Fair Lending Report of the Consumer Financial Protection Bureau, April 2017, 25250-25266 [2017-11318]
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Fannie/Freddie public loan level data,
and the National Mortgage Database
(NMDB).35 In addition, the Bureau is
planning a limited request of data
directly from creditors and other
stakeholders. As a preliminary matter,
the following types of analyses might be
informative of the impact of the rule
(the Bureau will consider other analyses
as well):
(a) The Bureau will utilize HMDA for
an analysis of both broad market trends
in origination volumes and trends for
particular sub-populations, as well as
any changes in the frequency of rejected
applications and causes for rejections,
including before and after the
introduction of the rule. This analysis,
although not directly informative of the
impact of the rule, may indicate
whether there were any significant
changes in the market right after the
introduction of the rule.
(b) The Bureau will use datasets, such
as NMDB or servicing datasets, that
contain information about debt-toincome ratios to analyze changes in
origination volumes of jumbo loans with
debt-to-income ratios around the 43%
cutoff for QM loans.
(c) The Bureau may conduct a similar
analysis with respect to the points and
fees threshold, provided the available
data allow. The Bureau may perform
this analysis for both jumbo loans and
conforming loans because conforming
loans also must satisfy the points and
fees test in order to receive QM status.
(d) To the extent the existing data and
resources allow, the Bureau will
examine rates of delinquency and
default among major categories of loans:
Non-QM loans; General QM Loans, and
Temporary GSE QM Loans. Although
the absolute default rates might have
been affected by factors other than the
rule, changes in relative default rates
between different types of QM loans and
between QM loans and non-QM loans
may be informative regarding the impact
of the rule.
35 The NMDB is an ongoing project, jointly
undertaken by the Federal Housing Finance Agency
(FHFA) and the Bureau, with the goal of providing
the public and regulatory agencies with data that
does not include any personally identifiable
information but that otherwise may serve as a
comprehensive resource about the U.S. residential
mortgage market. The core data in the NMDB are
drawn from a random, personally anonymous, 1-in20 sample of all credit bureau records associated
with a closed-end, first-lien mortgage, updated
quarterly. Mortgages, after being unlinked from any
personally identifiable information or
characteristics that could be traced back to any
borrower, are followed in the NMDB database until
they terminate through prepayment (including
refinancing), foreclosure, or maturity. The
information available to the FHFA, CFPB, or any
other authorized user of the NMDB data never
includes any personally identifiable information.
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2. Analysis of cost of credit before and
after the rule, as well as recent trends.
Among other datasets that provide
insight in mortgage pricing, of particular
value are data procured by the Bureau
from Informa Research Services, which
includes daily rate sheets for thirty to
fifty top creditors, depending on the
period. These data present a unique
opportunity to study changes in cost of
credit as well as changes in eligibility
requirements that may have occurred
after the introduction of the rule.
3. Interviews with creditors regarding
their activities undertaken to comply
with the requirements of the ATR/QM
Rule.
Through interviews with creditors,
the Bureau will obtain information on:
(a) The changes that creditors might
have made to their business practices in
connection with the requirements of the
rule, including leaving the market; (b)
any reported challenges in meeting the
rule’s requirements, as experienced by
creditors in the three years since the
rule has become effective; and (c)
creditors’ experience with the
Temporary GSE QM, including their
consideration of the eventual expiration
of this provision. The primary goal of
the research is to understand any
changes in pricing and underwriting
strategies made by creditors in
connection with the requirements of the
rule and the possible impact on access
to credit for consumers.
4. Consultations with government
regulatory agencies, government
sponsored enterprises, and private
market participants.
The Bureau believes that a non-trivial
share of current GSE-eligible and FHA/
VA/RHA-eligible loans have a debt-toincome ratio exceeding 43 percent.
Additionally, there may exist a yet
unspecified quantity of GSE or
government-eligible loans that meet GSE
or government underwriting guidelines
but do not meet Appendix Q
requirements on documentation and
calculation of income and debt. Many
such loans would not have been QM if
not for the temporary provision
(although potentially a subset of those
loans could have been QM if
documented consistent with Appendix
Q and if the DTI ratio calculated
consistent with Appendix Q were at or
below 43%). In consultations with
regulators, GSEs, and private market
participants, the Bureau seeks to obtain
data to analyze, or otherwise develop an
understanding, of how many loans fall
within this category, how effective the
provision has been in preserving access
to credit, and anticipated market
responses if the temporary provision
were to expire.
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V. Request for Comment
To inform the assessment, the Bureau
hereby invites members of the public to
submit information and other comments
relevant to the issues identified below,
as well as any information relevant to
assessing the effectiveness of the ATR/
QM Rule in meeting the purposes and
objectives of Title X of the Dodd-Frank
Act (section 1021) and the specific goals
of the Bureau (enumerated above). In
particular, the Bureau invites the public,
including consumers and their
advocates, housing counselors, mortgage
creditors and other industry
representatives, industry analysts, and
other interested persons to submit the
following:
(1) Comments on the feasibility and
effectiveness of the assessment plan, the
objectives of the ATR/QM Rule that the
Bureau intends to emphasize in the
assessment, and the outcomes, metrics,
baselines, and analytical methods for
assessing the effectiveness of the rule as
described in part IV above;
(2) Data and other factual information
that may be useful for executing the
Bureau’s assessment plan, as described
in part IV above;
(3) Recommendations to improve the
assessment plan, as well as data, other
factual information, and sources of data
that would be useful and available to
execute any recommended
improvements to the assessment plan;
(4) Data and other factual information
about the benefits and costs of the ATR/
QM Rule for consumers, creditors, and
other stakeholders in the mortgage
industry; and about the impacts of the
rule on transparency, efficiency, access,
and innovation in the mortgage market;
(5) Data and other factual information
about the rule’s effectiveness in meeting
the purposes and objectives of Title X of
the Dodd-Frank Act (section 1021),
which are listed in part IV above;
(6) Recommendations for modifying,
expanding, or eliminating the ATR/QM
Rule.
Dated: May 23, 2017.
Richard Cordray,
Director, Bureau of Consumer Financial
Protection.
[FR Doc. 2017–11218 Filed 5–31–17; 8:45 am]
BILLING CODE 4810–AM–P
BUREAU OF CONSUMER FINANCIAL
PROTECTION
Fair Lending Report of the Consumer
Financial Protection Bureau, April 2017
Bureau of Consumer Financial
Protection.
AGENCY:
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potential fair lending violations, based
on our prior guidance.
We also have achieved remarkable
SUMMARY: The Bureau of Consumer
success in our fair lending enforcement
Financial Protection (CFPB or Bureau) is activities during this time period,
issuing its fifth Fair Lending Report of
reaching historic resolution of the
the Consumer Financial Protection
largest redlining, auto finance, and
Bureau (Fair Lending Report) to
credit card fair lending cases, and
Congress. We are committed to ensuring instituting relief that has halted illegal
fair access to credit and eliminating
practices. Our fair lending supervision
discriminatory lending practices. This
and enforcement activities have resulted
report describes our fair lending
in over $400 million in remediation to
activities in prioritization, supervision,
harmed consumers.
enforcement, rulemaking, interagency
In the coming years, we will increase
coordination, and outreach for calendar our focus on markets or products where
year 2016.
we see significant or emerging fair
DATES: The Bureau released the April
lending risk to consumers, including
2017 Fair Lending Report on its Web
redlining, mortgage loan servicing,
site on April 14, 2017.
student loan servicing, and small
FOR FURTHER INFORMATION CONTACT:
business lending. Discrimination on
Anita Visser, Senior Policy Advisor to
prohibited grounds in the financial
the Director of Fair Lending, Office of
marketplace, though squarely against
Fair Lending and Equal Opportunity,
the law, is by no means a thing of the
Consumer Financial Protection Bureau,
past. The Consumer Bureau will
1–855–411–2372.
continue to enforce existing fair lending
laws at a steady and vigorous pace,
SUPPLEMENTARY INFORMATION:
taking care to ensure broad-based
1. Fair Lending Report of the Consumer
industry engagement and consistent
Financial Protection Bureau, April
oversight.
2017
I am proud to present our 2016 Fair
Message From Richard Cordray, Director Lending Report.
of the CFPB
Sincerely,
For over five years, the Consumer
Richard Cordray
Financial Protection Bureau has
Message From Patrice Alexander
pursued its statutory mandate to
Ficklin, Director, Office of Fair Lending
provide ‘‘oversight and enforcement’’ of
and Equal Opportunity
the fair lending laws under our
When I left private practice to join the
jurisdiction. I am proud of all we have
CFPB in 2011, I carried with me my
accomplished in ensuring that
experiences as industry counsel,
creditworthy consumers are not denied
advising bank and nonbank clients on
credit or charged more because of their
race or ethnicity or any other prohibited fair lending compliance. I knew from
my work that many lenders are
basis.
Our fair lending guidance,
interested in building and maintaining
supervisory activity, and enforcement
robust fair lending self-monitoring
actions have three goals: To strengthen
systems that reflect best practices in
industry compliance programs, root out consumer protection. I advised my
illegal activity, and ensure that harmed
clients on their efforts to evaluate and
consumers are remediated. Over these
address fair lending risk not only in
past five years, we have engaged in
mortgage origination, but also in
robust fair lending dialogue with
mortgage servicing, credit cards, and
industry and this dialogue has served to other areas that had not been a
significantly strengthen industry
traditional fair lending focus. Together
compliance programs. Members of our
we enhanced the existing methods of
Fair Lending Office have logged over
proxying for race and ethnicity; an
300 outreach meetings and events, not
essential step to allow my clients to
to mention preparing responses to the
fully implement the mandate contained
many calls and emails received from
in the Equal Credit Opportunity Act
compliance officials. We have invested
(ECOA), which prohibits discrimination
significant efforts toward strengthening
in all manner of consumer credit, not
industry compliance management
simply mortgages.
Shortly after arriving at the CFPB in
systems because they are critical firstline measures to protect consumers from 2011, I led a handful of other public
servants in founding the CFPB’s Fair
discriminatory lending policies and
Lending Office, which the Dodd-Frank
practices. As a result, our examiners
now often find that lenders have already Wall Street Reform and Consumer
Protection Act (Dodd-Frank Act)
implemented sound policies and
charged with ‘‘oversight and
procedures to identify and address
Fair Lending Report of the
Consumer Financial Protection Bureau.
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ACTION:
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enforcement’’ of ECOA. We drew from
our experiences and dialogue with
industry, the information transferred to
us from our sister prudential regulators,
civil rights and consumer advocate
groups’ perspectives, and the expertise
of the Bureau’s markets teams to
establish our first three fair lending
priorities: mortgage origination, auto
finance, and credit cards. We have
accomplished much in these markets
over these past five years, not the least
of which are the $400 million in
remediation to harmed consumers and
the remarkable and robust dialogue we
enjoy with many financial services
providers in support of their efforts to
treat all of their customers in a fair and
responsible manner.
As outlined in my December 2016
blog post,1 my team has again looked to
our statutory mandate and relevant data
to refresh the Bureau’s fair lending
priorities. In 2017 we will increase our
focus in the areas of redlining and
mortgage and student loan servicing to
ensure that creditworthy consumers
have access to mortgage loans and to the
full array of appropriate options when
they have trouble paying their
mortgages or student loans, regardless of
their race or ethnicity. In addition, we
will focus more fully on pursuing our
statutory mandate to promote fair credit
access for minority- and women-owned
businesses. We know that these
businesses play an important role in job
creation for communities of color, while
also strengthening our economy.
The Dodd-Frank Act mandated the
creation of the CFPB’s Office of Fair
Lending and Equal Opportunity and
charged it with ensuring fair, equitable,
and nondiscriminatory access to credit
to consumers; coordinating our fair
lending efforts with Federal and State
agencies and regulators; working with
private industry, fair lending, civil
rights, consumer and community
advocates to promote fair lending
compliance and education; and
annually reporting to Congress on our
efforts.
