On April 30, the Consumer Financial Protection Bureau (the CFPB) presented its annual Fair Lending Report to Congress. The Fair Lending Report details the CFPB’s actions and initiatives during 2013. In particular, the Report reveals how the CFPB makes enforcement decisions and includes examples of several of the CFPB’s enforcement actions from past year.
Some highlights from the Report are below:
- Assessing fair lending practices: The Report details how the CFPB assesses whether mortgage and auto lending is fair under the Equal Credit Opportunity Act (ECOA). The factors the CFPB takes into account include: board of director and management participation, policies and procedures, training materials, internal controls and monitoring, corrective action, and other sources of information, including any publicly-available information about the entity as well as information obtained through interviews or meetings with an institution. More details on the review process can be found here.
- ECOA violations in mortgage lending: The Report also lays out how the CFPB determines whether housing finance providers are in violation of ECOA. Several factors include: weak or nonexistent fair lending compliance management systems, underwriting and pricing policies that consider prohibited bases in a manner that violates ECOA or presents a risk of a fair lending violation, and inaccurate Home Mortgage Disclosure Act (HMDA) data. The last factor, in particular, has resulted in enforcement actions by the CFPB. In 2013, the CFPB took action against two mortgage lenders for violating HMDA, which resulted in civil money penalties and other relief.
- Discrimination in auto finance: The Report also outlines the CFPB’s actions in the auto industry. The Report focuses on indirect auto lenders’ discretionary dealer markup and compensation policies. It also describes the CFPB’s proxy method of accounting for race in auto lending statistics and the CFPB suggests that auto lenders should pay close attention to potential discrimination claims.