relationship between the Department of Justice (DOJ) and the Consumer Financial Protection Bureau (CFPB). Indeed, the Attorney General’s 2014 Annual Report to Congress Pursuant to the Equal Credit Opportunity Act Amendments of 1976, published this month, touts the increased cooperation between these agencies to vigorously enforce federal fair lending laws. One such law, the Equal Credit Opportunity Act (ECOA), prohibits lenders from discriminating against credit applicants on the basis of race, color, religion, age, sex and national origin, among other factors.
The Annual Report provides a lens into fair lending enforcement activity over the past year, while foreshadowing things to come. One obvious trend is that the CFPB and the DOJ are talking - a lot. This budding partnership, however, should come as no surprise. Overlapping federal jurisdiction makes these agencies natural allies in fair lending enforcement. The DOJ – through the Housing and Civil Enforcement Section in the Civil Rights Division – is authorized to enforce fair lending laws and civil rights statutes, including the ECOA, the Fair Housing Act (FHA) and the Servicemembers Civil Relief Act (SCRA). The CFPB, through jurisdiction granted to it by Title X of the Dodd-Frank Act, shares enforcement jurisdiction over certain fair lending laws, including the ECOA. Indeed, the coordination between the DOJ and the CFPB is prescribed in a 2012 Memorandum of Understanding (MOU) between the agencies.
Notably, the ECOA requires financial regulators to refer matters to the DOJ when the regulator suspects a lender of engaging in a pattern or practice of discrimination. The numbers provided in the Annual Report speak for themselves. Of the 18 referrals the DOJ received in 2014, 15 came from the CFPB. Ten of those referrals resulted in DOJ investigations, including four joint investigations with the CFPB. And one joint investigation resulted in a landmark $169 million settlement with a leading credit card issuer for discriminating against Hispanic borrowers by excluding them from certain debt-repayment programs. An additional seven joint investigations initiated before 2014 are still under way. These figures mark a significant uptick in DOJ-CFPB cooperation, a trend which will only continue upward.
Lenders and their counsel should be cognizant of this cooperation when dealing with the CFPB in any matters, particularly those relating to fair lending. And know that a possible DOJ investigation is only a referral away.