I am proud to say that the Office
continues to fulfill our Dodd-Frank
mandate and looks forward to
continuing to work together with all
stakeholders in protecting America’s
consumers. To that end, I am excited to
share our progress in this, our fifth, Fair
Lending Report.2
1 Patrice Ficklin, Fair Lending priorities in the
new year, Consumer Financial Protection Bureau
(Dec. 16, 2016), http:www.consumerfinance.gov/
about-us/blog/fair-lending-priorities-new-year/.
2 See Dodd-Frank Act section 1013(c)(2)(D),
Public Law 111–203, 124 Stat. 1376 (2010) (codified
at 12 U.S.C. 5493(c)(2)(D)).
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Sincerely,
Patrice Alexander Ficklin
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Executive Summary
The Dodd-Frank Wall Street Reform
and Consumer Protection Act (DoddFrank or Dodd-Frank Act) 3 established
the Bureau as the Nation’s first Federal
agency with a mission focused solely on
consumer financial protection and
making consumer financial markets
work for all Americans. Dodd-Frank
established the Office of Fair Lending
and Equal Opportunity (the Office of
Fair Lending) within the CFPB, and
charged it with ‘‘providing oversight
and enforcement of Federal laws
intended to ensure the fair, equitable,
and nondiscriminatory access to credit
for both individuals and
communities.’’ 4
• Prioritization. The Bureau’s riskbased prioritization process allows the
Office of Fair Lending to focus our
supervisory and enforcement efforts on
the markets, products, and institutions
that represent the greatest fair lending
risk for consumers. Based on the risks
we identified, our market-level focus for
the past five years has been on ensuring
that consumers are not excluded from or
made to pay more for mortgages,
indirect auto loans, and credit cards
because of their race, ethnicity, sex, or
age.
Going forward, because of emerging
fair lending risks in other areas, we are
increasing our focus on redlining,
mortgage and student loan servicing,
and small business lending. We remain
committed to assessing and evaluating
fair lending risk in all credit markets
under the Bureau’s jurisdiction. See
Section 1 for more information.
• Supervision and enforcement
activity. In 2016, our fair lending
supervisory and public enforcement
actions resulted in approximately $46
million in remediation to harmed
consumers.5 Mortgage lending
continues to be a key priority for the
Office of Fair Lending for both
supervision and enforcement. We have
focused in particular on redlining risk,
evaluating whether lenders have
intentionally discouraged prospective
applicants in minority neighborhoods
from applying for credit. Although
statistics play an important role in this
3 Public
Law 111–203, 124 Stat. 1376 (2010).
Act section 1013(c)(2)(A) (codified
at 12 U.S.C. 5493(c)(2)(A)).
5 Figures represent estimates of monetary relief
for consumers ordered or required by the Bureau or
a court as a result of supervisory or enforcement
actions on fair lending matters in 2016, as well as
other monetary payments such as loan subsidies,
increased consumer financial education, and civil
money penalties.
4 Dodd-Frank
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work, we never look at numbers alone
or in a vacuum, but rather consider
multiple factors, including potentially
nondiscriminatory explanations for
differential lending patterns. See
Sections 2.1.6 and 3.1.1 for more
information. Through 2016, our
mortgage origination work has covered
institutions responsible for close to half
of the transactions reported pursuant to
the Home Mortgage Disclosure Act
(HMDA), and more than 60% of the
transactions reported by institutions
subject to the CFPB’s supervision and
enforcement authority.6
In 2016, the Bureau continued its
work in overseeing and enforcing
compliance with ECOA in indirect auto
lending through both supervisory and
enforcement activity, including
monitoring compliance with our
previous supervisory and enforcement
actions. Our indirect auto lending work
has covered institutions responsible for
approximately 60% of the auto loan
market share by volume.7
The Bureau also continued fair
lending supervisory and enforcement
work in the credit card market. We have
focused in particular on the quality of
fair lending compliance management
systems (CMS) and on fair lending risks
in underwriting, line assignment, and
servicing. Our work in this highlyconcentrated market has covered
institutions responsible for more than
85% of outstanding credit card balances
in the United States.8
The Bureau has conducted
supervision and enforcement work in
other markets as well. For example, this
year we continued targeted ECOA
reviews of small-business lending,
focusing in particular on the quality of
fair lending compliance management
systems and on fair lending risks in
underwriting, pricing, and redlining.
Our supervisory work to date in small
business lending has covered
institutions responsible for
approximately 10% of the nonagricultural small business market
share. See Sections 2 and 3 for more
information.
• Rulemaking. In January 2016, in
response to ongoing conversations with
industry about compliance with
Regulation C, HMDA’s implementing
Regulation, the Bureau issued a Request
for Information (RFI) on the Bureau’s
HMDA data resubmission guidelines,
and is considering whether to adjust its
existing HMDA resubmission guidelines
6 CFPB
analysis of HMDA data for 2015.
analysis of 2015 AutoCount data from
Experian Automotive.
8 CFPB analysis of 3Q 2016 call reports.
7 CFPB
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and if so, how.9 On September 23, 2016,
the Bureau published a Bureau Official
Approval pursuant to section 706(e) of
the ECOA concerning the new Uniform
Residential Loan Application and the
collection of expanded HMDA
information about ethnicity and race in
2017. On March 24, 2017, the Bureau
published a proposed rule concerning
amendments to Regulation B’s ethnicity
and race information collection
provisions.10 See Section 4 for more
information.
• Interagency coordination and
collaboration. The Bureau continues to
coordinate with the Federal Financial
Institutions Examination Council
(FFIEC) agencies,11 as well as the
Department of Justice (DOJ), the Federal
Trade Commission (FTC), and the
Department of Housing and Urban
Development (HUD), as we each play a
role in ensuring compliance with and
enforcing our nation’s fair lending laws
and regulations. See Section 5 for more
information on our interagency
coordination and collaboration in 2016.
• Outreach to industry, advocates,
consumers, and other stakeholders. The
Bureau continues to initiate and
encourage industry and consumer
engagement opportunities to discuss fair
lending compliance and access to credit
issues, including through speeches,
presentations, blog posts, webinars,
rulemaking, and public comments. See
Section 6 for more information on our
outreach activities in 2016.
This report generally covers the
Bureau’s fair lending work during
calendar year 2016.
1. Fair Lending Prioritization
1.1 Risk-Based Prioritization: A DataDriven Approach to Prioritizing Areas of
Potential Fair Lending Harm to
Consumers
To use the CFPB’s fair lending
resources most effectively, the Office of
Fair Lending, working with other offices
in the Bureau, has developed and
9 Consumer Financial Protection Bureau, Request
for Information Regarding Home Mortgage
Disclosure Act Resubmission Guidelines 2015–0058
(Jan. 7, 2016), https://files.consumerfinance.gov/f/
201601_cfpb_request-for-information-regardinghome-mortgage-disclosure-act-resubmission.pdf.
10 Consumer Financial Protection Bureau,
Amendments to Equal Credit Opportunity Act
(Regulation B) Ethnicity and Race Information
Collection 2017–0009 (March 24, 2017), https://
files.consumerfinance.gov/f/documents/201703_
cfpb_NPRM-to-amend-Regulation-B.pdf.
11 The FFIEC member agencies are the Board of
Governors of the Federal Reserve System (FRB), the
Federal Deposit Insurance Corporation (FDIC), the
National Credit Union Administration (NCUA), the
Office of the Comptroller of the Currency (OCC),
and the Consumer Financial Protection Bureau
(CFPB). The State Liaison Committee was added to
FFIEC in 2006 as a voting member.
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refined a risk-based prioritization
approach that determines how best to
address areas of potential fair-lendingrelated consumer harm in the entities,
products, and markets under our
jurisdiction.
One critical piece of information that
we consider in the fair lending
prioritization process is the quality of an
institution’s compliance management
system, which the Bureau typically
ascertains through its supervisory work.
The Bureau has previously identified
common features of a well-developed
fair lending compliance management
system,12 though we recognize that the
appropriate scope of an institution’s fair
lending compliance management system
will vary based on its size, complexity,
and risk profile. In our experience, the
higher the quality of an institution’s fair
lending compliance management
system, the lower the institution’s fair
lending risk to consumers, other things
being equal.
As part of the prioritization process
the Office of Fair Lending also works
closely with the Bureau’s special
population offices, including the Office
for Students and Young Consumers, the
Office of Older Americans, and the
Bureau’s Markets offices, which identify
emerging developments and trends by
monitoring key consumer financial
markets. If this market intelligence
identifies fair lending risks in a
particular market that require further
attention, we incorporate that
information into our prioritization
process to determine the type and extent
of attention required to address those
risks. For instance, Fair Lending’s work
with the Office of Consumer Lending,
Reporting, and Collections Markets and
the Office for Students and Young
Consumers highlighted potential
steering risks in student loan servicing,
which resulted in the prioritization of
this market in our supervisory work.
The fair lending prioritization process
incorporates a number of additional
factors as well, including; consumer
complaints; tips and leads from
advocacy groups, whistleblowers, and
government agencies; supervisory and
enforcement history; and results from
analysis of HMDA and other data.
Once the Bureau has evaluated these
inputs to prioritize institutions,
products, and markets based on an
assessment of fair lending risk posed to
consumers, the Office of Fair Lending
considers how best to address those
risks as part of its strategic planning
12 See
Consumer Financial Protection Bureau,
Fair Lending Report of the Consumer Financial
Protection Bureau at 13–14 (Apr. 2014), https://
files.consumerfinance.gov/f/201404_cfpb_report_
fair-lending.pdf.
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process. For example, we can schedule
an institution for a supervisory review
or, where appropriate, open an
enforcement investigation. We can also
commit to further research, policy
development, and/or outreach,
especially for new issues or risks. Once
this strategic planning process is
complete, we regularly coordinate with
other regulators so we can inform each
other’s work, complement each other’s
efforts, and reduce any burden on
subject institutions.
Risk-based prioritization is an
ongoing process, and we continue to
receive and evaluate relevant
information even after priorities are
identified. At an institution level, such
information may include new tips and
leads, consumer complaints, additional
risks identified in current supervisory
and enforcement activities, and
compliance issues identified and
brought to our attention by institutions
themselves. In determining how best to
address this additional information, the
Office of Fair Lending considers several
factors, including (1) the nature and
extent of the fair lending risk, (2) the
degree of consumer harm, and (3)
whether the risk was self-identified and/
or self-reported to the Bureau. Fair
Lending takes account of responsible
conduct as set forth in CFPB Bulletin
2013–06, Responsible Business
Conduct: Self-Policing, Self-Reporting,
Remediation, and Cooperation.13
1.2 Fair Lending Priorities
Because the CFPB is responsible for
overseeing so many products and so
many lenders, we re-prioritize our work
from time to time to make sure that we
are focused on the areas of greatest risk
to consumers. In the coming year, we
will increase our focus on the markets
or products listed below, which present
substantial risk of credit discrimination
for consumers.
Redlining. We will continue to
evaluate whether lenders have
intentionally discouraged prospective
applicants in minority neighborhoods
from applying for credit.
Mortgage and Student Loan Servicing.
We will evaluate whether some
borrowers who are behind on their
mortgage or student loan payments may
have more difficulty working out a new
solution with the servicer because of
their race, ethnicity, sex, or age.
Small Business Lending. Congress
expressed concern that women-owned
13 Consumer Financial Protection Bureau,
Responsible Business Conduct: Self-Policing, SelfReporting, Remediation, and Cooperation, CFPB
Bulletin 2013–06 (June 25, 2013), https://
files.consumerfinance.gov/f/201306_cfpb_bulletin_
responsible-conduct.pdf.
