Since the Consumer Financial Protection Bureau’s inception in 2011, the Office of Fair Lending and Equal Opportunity (Office of Fair Lending) has been a powerful force within the agency. This week, Acting Director Mick Mulvaney announced that the Office of Fair Lending will be transferred from where it currently resides – in the Division of Supervision, Enforcement, and Fair Lending (SEFL) – to the Office of the Director, where it will become part of the Office of Equal Opportunity and Fairness. Despite the similar nomenclature, the priorities of the Office of Fair Lending and the Office of Equal Opportunity and Fairness are vastly different, with the latter having oversight over equal employment opportunity and diversity and inclusion initiatives within the CFPB. The move likely signals a substantial curtailment of CFPB fair lending enforcement activities.

Section 1013 of the Dodd-Frank Act mandated the establishment of an Office of Fair Lending and the statutory language provides that the Office of Fair Lending “shall have such powers and duties as the Director may delegate to the Office, including”:

  • Providing oversight and enforcement of federal fair lending laws (including ECOA and HMDA);
  • Coordinating fair lending efforts with other federal agencies and state regulators;
  • Working with the private industry and consumer advocates on the promotion of fair lending compliance and education; and
  • Providing annual reports to Congress on the Bureau’s efforts to fulfill its fair lending mandate.

The CFPB to date had in fact given the Office of Fair Lending the powers and duties listed in the statute, and Office of Fair Lending attorneys played a substantial role in overseeing fair lending examinations and bringing fair lending enforcement actions. Indeed, the Office of Fair Lending has come under fire for “regulation through enforcement” and for “pushing the envelope” through its aggressive enforcement of federal anti-discrimination statutes against lenders on the basis of statistical analyses (i.e., dealer markup and redlining). It is clear that, as a result of the restructuring, the Office of Fair Lending will no longer have supervisory or enforcement responsibilities. According to an email sent by Mulvaney to CFPB staff that was leaked to several news outlets, the Office of Fair Lending’s new focus will be on advocacy, coordination, and education. Although SEFL as a whole still maintains responsibility for fair lending supervisory and enforcement matters, this restructuring signals a de-emphasis on fair lending and likely will lead to a significant decrease in the number of fair lending examinations, investigations and enforcement actions brought by the Bureau. Indeed, Congress presumably required the establishment of a separate fair lending office out of recognition that having such an office would ensure a persistent attention to fair lending issues. Stripping the office of supervisory and enforcement responsibilities will similarly result in less of a focus on those issues. While SEFL leadership and staff are likely to continue to pursue fair lending matters, those matters will now compete for attention and resources with the myriad other issues over which the CFPB has jurisdiction.

In its Fair Lending Report released last year, the Bureau’s then-Director Cordray touted its “historic resolution of the largest redlining, auto finance, and credit card fair lending cases.” Cordray also identified redlining, mortgage loan servicing, student loan servicing, and small business lending as the Bureau’s fair lending priorities going forward. Under the Bureau’s new leadership, fair lending issues evidently will no longer be a top priority. With the rollback in the CFPB’s fair lending enforcement activities, there may be an uptick in consumer advocacy groups seeking other avenues for fair lending relief, such as class action litigation and complaints filed with HUD and state agencies tasked with enforcing state anti-discrimination laws.