CFPB Stands Firm on Fair Lending and Disparate Impact
The Consumer Financial Protection Bureau issued a press release Wednesday that every financial compliance officer in the country should read. In it, the CFPB threatened to use “all available legal avenues, including disparate impact, to pursue lenders whose practices discriminate against consumers.” (Disparate impact occurs when a lender’s practices or policies appear to be neutral, but have discriminatory effects.)
The CFPB, which has the authority to supervise and enforce compliance with the Equal Credit Opportunity Act, underscored its message with the headline, “Consumer Financial Protection Bureau to pursue discriminatory lenders.”
““We want consumers to avoid the marketplace’s silent pickpocket —discrimination,” CFPB Director Richard Cordray was quoted as saying.
In addition, the CFPB’s news release described its campaign to educate and equip consumers about discrimination, and included a link to tips and warning signs. Examples include:
You are treated differently in person than you are on the phone.
You are discouraged from applying for credit.
You are denied credit, but not given a reason why or told how to find out why.
The news release also announced that it had just released a compliance bulletin reaffirming the CFPB’s commitment to enforcing the ECOA by recognizing the disparate impact doctrine As the CFPB exercises its supervisory and enforcement authority, “it will consider evidence of the disparate impact doctrine as one method of proving lending discrimination under the ECOA and Regulation B,” according to the bulletin released by the agency.
The bottom line: Fair lending continues to be a focus in Washington. It remains the No. 1 concern by bankers. Disparate impact theory is not new, but according to the American Banker, is “catching many lenders off guard.”
More than ever, it is essential that financial institutions review and understand their numbers from a fair-lending perspective. TRUPOINT Partners is committed to helping community banks analyze and interpret their data.