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25253
and minority-owned businesses may
experience discrimination when they
apply for credit, and has required the
CFPB to take steps to ensure their fair
access to credit. Small business lending
supervisory activity will also help
expand and enhance the Bureau’s
knowledge in this area, including the
credit process; existing data collection
processes; and the nature, extent, and
management of fair lending risk. The
Bureau remains committed to ensuring
that consumers are protected from
discrimination in all credit markets
under its authority.
2. Fair Lending Supervision
The CFPB’s Fair Lending Supervision
program assesses compliance with
ECOA and HMDA at banks and
nonbanks over which the Bureau has
supervisory authority. Supervision
activities range from assessments of
institutions’ fair lending compliance
management systems to in-depth
reviews of products or activities that
may pose heightened fair lending risks
to consumers. As part of its Fair
Lending Supervision program, the
Bureau continues to conduct three types
of fair lending reviews at Bureausupervised institutions: ECOA baseline
reviews, ECOA targeted reviews, and
HMDA data integrity reviews.
When the CFPB identifies situations
in which fair lending compliance is
inadequate, it directs institutions to
establish fair lending compliance
programs commensurate with the size
and complexity of the institution and its
lines of business. When fair lending
violations are identified, the CFPB may
direct institutions to provide
remediation and restitution to
consumers, and may pursue other
appropriate relief. The CFPB also refers
a matter to the Justice Department when
it has reason to believe that a creditor
has engaged in a pattern or practice of
lending discrimination in violation of
ECOA.14 The CFPB may also refer other
potential ECOA violations to the Justice
Department.
2.1 Fair Lending Supervisory
Observations
Although the Bureau’s supervisory
process is confidential, the Bureau
publishes regular reports called
Supervisory Highlights, which provide
information on supervisory trends the
Bureau observes without identifying
specific entities. The Bureau may also
draw on its supervisory experience to
publish compliance bulletins in order to
remind the institutions that we
supervise of their legal obligations.
14 15
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Industry participants can use this
information to inform and assist in
complying with ECOA and HMDA.
Loan Application Register (LAR) where
the number of errors exceeded the
CFPB’s HMDA resubmission thresholds.
2.1.1 Evaluating Mortgage Servicing
Compliance Programs
Our supervisory work has included
use of the ECOA Baseline Modules,
which are part of the CFPB Supervision
and Examination Manual. Examination
teams use these modules to conduct
ECOA Baseline Reviews, which evaluate
how well institutions’ compliance
management systems identify and
manage fair lending risks. The Mortgage
Servicing Special Edition of Supervisory
Highlights,15 published in June 2016,
reminded institutions that Module 4 of
the ECOA baseline review modules,
‘‘Fair Lending Risks Related to
Servicing,’’ is used by Bureau examiners
to evaluate compliance management
systems under ECOA. Among other
things, Module 4 contains questions
regarding fair lending training of
servicing staff, fair lending monitoring
of servicing, and servicing of consumers
with limited English proficiency.
2.1.3 Expanding Credit Through the
Use of Special Purpose Credit Programs
• The Summer 2016 edition of
Supervisory Highlights 18 discussed
supervisory observations of special
purpose credit programs, which are
established and administered to extend
credit to a class of persons who
otherwise probably would not receive
such credit or would receive it on less
favorable terms. ECOA 19 and
Regulation B 20 permit a creditor to
extend special purpose credit to
applicants who meet eligibility
requirements for certain types of credit
programs.21 Regulation B specifically
confers special purpose credit program
status upon:
Any special purpose credit program
offered by a for-profit organization, or in
which such an organization participates
to meet special social needs, if:
(i) The program is established and
administered pursuant to a written plan
that identifies the class of persons that
the program is designed to benefit and
sets forth the procedures and standards
for extending credit pursuant to the
program; and
(ii) The program is established and
administered to extend credit to a class
of persons who, under the
organization’s customary standards of
creditworthiness, probably would not
receive such credit or would receive it
on less favorable terms than are
ordinarily available to other applicants
applying to the organization for a
similar type and amount of credit.22
The commentary to Regulation B
clarifies that, in order to satisfy these
requirements, ‘‘a for-profit organization
must determine that the program will
benefit a class of people who would
otherwise be denied credit or would
receive it on less favorable terms. This
determination can be based on a broad
analysis using the organization’s own
research or data from outside sources,
including governmental reports and
studies.’’ 23
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2.1.2 Reporting Actions Taken for
Conditionally-Approved Applications
With Unmet Underwriting Conditions
The Summer 2016 edition of
Supervisory Highlights,16 published in
June 2016, highlighted findings from
examinations where institutions
improperly coded actions taken in
reported HMDA data. Among other
things, Regulation C requires covered
depository and non-depository
institutions to submit to the appropriate
Federal agency data they collect and
record pursuant to Regulation C,
including the type of action taken on
reportable transactions.17 As reported in
Supervisory Highlights, examiners
found that after issuing a conditional
approval subject to underwriting
conditions, the institutions did not
accurately report the action taken on the
loans or applications. As a result,
Supervision directed one or more
institutions to enhance their policies
and procedures regarding their HMDA
reporting of the actions taken on loans
and applications and, where necessary,
provide adverse action notices.
Supervision also required one or more
institutions to resubmit their HMDA
15 Consumer Financial Protection Bureau,
Supervisory Highlights Mortgage Servicing Special
Edition 2016 at 5 (June 22, 2016), https://
files.consumerfinance.gov/f/documents/Mortgage_
Servicing_Supervisory_Highlights_11_Final_
web_.pdf.
16 Consumer Financial Protection Bureau,
Supervisory Highlights Summer 2016 at 13–16 (June
30, 2016), https://files.consumerfinance.gov/f/
documents/Supervisory_Highlights_Issue_12.pdf.
17 12 CFR 1003.4(a), (a)(8); 12 CFR 1003.5(a)(1).
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18 Consumer Financial Protection Bureau,
Supervisory Highlights Summer 2016 at 16–18 (June
30, 2016), https://files.consumerfinance.gov/f/
documents/Supervisory_Highlights_Issue_12.pdf.
19 15 U.S.C. 1691 et seq.
20 12 CFR part 1002.
21 15 U.S.C. 1691(c)(3) (providing that ECOA’s
prohibitions against discrimination are not violated
when a creditor refuses to extend credit offered
pursuant to certain special purpose credit programs
satisfying Regulation B-prescribed standards); 12
CFR 1002.8 (special purpose credit program
standards).
22 12 CFR 1002.8(a)(3).
23 12 CFR part 1002, Suppl. I, 1002.8, comment
8(a) at 5.
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As Supervisory Highlights noted,
during the course of the Bureau’s
supervisory activity, examination teams
have observed credit decisions made
pursuant to the terms of programs that
for-profit institutions have described as
special purpose credit programs.
Examination teams have reviewed the
terms of the programs, including the
written plan required by Regulation B,
and the institution’s determination that
the program would benefit a class of
people who would otherwise be denied
credit or would receive it on less
favorable terms.
In every case, special purpose credit
program status depends upon adherence
to the ECOA and Regulation B
requirements for special purpose credit
programs. A program, for example,
offering more favorable pricing or
products exclusively to a particular
class of persons without evidence that
such individuals would otherwise be
denied credit or would receive it on less
favorable terms would not satisfy the
ECOA and Regulation B requirements
for a special purpose credit program.
With that in mind, however, the Bureau
generally takes a favorable view of
conscientious efforts that institutions
may undertake to develop special
purpose credit programs to promote
extensions of credit to any class of
persons who would otherwise be denied
credit or would receive it on less
favorable terms.
2.1.4 Offering Language Services to
Limited English Proficient (LEP)
Consumers
The Fall 2016 edition of Supervisory
Highlights,24 published in October 2016,
discussed supervisory observations
about the provision of language services
to consumers with limited English
proficiency (LEP). The Dodd-Frank Act,
ECOA,25 and Regulation B 26 mandate
that the Office of Fair Lending ‘‘ensure
the fair, equitable, and
nondiscriminatory access to credit’’ 27
and ‘‘promote the availability of
credit.’’ 28 Consistent with that mandate,
the CFPB, including through its Office
of Fair Lending, continues to encourage
lenders to provide assistance to LEP
consumers.29 Financial institutions may
24 Consumer Financial Protection Bureau,
Supervisory Highlights Fall 2016 at 20 (Oct. 31,
2016), https://files.consumerfinance.gov/f/
documents/Supervisory_Highlights_Issue_13__
Final_10.31.16.pdf.
25 12 U.S.C. 1691 et seq.
26 12 CFR part 1002 et seq.
27 12 U.S.C. 5493(c)(2)(A).
28 12 CFR 1002.1(b).
29 According to recent American Community
Survey estimates, there are approximately 25
million people in the United States who speak
English less than ‘‘very well.’’ U.S. Census Bureau,
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provide access to credit in languages
other than English in a manner that is
beneficial to consumers as well as the
institution, while taking steps to ensure
their actions are compliant with ECOA
and other applicable laws.
As reported in Supervisory Highlights,
in the course of conducting supervisory
activity, examiners have observed one
or more financial institutions providing
services in languages other than English,
including to consumers with limited
English proficiency,30 in a manner that
did not result in any adverse
supervisory or enforcement action
under the facts and circumstances of the
reviews. Specifically, examiners
observed:
• Marketing and servicing of loans in
languages other than English;
• Collection of customer language
information to facilitate communication
with LEP consumers in a language other
than English;
• Translation of certain financial
institution documents sent to borrowers,
including monthly statements and
payment assistance forms, into
languages other than English;
• Use of bilingual and/or multilingual
customer service agents, including
single points of contact,31 and other
forms of oral customer assistance in
languages other than English; and
• Quality assurance testing and
monitoring of customer assistance
provided in languages other than
English.
Examiners have observed a number of
factors that financial institutions
consider in determining whether to
provide services in languages other than
Language Spoken at Home, 2011–2015 American
Community Survey 5-Year Estimates, https://
factfinder.census.gov/faces/tableservices/jsf/pages/
productview.xhtml?pid=ACS_15_5YR_S1601&
prodType=table.
30 The Bureau recently updated its ECOA baseline
review modules. See Consumer Financial
Protection Bureau, Supervisory Highlights: Winter
2016 at 28–29 (Mar. 8, 2016), https://files.consumer
finance.gov/f/201603_cfpb_supervisoryhighlights.pdf. Among other updates, the modules
include new questions related to the provision of
language services, including to LEP consumers, in
the context of origination and servicing. See
Consumer Financial Protection Bureau, CFPB
Examination Procedures, ECOA Baseline Review
Modules 13, 21–22 (Oct. 2015), https://
files.consumerfinance.gov/f/201510_cfpb_ecoabaseline-review-modules.pdf. These modules are
used by examiners during ECOA baseline reviews
to identify and analyze risks of ECOA violations, to
facilitate the identification of certain types of ECOA
and Regulation B violations, and to inform fair
lending prioritization decisions for future CFPB
reviews. Id. at 1.
31 See 12 CFR 1024.40(a)(1) & (2) (requiring
mortgage servicers to assign personnel to a
delinquent borrower within a certain time after
delinquency and make assigned personnel available
by phone in order to respond to borrower inquiries
and assist with loss mitigation options, as
applicable).
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English and the extent of those services,
some of which include: Census Bureau
data on the demographics or prevalence
of non-English languages within the
financial institution’s footprint;
communications and activities that most
significantly impact consumers (e.g.,
loss mitigation and/or default servicing);
and compliance with Federal, State, and
other regulatory provisions that address
obligations pertaining to languages other
than English.32 Factors relevant in the
compliance context may vary depending
on the institution and circumstances.
Examiners also have observed
situations in which financial
institutions’ treatment of LEP and nonEnglish-speaking consumers posed fair
lending risk. For example, examiners
observed one or more institutions
marketing only some of their available
credit card products to Spanishspeaking consumers, while marketing
several additional credit card products
to English-speaking consumers. One or
more such institutions also lacked
documentation describing how they
decided to exclude those products from
Spanish language marketing, raising
questions about the adequacy of their
compliance management systems
related to fair lending. To mitigate any
compliance risks related to these
practices, one or more financial
institutions revised their marketing
materials to notify consumers in
Spanish of the availability of other
credit card products and included clear
and timely disclosures to prospective
consumers describing the extent and
limits of any language services provided
throughout the product lifecycle.
Institutions were not required to
provide Spanish language services to
address this risk beyond the Spanish
language services they were already
providing.
32 See, e.g., 12 CFR 1005.31(g)(1)(i) (requiring
disclosures in languages other than English in
certain circumstances involving remittance
transfers); 12 CFR 1026.24(i)(7) (addressing
obligations relating to advertising and disclosures
in languages other than English for closed-end
credit); 12 CFR 1002.4(e) (providing that disclosures
made in languages other than English must be
available in English upon request); Cal. Civ. Code
Sec.1632(b) (requiring that certain agreements
‘‘primarily’’ negotiated in Spanish, Chinese,
Tagalog, Vietnamese, or Korean must be translated
to the language of the negotiation under certain
circumstances); Or. Rev. Stat. § 86A.198 (requiring
a mortgage banker, broker, or originator to provide
translations of certain notices related to the
mortgage transaction if the banker, broker, or
originator advertises and negotiates in a language
other than English under certain circumstances);
Tex. Fin. Code Ann. Sec. 341.502(a–1) (providing
that for certain loan contracts negotiated in
Spanish, a summary of the loan terms must be made
available to the debtor in Spanish in a form
identical to required TILA disclosures for closedend credit).
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As reported in Supervisory Highlights,
the Bureau’s supervisory activity
resulted in public enforcement actions
related to the treatment of LEP and nonEnglish-speaking consumers, including
actions against Synchrony Bank and
American Express Centurion Bank. The
Fall 2016 edition of Supervisory
Highlights also discussed common
features of a well-developed compliance
management system that can mitigate
fair lending and other risks associated
with providing services to LEP and nonEnglish-speaking consumers.
2.1.5 HMDA Data Collection and
Reporting Reminders for 2017
The Fall 2016 edition of Supervisory
Highlights 33 noted HMDA data
collection and reporting reminders for
2017. Please see Section 4.1.4 for detail
on changes to HMDA data collection
and reporting in 2017 and later years.
2.1.6 Assessing Redlining Risks
The Fall 2016 edition of Supervisory
Highlights 34 noted that the Office of
Fair Lending has identified redlining as
a priority area in the Bureau’s fair
lending work. Redlining is a form of
unlawful lending discrimination under
ECOA. Historically, actual red lines
were drawn on maps around
neighborhoods to which credit would
not be provided, giving this practice its
name. The Federal prudential banking
regulators have collectively defined
redlining as ‘‘a form of illegal disparate
treatment in which a lender provides
unequal access to credit, or unequal
terms of credit, because of the race,
color, national origin, or other
prohibited characteristic(s) of the
residents of the area in which the credit
seeker resides or will reside or in which
the residential property to be mortgaged
is located.’’ 35
The Bureau considers various factors,
as appropriate, in assessing redlining
risk in its supervisory activity. These
factors, and the scoping process, are
described in detail in the Interagency
Fair Lending Examination Procedures.
These factors generally include (but are
not limited to):
33 Consumer Financial Protection Bureau,
Supervisory Highlights Fall 2016 at 25–26 (Oct. 31,
2016), https://files.consumerfinance.gov/f/
documents/Supervisory_Highlights_Issue_13__
Final_10.31.16.pdf.
34 Consumer Financial Protection Bureau,
Supervisory Highlights Fall 2016 at 27 (Oct. 31,
2016), https://files.consumerfinance.gov/f/
documents/Supervisory_Highlights_Issue_13__
Final_10.31.16.pdf.
35 FFIEC Interagency Fair Lending Examination
Procedures Manual (Aug. 2009), https://
www.ffiec.gov/pdf/fairlend.pdf. CFPB Supervision
and Examination Manual (Oct. 2012), https://
files.consumerfinance.gov/f/201210_cfpb_
supervision-and-examination-manual-v2.pdf.
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• Strength of an institution’s CMS,
including underwriting guidelines and
policies;
• Unique attributes of relevant
geographic areas (population
demographics, credit profiles, housing
market);
• Lending patterns (applications and
originations, with and without
purchased loans);
• Peer and market comparisons;
• Physical presence (full service
branches, ATM-only branches, brokers,
correspondents, loan production
offices), including consideration of
services offered;
• Marketing;
• Mapping;
• Community Reinvestment Act
(CRA) assessment area and market area
more generally;
• An institution’s lending policies
and procedures record;
• Additional evidence (whistleblower
tips, loan officer diversity, testing
evidence, comparative file reviews); and
• An institution’s explanations for
apparent differences in treatment.
The Bureau has observed that
institutions with strong compliance
programs examine lending patterns
regularly, look for any statisticallysignificant disparities, evaluate physical
presence, monitor marketing campaigns
and programs, and assess CRA
assessment areas and market areas more
generally. Our supervisory experience
reveals that institutions may reduce fair
lending risk by documenting risks they
identify and by taking appropriate steps
in response to identified risks, as
components of their fair lending
compliance management programs.
Examination teams typically assess
redlining risk, at the initial phase, at the
Metropolitan Statistical Area (MSA)
level for each supervised entity, and
consider the unique characteristics of
each MSA (population demographics,
etc.).
To conduct the initial analysis,
examination teams use HMDA data and
Census data 36 to assess the lending
patterns at institutions subject to the
Bureau’s supervisory authority. To date,
examination teams have used these
publicly available data to conduct this
initial risk assessment. These initial
analyses typically compare a given
institution’s lending patterns to other
lenders in the same MSA to determine
whether the institution received
significantly fewer applications from
36 The
Bureau uses the most current United States
national census data that apply to the HMDA data—
for example, to date it has used 2010 census data
for HMDA data 2011 and later. Specifically, the
‘‘Demographic Profiles’’ are used.
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minority 37 areas 38 relative to other
lenders in the MSA. Examination teams
may consider the difference between the
subject institution and other lenders in
the percentage of their applications or
originations that come from minority
areas, both in absolute terms (for
example, 10% vs. 20%) and relative
terms (for example, the subject
institution is half as likely to have
applications or originations in minority
areas as other lenders).39
Examination teams may also compare
an institution to other more refined
groups of peer institutions. Refined
peers can be defined in a number of
ways, and past Bureau redlining
examinations and enforcement matters
have relied on multiple peer
comparisons. The examination team
often starts by compiling a refined set of
peer institutions to find lenders of a
similar size—for example, lenders that
received a similar number of
applications or originated a similar
number of loans in the MSA. The
examination team may also consider an
institution’s mix of lending products.
For example, if an institution
participates in the Federal Housing
Administration (FHA) loan program, it
may be compared to other institutions
that also originate FHA loans; if not, it
may be compared to other lenders that
do not offer FHA loans. Additional
refinements may incorporate loan
purpose (for example, focusing only on
home purchase loans) or action taken
(for example, incorporating purchased
loans into the analysis). Examination
teams have also taken suggestions, as
37 For these purposes, the term ‘‘minority’’
ordinarily refers to anyone who identifies with any
combination of race or ethnicity other than nonHispanic White. Examination teams have also
focused on African-American and Hispanic
consumers, and could foreseeably focus on other
more specific minority communities such as Asian,
Native Hawaiian, or Native Alaskan populations, if
appropriate for the specific geography. In one
examination that escalated to an enforcement
matter, the statistical evidence presented focused
on African-American and Hispanic census tracts,
rather than all minority consumers, because the
harmed consumers were primarily AfricanAmerican and Hispanic.
38 Examination teams typically look at majority
minority areas (>50% minority) and high minority
areas (>80% minority), although sometimes one
metric is more appropriate than another, and
sometimes other metrics need to be used to account
for the population demographics of the specific
MSA.
39 This relative analysis may be expressed as an
odds ratio: The given lender’s odds of receiving an
application or originating a loan in a minority area
divided by other lenders’ comparable odds. An
odds ratio greater than one means that the
institution is more likely to receive applications or
originate loans in minority areas than other lenders;
an odds ratio lower than one means that the
institution is less likely do so. Odds ratios show
greater risk as they approach zero.
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appropriate, from institutions about
appropriate peers in specific markets.
In considering lending patterns,
examination teams generally consider
marketing activities and physical
presence, including locations of
branches, loan production offices,
ATMs, brokers, or correspondents. As
noted in Supervisory Highlights, in one
or more supervisory matters, the
institutions concentrated marketing in
majority-White suburban counties of a
Metropolitan Statistical Area (MSA) and
avoided a more urban county with the
greatest minority population in the
MSA. In one or more other exams,
examiners observed that, although there
were disparities in branch locations, the
location of branches did not affect
access to credit in that case because,
among other things, the branches did
not accept ‘‘walk-in’’ traffic and all
applications were submitted online. The
results of the examinations were also
dependent on other factors that showed
equitable access to credit, and there
could be cases in which branch
locations in combination with other
risk-based factors escalate redlining risk.
For redlining analyses, examination
teams generally map information,
including data on lending patterns
(applications and originations),
marketing, and physical presence,
against census data to see if there are
differences based on the predominant
race/ethnicity of the census tract,
county, or other geographic designation.
Additionally, examination teams will
consider any other available evidence
about the nature of the lender’s business
that might help explain the observed
lending patterns.
Examination teams have considered
numerous factors in each redlining
examination, and have invited
institutions to identify explanations for
any apparent differences in treatment.
Although redlining examinations are
generally scheduled at institutions
where the Bureau has identified
statistical disparities, statistics are never
considered in a vacuum. The Bureau
will always work with institutions to
understand their markets, business
models, and other information that
could provide nondiscriminatory
explanations for lending patterns that
would otherwise raise a fair lending risk
of redlining.
2.1.7 Enforcement Actions Arising
From Supervisory Activity
In addition to providing information
on supervisory trends, Supervisory
Highlights also provides information on
enforcement actions that resulted from
supervisory activity. See Section 3.3.1
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for more information on such public
enforcement actions.
3. Fair Lending Enforcement
The Bureau conducts investigations of
potential violations of HMDA and
ECOA, and if it believes a violation has
occurred, can file a complaint either
through its administrative enforcement
process or in Federal court. Like the
other Federal bank regulators, the
Bureau refers matters to the DOJ when
it has reason to believe that a creditor
has engaged in a pattern or practice of
lending discrimination.40 However,
when the Bureau makes a referral to the
DOJ, the Bureau can still take its own
independent action to address a
violation. In 2016, the Bureau
announced two fair lending
enforcement actions in mortgage
origination and indirect auto lending.
The Bureau also has a number of
ongoing fair lending investigations and
has authority to settle or sue in a
number of matters. In addition, the
Bureau issued warning letters to
mortgage lenders and mortgage brokers
that may be in violation of HMDA
requirements to report on housingrelated lending activity.
3.1 Fair Lending Public Enforcement
Actions
3.1.1
Mortgage
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BancorpSouth Bank
On June 29, 2016, the CFPB and the
DOJ announced a joint action against
BancorpSouth Bank (BancorpSouth) for
discriminatory mortgage lending
practices that harmed African
Americans and other minorities. The
complaint filed by the CFPB and DOJ 41
alleged that BancorpSouth engaged in
numerous discriminatory practices,
including illegal redlining in Memphis;
denying certain African Americans
mortgage loans more often than
similarly situated non-Hispanic White
applicants; charging African-American
borrowers more for certain mortgage
loans than non-Hispanic White
borrowers with similar loan
qualifications; and implementing an
explicitly discriminatory loan denial
policy. The consent order, which was
entered by the court on July 25, 2016,
requires BancorpSouth to pay $4
million in direct loan subsidies in
minority neighborhoods 42 in Memphis,
40 15
U.S.C. 1691e(g).
United States v. BancorpSouth
Bank, No. 1:16–cv–00118–GHD–DAS (N.D. Miss.
June 29, 2016), ECF No. 1, https://files.consumer
finance.gov/f/documents/201606_cfpb_
bancorpsouth-joint-complaint.pdf.
42 Majority-minority neighborhoods or minority
neighborhoods refers to census tracts with a
minority population greater than 50%.
41 Complaint,
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at least $800,000 for community
programs, advertising, outreach, and
credit repair, $2.78 million to AfricanAmerican consumers who were
unlawfully denied or overcharged for
loans, and a $3 million penalty.43
BancorpSouth is a regional depository
institution headquartered in Tupelo,
Mississippi that operates branches in
eight States: Alabama, Arkansas,
Florida, Louisiana, Mississippi,
Missouri, Tennessee, and Texas. In the
complaint, CFPB and DOJ alleged that
BancorpSouth:
• Illegally redlined in Memphis: The
agencies alleged that, at least from 2011
to 2013, BancorpSouth illegally redlined
in the Memphis area—the market from
which the bank received the most
applications—by structuring its
business to avoid and discourage
consumers in minority neighborhoods
from accessing mortgages. Specifically,
the agencies alleged that the bank
placed its branches outside of minority
neighborhoods, excluded nearly all
minority neighborhoods from the area it
chose to serve under the Community
Reinvestment Act, and directed nearly
all of its marketing away from minority
neighborhoods. As a result,
BancorpSouth generated relatively few
applications from minority
neighborhoods as compared to its peers.
• Discriminated in underwriting
certain mortgages: The agencies also
alleged that one of BancorpSouth’s
lending units discriminated against
African-American applicants by
denying them mortgage loans—
including loans with consumer as well
as business purposes—more often than
similarly situated non-Hispanic White
applicants. Specifically, the agencies
alleged that BancorpSouth granted its
employees wide discretion to make
credit decisions on mortgage loans. This
discretion resulted in African-American
applicants being denied certain
mortgages at rates more than two times
higher than expected if they had been
non-Hispanic White.
• Discriminated in pricing certain
mortgage loans: The agencies also
alleged that one of BancorpSouth’s
lending units discriminated against
African-American borrowers that it did
approve by charging them higher annual
percentage rates than non-Hispanic
White borrowers with similar loan
qualifications. Specifically, the agencies
alleged that BancorpSouth granted its
employees wide discretion to set the
prices of mortgage loans. This discretion
43 Consent Order, United States v. BancorpSouth
Bank, No. 1:16–cv–00118–GHD–DAS (N.D. Miss.
July 25, 2016), ECF No. 8, https://files.consumer
finance.gov/f/documents/201606_cfpb_
bancorpSouth-consent-order.pdf.
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25257
resulted in African-American borrowers
paying significantly higher annual
percentage rates than similarly situated
non-Hispanic White borrowers, costing
African-American consumers hundreds
of dollars more each year they held the
loan.
• Implemented an explicitly
discriminatory denial policy: The
complaint alleged that BancorpSouth
required its employees to deny
applications from minorities and other
‘‘protected class’’ applicants more
quickly than those from other applicants
and not to provide credit assistance to
‘‘borderline’’ applicants, which may
have improved their chances of getting
a loan. The bank generally permitted
loan officers to assist marginal
applicants, but the explicitly race-based
denial policy departed from that
practice. An audio recording of a 2012
internal meeting at BancorpSouth
clearly articulates this discriminatory
policy, as well as negative and
stereotyped perceptions of African
Americans.
The consent order requires
BancorpSouth to take a number of
remedial measures, including paying $4
million into a loan subsidy program to
increase access to affordable credit, by
offering qualified applicants in majorityminority neighborhoods in Memphis
mortgage loans on a more affordable
basis than otherwise available from
BancorpSouth. The loan subsidies can
include interest rate reductions, closing
cost assistance, and down payment
assistance. In addition, the consent
order requires BancorpSouth to spend
$500,000 to partner with communitybased or governmental organizations
that provide education, credit repair,
and other assistance in minority
neighborhoods in Memphis, and to
spend at least $300,000 on a targeted
advertising and outreach campaign to
generate applications for mortgage loans
from qualified consumers in majorityminority neighborhoods in Memphis.
The consent order also requires
BancorpSouth to pay $2.78 million to
African-American consumers who were
improperly denied mortgage loans or
overcharged for their loans because of
BancorpSouth’s allegedly
discriminatory pricing and underwriting
policies. Finally, BancorpSouth paid a
$3 million penalty to the CFPB’s Civil
Penalty Fund.
In addition to the monetary
requirements, the court decree orders
BancorpSouth to expand its physical
presence by opening one new branch or
loan production office in a highminority neighborhood (a census tract
with a minority population greater than
80%) in Memphis. The bank is also
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required to offer African-American
consumers who were denied mortgage
loans while BancorpSouth’s allegedly
discriminatory underwriting policy was
in place the opportunity to apply for a
new loan at a subsidized interest rate.
Among other revisions to its policies,
BancorpSouth is also required by the
consent order to implement policies that
require its employees to provide equal
levels of information and assistance to
individuals who inquire about mortgage
loans, regardless of race or any other
prohibited characteristic.
When investigating identified
redlining risks, the Bureau’s approach is
consistent with that of other Federal
agencies, including other Federal law
enforcement agencies and bank
regulators. For example, the Bureau
looks to risk indicators described in the
Interagency Fair Lending Examination
Procedures, which were initially issued
by the prudential regulators and later
adopted by the Bureau.44 The Bureau
also looks to the types of evidence that
DOJ has cited in support of its
complaints alleging redlining. These
sources identify multiple factors that the
Bureau considers during a redlining
investigation, detailed above in Section
2.1.6 on Redlining.
As part of its investigation, the CFPB
also sent testers to several
BancorpSouth branches to inquire about
mortgages, and the results of that testing
support the CFPB and DOJ allegations.
The agencies alleged that, in several
instances, a BancorpSouth loan officer
treated the African-American tester less
favorably than a non-Hispanic White
counterpart. Specifically, the complaint
alleged that BancorpSouth employees
treated African-American testers who
sought information about mortgage
loans worse than non-Hispanic White
testers with similar credit qualifications.
For example, BancorpSouth employees
provided information that would restrict
African-American consumers to smaller
loans than non-Hispanic White testers.
This investigation was the CFPB’s first
use of testing to support an allegation of
discrimination. Testing is a tool the
Bureau employs in its enforcement
investigative activity. Other government
agencies, including the DOJ and HUD,
as well as private fair housing
organizations and State and local
agencies, have used testers for decades
as a method of identifying
discrimination. Courts have long
44 See
CFPB Supervision and Examination
Manual (Oct. 2012), https://files.consumer
finance.gov/f/201210_cfpb_supervision-andexamination-manual-v2.pdf (CFPB Examination
Procedures, Equal Credit Opportunity Act Baseline
Review Modules).
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recognized testing as a reliable
investigative tool.
3.1.2
Auto Finance
Toyota Motor Credit Corporation
On February 2, 2016, the CFPB
resolved an action with Toyota Motor
Credit Corporation (Toyota Motor
Credit) 45 that requires Toyota Motor
Credit to change its pricing and
compensation system by substantially
reducing or eliminating discretionary
markups to minimize the risks of
discrimination. On that same date, the
DOJ also filed a complaint and proposed
consent order in the U.S. District Court
for the Central District of California
addressing the same conduct. That
consent order was entered by the court
on February 11, 2016. Toyota Motor
Credit’s past practices resulted in
thousands of African-American and
Asian and Pacific Islander borrowers
paying higher interest rates than
similarly-situated non-Hispanic White
borrowers for their auto loans. The
consent order requires Toyota Motor
Credit to pay up to $21.9 million in
restitution to affected borrowers.
Toyota Motor Credit is the U.S.
financing arm of Toyota Financial
Services, which is a subsidiary of
Toyota Motor Corporation. As of the
second quarter of 2015, Toyota Motor
Credit was the largest captive auto
lender 46 in the United States and the
fifth largest auto lender overall. As an
indirect auto lender, Toyota Motor
Credit sets risk-based interest rates, or
‘‘buy rates,’’ that it conveys to auto
dealers. Indirect auto lenders like
Toyota Motor Credit then allow auto
dealers to charge a higher interest rate
when they finalize the deal with the
consumer. This policy or practice is
typically called ‘‘discretionary markup.’’
Markups can generate compensation for
dealers while giving them the discretion
to charge similarly-situated consumers
different rates. Over the time period
under review, Toyota Motor Credit
permitted dealers to mark up
consumers’ interest rates as much as
2.5%.
The enforcement action was the result
of a joint CFPB and DOJ investigation
that began in April 2013. The agencies
investigated Toyota Motor Credit’s
indirect auto lending activities’
compliance with ECOA. The Bureau
found that Toyota Motor Credit violated
ECOA by adopting policies that resulted
45 Consent Order, In re Toyota Motor Credit Corp.,
CFPB No. 2016–CFPB–0002 (Feb. 2, 2016), https://
files.consumerfinance.gov/f/201602_cfpb_consentorder-toyota-motor-credit-corporation.pdf.
46 Captive auto lenders are indirect auto lenders
that are directly affiliated with a particular
automobile manufacturer.
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in African-American and Asian and
Pacific Islander borrowers paying higher
interest rates for their auto loans than
non-Hispanic White borrowers as a
result of the dealer markups that Toyota
Motor Credit permitted and
incentivized. Toyota Motor Credit’s
pricing and compensation structure
meant that for the period covered in the
order, thousands of African-American
borrowers were charged, on average,
over $200 more for their auto loans, and
thousands of Asian and Pacific Islander
borrowers were charged, on average,
over $100 more for their auto loans.
The CFPB’s administrative action and
DOJ’s consent order require Toyota
Motor Credit to reduce dealer discretion
to mark up the interest rate to only
1.25% above the buy rate for auto loans
with terms of five years or less, and 1%
for auto loans with longer terms, or to
move to non-discretionary dealer
compensation. Toyota Motor Credit is
also required to pay $19.9 million in
remediation to affected AfricanAmerican and Asian and Pacific
Islander borrowers whose auto loans
were financed by Toyota Motor Credit
between January 2011 and February 2,
2016. Toyota Motor Credit is required to
pay up to an additional $2 million into
the settlement fund to compensate any
affected African-American and Asian
and Pacific Islander borrowers in the
time period between February 2, 2016,
and when Toyota Motor Credit
implements its new pricing and
compensation structure. The Bureau did
not assess penalties against Toyota
Motor Credit because of its responsible
conduct, namely the proactive steps the
institution is taking to directly address
the fair lending risk of discretionary
pricing and compensation systems by
substantially reducing or eliminating
that discretion altogether. In addition,
Toyota Motor Credit is required to hire
a settlement administrator who will
contact consumers, distribute the funds,
and ensure that affected borrowers
receive compensation.
3.2 HMDA Warning Letters—Potential
Mortgage Lending Reporting Failures
On October 27, 2016, the CFPB issued
warning letters to 44 mortgage lenders
and mortgage brokers. The Bureau had
information that appeared to show these
financial institutions may be required to
collect, record, and report data about
their housing-related lending activity,
and that they may be in violation of
those requirements. The CFPB, in
sending these letters, made no
determination that a legal violation did,
in fact, occur.
HMDA, which was originally enacted
in 1975, requires many financial
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institutions to collect data about their
housing-related lending activity,
including home purchase loans, home
improvement loans, and refinancings
that they originate or purchase, or for
which they receive applications.
Annually, these financial institutions
must report to the appropriate Federal
agencies and make the data available to
the public. The public and regulators
can use the information to monitor
whether financial institutions are
serving the housing needs of their
communities, to assist in distributing
public-sector investment so as to attract
private investment to areas where it is
needed, and to identify possible
discriminatory lending patterns.
Data transparency helps to ensure that
financial institutions are not engaging in
discriminatory lending or failing to meet
the credit needs of the entire
community, including low- and
moderate-income neighborhoods.
Financial institutions that avoid their
responsibility to collect and report
mortgage loan data hinder regulatory
efforts to enforce fair lending laws.
The CFPB identified the 44
companies by reviewing available bank
and nonbank mortgage data. The
warning letters flag that entities that
meet certain requirements are required
to collect, record, and report mortgage
lending data. The letters say that
recipients should review their practices
to ensure they comply with all relevant
laws. The companies are encouraged to
respond to the Bureau to advise if they
have taken, or will take, steps to ensure
compliance with the law. They can also
tell the Bureau if they think the law
does not apply to them.47
3.3 Implementing Enforcement Orders
When an enforcement action is
resolved through a public enforcement
order, the Bureau (and the DOJ, when
relevant) takes steps to ensure that the
respondent or defendant complies with
the requirements of the order. As
appropriate to the specific requirements
of individual public enforcement orders,
the Bureau may take steps to ensure that
borrowers who are eligible for
compensation receive remuneration and
that the defendant has implemented a
comprehensive fair lending compliance
management system. Throughout 2016,
the Office of Fair Lending worked to
implement and oversee compliance
with the pending public enforcement
orders that were entered by Federal
47 More information on HMDA reporting
requirements and a sample warning letter are
available at https://www.consumerfinance.gov/
about-us/newsroom/cfpb-warns-financialinstitutions-about-potential-mortgage-lendingreporting-failures/.
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courts or entered by the Bureau’s
Director in prior years.
3.3.1
Settlement Administration
Ally Financial Inc. and Ally Bank
On December 19, 2013, working in
close coordination with the DOJ, the
CFPB ordered Ally Financial Inc. and
Ally Bank (Ally) to pay $80 million in
damages to harmed African-American,
Hispanic, and Asian and/or Pacific
Islander borrowers. The DOJ
simultaneously filed a consent order in
the United States District Court for the
Eastern District of Michigan, which was
entered by the court on December 23,
2013. This public enforcement action
represented the Federal government’s
largest auto loan discrimination
settlement in history.48
On January 29, 2016, approximately
301,000 harmed borrowers participating
in the settlement—representing
approximately 235,000 loans—were
mailed checks by the Ally settlement
administrator, totaling $80 million plus
interest, which the Bureau announced
in a blog post in English and
Spanish.49 50 In addition, and pursuant
to its continuing obligations under the
terms of the orders, Ally has also made
ongoing payments to consumers affected
after the consent orders were entered.
Specifically, Ally paid approximately
$38.9 million in September 2015 and an
additional $51.5 million in May 2016, to
consumers that Ally determined were
both eligible and overcharged on auto
loans issued during 2014 and 2015,
respectively.
Provident Funding Associates
As previously reported, on May 28,
2015, the CFPB and the DOJ filed a joint
complaint against Provident Funding
Associations (Provident) for
discrimination in mortgage lending,
along with a proposed order to settle the
complaint in the United States District
Court for the Northern District of
California. The complaint alleged that
from 2006 to 2011, Provident
discriminated in violation of ECOA by
charging over 14,000 African-American
and Hispanic borrowers more in
48 Consent Order, In re Ally Financial Inc., CFPB
No. 2013–CFPB–0010 (Dec. 20, 2013), https://
files.consumerfinance.gov/f/201312_cfpb_consentorder_ally.pdf.
49 Patrice Ficklin, Harmed Ally Borrowers Have
Been Sent $80 Million in Damages, Consumer
Financial Protection Bureau (Jan. 29, 2016), https://
www.consumerfinance.gov/blog/harmed-allyborrowers-have-been-sent-80-million-in-damages/.
50 Patrice Ficklin, Prestatarios perjudicados por
˜
Ally reciben $80 millones en danos, Consumer
Financial Protection Bureau (Feb. 4, 2016), https://
www.consumerfinance.gov/about-us/blog/
prestatarios-perjudicados-por-ally-reciben-80millones-en-danos/.
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brokers’ fees than similarly situated
non-Hispanic White borrowers on the
basis of race and national origin. The
consent order, which the court entered
on June 18, 2015, requires Provident to
pay $9 million in damages to harmed
borrowers, to hire a settlement
administrator to distribute funds to the
harmed borrowers identified by the
CFPB and DOJ, and not to discriminate
against borrowers in assessing total
broker fees.51
In Fall 2016, the Bureau published a
blog post in English and Spanish
announcing the selection of the
settlement administrator and its mailing
of participation packets to eligible
consumers.52 53 The blog post also
provided information to consumers on
how to contact the administrator,
participate in the settlement, and submit
settlement forms.
American Honda Finance Corporation
As previously reported, on July 14,
2015, the CFPB and the DOJ resolved an
action with American Honda Finance
Corporation (Honda) to put new
measures in place to address
discretionary auto loan pricing and
compensation practices. Honda’s past
practices resulted in thousands of
African-American, Hispanic, and Asian
and Pacific Islander borrowers paying
higher interest rates than non-Hispanic
White borrowers for their auto loans
between January 1, 2011, and July 14,
2015, without regard to their
creditworthiness. The consent order
requires Honda to change its pricing and
compensation system to substantially
reduce dealer discretion and minimize
the risks of discrimination, and pay $24
million in restitution to affected
borrowers.54
In October 2016, the Bureau
published a blog post in English and
Spanish announcing that the settlement
administrator was mailing participation
51 Consent Order, United States v. Provident
Funding Assocs., L.P., No. 3:15–cv–023–73 (N.D.
Cal. May 28, 2015), ECF No. 2, https://files.consumer
finance.gov/f/201505_cfpb_consent-orderprovident-funding-associates.pdf.
52 Patrice Ficklin, Provident Settlement
Administrator to Contact Eligible Borrowers Soon,
Consumer Financial Protection Bureau (Sept. 28,
2016), https://www.consumerfinance.gov/about-us/
blog/provident-settlement-administrator-contacteligible-borrowers-soon/.
53 Patrice Ficklin, Administrador del Acuerdo de
Provident planea ponerse en contacto con
´
prestatarios elegibles proximamente, Consumer
Financial Protection Bureau (Oct. 6, 2016), https://
www.consumerfinance.gov/about-us/blog/
administrador-del-acuerdo-de-provident-planeaponerse-en-contacto-con-prestatarios-elegiblesproximamente/.
54 Consent Order, In re American Honda Finance
Corp., CFPB No. 2015–CFPB–0014 (July 14, 2015),
https://files.consumerfinance.gov/f/201507_cfpb_
consent-order_honda.pdf.
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packets to potentially eligible
consumers, and providing information
to consumers on how to contact the
administrator, participate in the
settlement, and submit settlement
forms.55 56
3.4 Equal Credit Opportunity Act
Referrals to the Department of Justice
The CFPB must refer to the DOJ a
matter when it has reason to believe that
a creditor has engaged in a pattern or
practice of lending discrimination in
violation of ECOA.57 The CFPB also
may refer other potential ECOA
violations to the DOJ. In 2016, the CFPB
referred eight matters to the DOJ. In four
of the eight matters, the DOJ declined to
open an independent investigation and
deferred to the Bureau’s handling of the
matter. The CFPB’s referrals to the DOJ
in 2016 covered a variety of practices,
specifically discrimination in mortgage
lending on the bases of the age, marital
status, receipt of public assistance
income, and sex; discrimination in
indirect auto lending on the bases of
national origin, race, and receipt of
public assistance income; and
discrimination in credit card account
management on the bases of national
origin and race.
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3.5 Pending Fair Lending
Investigations
In 2016, the Bureau had a number of
ongoing fair lending investigations and
authorized enforcement actions against
a number of institutions involving a
variety of consumer financial products.
Consistent with the Bureau’s priorities
and the Office of Fair Lending’s riskbased prioritization, one key area on
which the Bureau focused its fair
lending enforcement efforts was
addressing potential discrimination in
mortgage lending, including the
unlawful practice of redlining.
Redlining occurs when a lender
provides unequal access to credit, or
unequal terms of credit, because of the
racial or ethnic composition of a
neighborhood. At the end of 2016, the
Bureau had a number of pending
investigations in this area. Additionally,
55 Patrice Ficklin, What you need to know to get
money from the settlement with Honda Finance for
overcharging minorities, Consumer Financial
Protection Bureau (Oct. 3, 2016), https://
www.consumerfinance.gov/about-us/blog/whatyou-need-know-get-money-settlement-hondafinance-overcharging-minorities/.
56 Patrice Ficklin, Lo que necesita saber para
´
recibir dinero del acuerdo de compensacion con
´
´
Honda Finance por cobrarles de mas a las minorıas,
Consumer Financial Protection Bureau (Oct. 11,
2016), https://www.consumerfinance.gov/about-us/
blog/lo-que-necesita-saber-para-recibir-dinero-delacuerdo-de-compensacion-con-honda-finance-porcobrarles-de-mas-las-minorias/.
57 15 U.S.C. 1691e(g).
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at the end of 2016, the Bureau had a
number of pending investigations in
other areas.
4. Rulemaking and Related Guidance
4.1 Home Mortgage Disclosure Act and
Regulation C
On October 2015, the Bureau issued
and published in the Federal Register a
final rule to implement the Dodd-Frank
amendments to HMDA.58 The rule also
finalizes certain amendments that the
Bureau believes are necessary to
improve the utility of HMDA data,
further the purposes of HMDA, improve
the quality of HMDA data, and create a
more transparent mortgage market.
4.1.1 HMDA History
HMDA, as implemented by
Regulation C, is intended to provide the
public with loan data that can be used
to help determine whether financial
institutions are serving the housing
needs of their communities; to assist
public officials in distributing publicsector investment to attract private
investment in communities where it is
needed; and to assist in identifying
possible discriminatory lending patterns
and enforcing anti-discrimination
statutes.59 HMDA data are also used for
a range of mortgage market monitoring
purposes by community groups, public
officials, the financial industry,
economists, academics, social scientists,
regulators, and the media. Bank
regulators and other agencies use
HMDA to monitor compliance with and
enforcement of the CRA and Federal
anti-discrimination laws, including
ECOA and the Fair Housing Act (FHA).
The Dodd-Frank Act transferred
rulemaking authority for HMDA to the
Bureau, effective July 2011. It also
amended HMDA to require financial
institutions to report new data points
and authorized the Bureau to require
financial institutions to collect, record,
and report additional information.
4.1.2 Summary of Regulation C
Changes
The HMDA Rule changes institutional
coverage in two phases. First, to reduce
burden on industry, certain lowervolume depository institutions will no
longer be required to collect and report
HMDA data beginning in 2017. A bank,
savings association, or credit union will
not be subject to Regulation C in 2017
unless it meets the asset-size, location,
federally related, and loan activity tests
58 Home Mortgage Disclosure, 80 FR 66128 (Oct.
28, 2015) (codified at 12 CFR pt. 1003), https://
www.gpo.gov/fdsys/pkg/FR-2015-10-28/pdf/201526607.pdf.
59 12 U.S.C. 2801; 12 CFR 1003.1(b).
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under current Regulation C and it
originates at least 25 home purchase
loans, including refinancings of home
purchase loans, in both 2015 and 2016.
Second, effective January 1, 2018, the
HMDA Rule adopts a uniform loanvolume threshold for all institutions.
Beginning in 2018, an institution will be
subject to Regulation C if it originated
at least 25 covered closed-end mortgage
loan originations in each of the two
preceding calendar years or at least 100
covered open-end lines of credit in each
of the two preceding calendar years.
Other applicable coverage requirements
will apply, depending on the type of
covered entity.
The Rule also modifies the types of
transactions covered under Regulation
C. In general, the HMDA Rule adopts a
dwelling-secured standard for
transactional coverage. Beginning on
January 1, 2018, covered loans under
the HMDA Rule generally will include
closed-end mortgage loans and openend lines of credit secured by a dwelling
and will not include unsecured loans.
For HMDA data collected on or after
January 1, 2018, covered institutions
will collect, record, and report
additional information on covered
loans. New data points include those
specifically identified in Dodd-Frank as
well as others the Bureau determined
will assist in carrying out HMDA’s
purposes. The HMDA Rule adds new
data points for applicant or borrower
age, credit score, automated
underwriting system information, debtto-income ratio, combined loan-to-value
ratio, unique loan identifier, property
value, application channel, points and
fees, borrower-paid origination charges,
discount points, lender credits, loan
term, prepayment penalty, nonamortizing loan features, interest rate,
and loan originator identifier as well as
other data points. The HMDA Rule also
modifies several existing data points.
For data collected on or after January
1, 2018, the HMDA Rule amends the
requirements for collection and
reporting of information regarding an
applicant’s or borrower’s ethnicity, race,
and sex. First, a covered institution will
report whether or not it collected the
information on the basis of visual
observation or surname. Second,
covered institutions must permit
applicants to self-identify their ethnicity
and race using disaggregated ethnic and
racial subcategories. However, the
HMDA Rule will not require or permit
covered institutions to use the
disaggregated subcategories when
identifying the applicant’s or borrower’s
ethnicity and race based on visual
observation or surname.
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The Bureau is developing a new webbased submission tool for reporting
HMDA data, which covered institutions
will use beginning in 2018. Regulation
C’s appendix A is amended effective
January 1, 2018 to include new
transition requirements for data
collected in 2017 and reported in 2018.
Covered institutions will be required to
electronically submit their loan
application registers (LARs). Beginning
with data collected in 2018 and reported
in 2019, covered institutions will report
the new dataset required by the HMDA
Rule, using revised procedures that will
be available at
www.consumerfinance.gov/hmda.
Beginning in 2020, the HMDA Rule
requires quarterly reporting for covered
institutions that reported a combined
total of at least 60,000 applications and
covered loans in the preceding calendar
year. An institution will not count
covered loans that it purchased in the
preceding calendar year when
determining whether it is required to
report on a quarterly basis. The first
quarterly submission will be due by
May 30, 2020.
Beginning in 2018, covered
institutions will no longer be required to
provide a disclosure statement or a
modified LAR to the public upon
request. Instead, in response to a
request, a covered institution will
provide a notice that its disclosure
statement and modified LAR are
available on the Bureau’s Web site.
These revised disclosure requirements
will apply to data collected on or after
January 1, 2017 and reported in or after
2018.
For data collected in or after 2018 and
reported in or after 2019, the Bureau
will use a balancing test to determine
whether and, if so, how HMDA data
should be modified prior to its
disclosure in order to protect applicant
and borrower privacy while also
fulfilling HMDA’s disclosure purposes.
At a later date, the Bureau will provide
a process for the public to provide input
regarding the application of this
balancing test to determine the HMDA
data to be publicly disclosed.
4.1.3 Reducing Industry Burden
The Bureau took a number of steps to
reduce industry burden while ensuring
HMDA data are useful and reflective of
the current housing finance market. A
key part of this balancing is ensuring an
adequate implementation period. Most
provisions of the HMDA Rule go into
effect on January 1, 2018—more than
two years after publication of the Rule—
and apply to data collected in 2018 and
reported in 2019 or later years. At the
same time, an institutional coverage
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change that will reduce the number of
depository institutions that need to
report is effective earlier: On January 1,
2017. Institutions subject to the new
quarterly reporting requirement will
have additional time to prepare: That
requirement is effective on January 1,
2020, and the first quarterly submission
will be due by May 30, 2020.
As with all of its rules, the Bureau
continues to look for ways to help the
mortgage industry implement the new
mortgage lending data reporting rules,
and has created regulatory
implementation resources that are
available online. These resources
include an overview of the final rule, a
plain-language compliance guide, a
timeline with various effective dates, a
decision tree to help institutions
determine whether they need to report
mortgage lending data, a chart that
provides a summary of the reportable
data, a chart that describes when to
report data as not applicable, a chart
that describes what transactions are
reportable, a webinar on the HMDA
Rule, and a Technology Preview for the
Bureau’s new web-based submission
tool. In addition, the Bureau has
published Filing Instruction Guides
(FIG) for 2017 and 2018 that include file
specifications. The Bureau will monitor
implementation progress and will be
publishing additional regulatory
implementation tools and resources on
its Web site to support implementation
needs.60 Since the HMDA rule was
issued on October 15, 2015, the Bureau
has focused on outreach by sharing
information about the regulatory
changes, including webinars,
responding to industry inquiries, and
issuing press releases and emails to
stakeholder groups. In addition, Bureau
staff has spoken at numerous industryfocused conferences and mortgage
events. Since the HMDA rule has been
released, the Bureau’s Web site has had
over 50,000 visits to the HMDA
implementation page and over 18,000
downloads of our plain-language HMDA
compliance guide.
4.1.4 Filing 2017 HMDA Data
Beginning with the HMDA data
collected in 2017 and submitted in
2018, responsibility to receive and
process HMDA data will transfer from
the Federal Reserve Board (FRB) to the
CFPB. The HMDA agencies have agreed
that a covered institution filing HMDA
data collected in or after 2017 with the
CFPB will be deemed to have submitted
60 These resources are available at Consumer
Financial Protection Bureau, Home Mortgage
Disclosure Act rule implementation, https://www.
consumerfinance.gov/regulatory-implementation/
hmda/.
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the HMDA data to the appropriate
Federal agency.61 The effective date of
the change in the Federal agency that
receives and processes the HMDA data
does not coincide with the effective date
for the new HMDA data to be collected
and reported under the Final Rule
amending Regulation C published in the
Federal Register on October 28, 2015.
The Final Rule’s new data requirements
will apply to data collected beginning
on January 1, 2018. The data fields for
data collected in 2017 have not
changed.
Also beginning with data collected in
2017, filers will submit their HMDA
data using a web interface referred to as
the ‘‘HMDA Platform.’’ In addition,
beginning with the data collected in
2017, as part of the submission process,
a HMDA reporter’s authorized
representative with knowledge of the
data submitted shall certify to the
accuracy and completeness of the data
submitted. Additional information
about HMDA, the FIG, and other data
submission resources is located at the
Bureau’s Web site.62
4.1.5
HMDA Data Resubmission RFI
In response to dialogue with industry
and other stakeholders, the Bureau is
considering modifications to its current
HMDA resubmission guidelines. In
comments on the Bureau’s proposed
changes to Regulation C, some
stakeholders asked that the Bureau
adjust its existing HMDA resubmission
guidelines to reflect the expanded data
the Bureau will collect under the HMDA
Rule.
Accordingly, on January 7, 2016, the
Bureau published on its Web site a
Request for Information (RFI) asking for
public comment on the Bureau’s HMDA
resubmission guidelines.63 Specifically,
the Bureau requested feedback on the
Bureau’s use of resubmission error
thresholds; how they should be
calculated; whether they should vary
with the size of the HMDA submission
or kind of data; and the consequences
for exceeding a threshold, among other
61 The HMDA agencies refer collectively to the
CFPB, the Office of the Comptroller of the Currency
(OCC), the Federal Deposit Insurance Corporation
(FDIC), the FRB, the National Credit Union
Administration (NCUA), and the Department of
Housing and Urban Development (HUD).
62 See Consumer Financial Protection Bureau,
Filing instructions guide for HMDA data collected
in 2017 (July 2016), https://www.consumer
finance.gov/data-research/hmda/static/for-filers/
2017/2017-HMDA-FIG.pdf.
63 See Consumer Financial Protection Bureau,
CFPB Seeks Public Input on Mortgage Lending
Information Resubmission Guidelines (Jan. 7, 2016),
https://www.consumerfinance.gov/newsroom/cfpbseeks-public-input-on-mortgage-lendinginformation-resubmission-guidelines/.
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topics. Some examples of questions
posed to the public include:
• Should the Bureau continue to use
error percentage thresholds to determine
the need for data resubmission? If not,
how else may the Bureau ensure data
integrity and compliance with HMDA
and Regulation C?
• If the Bureau retains error
percentage thresholds, should the
thresholds be calculated differently than
they are today? If so, how and why?
• If the Bureau retains error
percentage thresholds, should it
continue to maintain separate error
thresholds for the entire HMDA LAR
sample and individual data fields
within the LAR sample? If not, why?
The RFI was published in the Federal
Register on January 12, 2016.64 The 60day comment period ended on March
14, 2016. As of this report’s publication
date, in light of feedback received, the
Bureau was considering whether to
adjust its existing HMDA resubmission
guidelines and if so, how.
4.1.6 HMDA Rule Technical
Corrections and Clarifying Amendments
Since issuing the 2015 HMDA Final
Rule, the Bureau has identified and
received information about some areas
of uncertainty about requirements under
the rule. This spring, the Bureau plans
to seek comment on a proposal to
amend certain provisions of Regulation
C to make technical corrections and to
clarify certain requirements under
Regulation C.
4.2
ECOA and Regulation B
In 2016, with regard to ECOA, the
CFPB published a Bureau Official
Approval and was in the proposed rule
stage to amend certain sections of
Regulation B.
4.2.1 Status of New Uniform
Residential Loan Application and
Collection of Expanded Home Mortgage
Disclosure Act Information About
Ethnicity and Race in 2017 Under
Regulation B
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On September 23, 2016, the Bureau
published a Bureau Official Approval
pursuant to section 706(e) of the ECOA
concerning the new Uniform Residential
Loan Application and the collection of
expanded HMDA information about
ethnicity and race in 2017.65
64 Request
for Info. Regarding Home Mortgage
Disclosure Act Resubmission Guidelines, 81 F.R.
1405 (Jan. 12, 2016), https://www.gpo.gov/fdsys/
pkg/FR-2016-01-12/pdf/2016-00442.pdf.
65 Consumer Financial Protection Bureau, Status
of New Uniform Residential Loan Application and
Collection of Expanded Home Mortgage Disclosure
Act Information about Ethnicity and Race in 2017
under Regulation B (Sept. 23, 2016), https://
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In accordance with the request by
Federal Housing Finance Agency and
the Federal Home Loan Mortgage
Corporation (Freddie Mac) and the
Federal National Mortgage Association
(Fannie Mae), the Bureau reviewed the
revised and redesigned Uniform
Residential Loan Application issued on
August 23, 2016 (2016 URLA). Under
the terms provided in the Bureau’s
notice, the Bureau determined that the
relevant language in the 2016 URLA is
in compliance with the specified
provisions of Regulation B. A creditor’s
use of the 2016 URLA is not required
under Regulation B. However, the notice
provides that, a creditor that uses the
2016 URLA without any modification
that would violate § 1002.5(b) through
(d) would act in compliance with
§ 1002.5(b) through (d).
The notice also addressed collection
of information concerning the ethnicity
and race of applicants in conformity
with Regulation B from January 1, 2017,
through December 31, 2017. The
Bureau’s official approval provided that
at any time from January 1, 2017,
through December 31, 2017, a creditor
may, at its option, permit applicants to
self-identify using disaggregated ethnic
and racial categories as instructed in
appendix B to Regulation C, as amended
by the 2015 HMDA final rule. The
Bureau believes such authorization may
provide creditors time to begin to
implement the regulatory changes and
improve their compliance processes
before the new requirement becomes
effective, and therefore mandatory, on
January 1, 2018. Allowing for this
increased implementation period will,
in the Bureau’s view, reduce
compliance burden and further the
purposes of HMDA and Regulation C.
4.2.2 Amendments to the Equal Credit
Opportunity Act (Regulation B)
Ethnicity and Race Information
Collection
Regulation C currently requires
financial institutions to collect and
report information about the ethnicity
and race, as well as certain other
characteristics, of applicants and
borrowers. Regulation C, as amended by
2015 HMDA Final Rule, generally
effective January 1, 2018, will require
financial institutions to permit
applicants and borrowers to self-identify
using disaggregated ethnic and racial
categories beginning January 1, 2018.
Regulation B also currently requires
creditors to request and retain
information about the ethnicity and
race, as well as certain other
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characteristics, of applicants for certain
dwelling-secured loans, but uses only
aggregate ethnic and racial categories.
On March 24, 2017, the Bureau issued
a proposed rule seeking comment on
amendments to Regulation B to permit
creditors additional flexibility in
complying with Regulation B in order to
facilitate compliance with Regulation C,
to add certain model forms and remove
others from Regulation B, and to make
various other amendments to Regulation
B and its commentary to facilitate the
collection and retention of information
about the ethnicity, sex, and race of
certain mortgage applicants.66
4.3
Small Business Data Collection
Section 1071 of the Dodd-Frank Act
requires financial institutions to
compile, maintain, and submit to the
Bureau certain data on credit
applications for women-owned,
minority-owned, and small
businesses.67 Congress enacted section
1071 for the purpose of facilitating
enforcement of fair lending laws and
identifying business and community
development needs and opportunities
for women-owned, minority-owned, and
small businesses. The amendments to
ECOA made by the Dodd-Frank Act
require that certain data be collected
and maintained, including the number
of the application and date the
application was received; the type and
purpose of loan or credit applied for; the
amount of credit applied for and
approved; the type of action taken with
regard to each application and the date
of such action; the census tract of the
principal place of business; the gross
annual revenue of the business; and the
race, sex, and ethnicity of the principal
owners of the business. The Bureau’s
Fall 2016 Unified Agenda and
Regulatory Plan indicates that
rulemaking pursuant to Section 1071 is
now in the pre-rule stage.68 This first
stage of the Bureau’s work will be
focused on outreach and research and
on the potential ways to implement
section 1071, after which the Bureau
will begin developing proposed rules
concerning the data to be collected and
determining the appropriate operational
procedures and privacy protections
needed for information-gathering and
public disclosure.
66 Consumer Financial Protection Bureau,
Amendments to Equal Credit Opportunity Act
(Regulation B) Ethnicity and Race Information
Collection 2017–0009 (March 24, 2017), https://
files.consumerfinance.gov/f/documents/201703_
cfpb_NPRM-to-amend-Regulation-B.pdf.
67 Dodd-Frank Act section 1071 (codified at 15
U.S.C. 1691c–2).
68 Semiannual Regulatory Agenda, 81 FR 94844,
94846 (Dec. 23, 2016).
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The Bureau has begun to explore
some of the issues involved in the
rulemaking, including through ongoing
engagement with industry and other
stakeholders. In addition, current and
future small business lending
supervisory activity will help expand
and enhance the Bureau’s knowledge in
this area, including the credit
application process; existing data
collection processes; and the nature,
extent, and management of fair lending
risk. The Bureau is also considering
how best to work with other agencies to,
in part, gain insight into existing
business lending data collection efforts
and to explore possible ways to
cooperate in future efforts.
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4.4 Amicus Program
The Bureau’s Amicus Program files
amicus, or friend-of-the-court, briefs in
court cases concerning the Federal
consumer financial protection laws that
the Bureau is charged with
implementing, including ECOA. These
amicus briefs provide the courts with
our views on significant consumer
financial protection issues and help
ensure that consumer financial
protection statutes and regulations are
correctly and consistently interpreted by
the courts.
In 2016, the Bureau filed an amicus
brief in Alexander v. AmeriPro Funding,
Inc., in which a group of consumer
plaintiffs appealed the dismissal by the
United States District Court for the
Southern District of Texas of an ECOA
complaint alleging discrimination by
mortgage lenders on the basis that all or
part of the plaintiffs’ income derived
from a public assistance program. The
District Court held that the complaint
failed to allege facts that gave rise to a
prima facie showing of discrimination
under the McDonnell-Douglas
framework and also failed to allege
direct evidence of discrimination
because the allegations were
‘‘conclusory’’ and did not allege
hostility or animus.69 The Bureau filed
its amicus brief on February 23, 2016,
and argued that the District Court’s
decision imposed pleading burdens on
ECOA plaintiffs that were not required
by ECOA or the Federal Rules of Civil
Procedure.70
On February 16, 2017, in a unanimous
decision, the United States Court of
69 Alexander v. AmeriPro Funding, Inc., No. H–
14–2947, 2015 WL 4545625 at *4–5 (S.D. Tex. July
28, 2015).
70 Br. of Amicus Curiae Consumer Financial
Protection Bureau in Supp. of Appellants and
Reversal, Alexander, et al. v. AmeriPro Funding,
Inc., et al., No. 15–20710 (5th Cir. Feb. 23, 2016),
ECF No. 00513394181, https://www.consumer
finance.gov/policy-compliance/amicus/briefs/
alexander-ameripro-funding/
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Appeals for the Fifth Circuit reversed
the dismissal with respect to some of
the plaintiffs but affirmed the dismissal
with respect to others.71 Reversing the
District Court, the court held that one
set of plaintiffs stated an ECOA claim
because they alleged that they applied
for credit, that the creditor refused to
consider public assistance income in
considering their credit applications,
and that the applicants as a result
received less favorable mortgages.
Unlike the District Court’s decision, the
court did not require the plaintiffs to
also allege hostility or animus or to
make a prima facie showing of
discrimination under the McDonnellDouglas framework. Affirming the
District Court, the court also held that
another set of plaintiffs failed to state a
claim under ECOA because they either
failed to allege sufficient facts of
discriminatory conduct, failed to allege
facts indicating that they had applied
for credit, or failed to allege facts
indicating that one defendant was a
‘‘creditor’’ under ECOA.
5. Interagency Coordination
5.1 Interagency Coordination and
Engagement
The Office of Fair Lending regularly
coordinates the CFPB’s fair lending
regulatory, supervisory and enforcement
activities with those of other Federal
agencies and State regulators to promote
consistent, efficient, and effective
enforcement of Federal fair lending
laws.72 Through our interagency
engagement, we work to address current
and emerging fair lending risks.
On November 14, 2016, along with
other members of the FFIEC, the Bureau
issued an updated Uniform Interagency
Consumer Compliance Rating System.73
The revisions reflect the regulatory,
supervisory, technological, and market
changes that have occurred since the
system was established. The previous
rating system was adopted in 1980, and
the proposed revisions aim to address
the broad array of risks in the market
that can cause consumer harm,
including fair lending violations. The
Bureau plans to implement the updated
rating system on consumer compliance
examinations that begin on or after
March 31, 2017.
The CFPB, along with the FTC, DOJ,
HUD, FDIC, FRB, NCUA, OCC, and the
71 Alexander v. AmeriPro Funding, Inc., 848 F.3d
698 (5th Cir. 2017).
72 Dodd-Frank Act section 1013(c)(2)(B) (codified
at 12 U.S.C. 5493(c)(2)(B)).
73 Uniform Interagency Consumer Compliance
Rating System, 81 FR 79473 (Nov. 14, 2016),
https://www.federalregister.gov/documents/2016/
11/14/2016-27226/uniform-interagency-consumercompliance-rating-system.
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Federal Housing Finance Agency,
comprise the Interagency Task Force on
Fair Lending. The Task Force meets
regularly to discuss fair lending
enforcement efforts, share current
methods of conducting supervisory and
enforcement fair lending activities, and
coordinate fair lending policies.
The CFPB belongs to a standing
working group of Federal agencies—
with the DOJ, HUD, and FTC—that
meets regularly to discuss issues
relating to fair lending enforcement.
These agencies comprise the
Interagency Working Group on Fair
Lending Enforcement. The agencies use
these meetings to discuss fair lending
developments and trends,
methodologies for evaluating fair
lending risks and violations, and
coordination of fair lending enforcement
efforts. In addition to these interagency
working groups, we meet periodically
and on an ad hoc basis with the
prudential regulators to coordinate our
fair lending work.
The CFPB takes part in the FFIEC
HMDA/Community Reinvestment Act
Data Collection Subcommittee, which is
a subcommittee of the FFIEC Task Force
on Consumer Compliance, as its work
relates to the collection and processing
of HMDA data, and the Bureau is one of
the agencies to which HMDA data is
submitted by financial institutions.
6. Outreach: Promoting Fair Lending
Compliance and Education
Pursuant to Dodd-Frank,74 the Office
of Fair Lending regularly engages in
outreach with industry, bar associations,
consumer advocates, civil rights
organizations, other government
agencies, and other stakeholders to help
educate and inform about fair lending.
The Bureau is committed to
communicating directly with all
stakeholders on its policies, compliance
expectations, and fair lending priorities.
As part of this commitment to outreach
and education in the area of fair
lending, equal opportunity, and
ensuring fair access to credit, Bureau
personnel have engaged in dialogue
with stakeholders on issues including
the use of public assistance income in
underwriting, redlining, disparate
treatment, disparate impact, HMDA data
collection and reporting, indirect auto
financing, the use of proxy
methodology, and the unique challenges
facing LEP and lesbian, gay, bisexual
and transgender (LGBT) consumers in
accessing credit. Outreach is
accomplished through issuance of
Reports to Congress, Interagency
74 Dodd-Frank Act section 1013(c)(2)(C) (codified
at 12 U.S.C. 5493(c)(2)(C)).
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Statements, Supervisory Highlights,
Compliance Bulletins, letters, blog
posts, speeches and presentations at
conferences and trainings, and
participation in meetings to discuss fair
lending and access to credit matters.
6.1
Blog Posts
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The Bureau firmly believes that an
informed consumer is the best defense
against discriminatory lending
practices. When issues arise that
consumers need to know about, the
Bureau uses many tools to aid
consumers in financial decisionmaking.75 76 The Bureau regularly uses
its blog as a tool to communicate
effectively to consumers on timely
issues, emerging areas of concern,
Bureau initiatives, and more. In 2016 we
published 14 blog posts related to two
main fair lending topics: Providing
consumers updated information about
our fair lending enforcement actions
and providing consumer education on
fair lending. Our enforcement update
blog posts included the announcement
(in both English and Spanish) of the
BancorpSouth Bank settlement,77 78
updates on the Ally Financial Inc. and
Ally Bank settlement,79 80 updates on
the Provident Funding Association, L.P.
75 For helpful information on shopping for auto
loans, please see the Bureau’s Know Before You
Owe: Auto Loans toolkit, at Consumer Financial
Protection Bureau, Take control of your auto loan,
https://www.consumerfinance.gov/consumer-tools/
auto-loans/.
76 For helpful information on shopping for home
loans, please see the Bureau’s toolkit, at Consumer
Financial Protection Bureau, Owning a Home: Tools
and resources for homebuyers, https://
www.consumerfinance.gov/owning-a-home/.
77 Patrice Ficklin & Daniel Dodd-Ramirez,
Redlining: CFPB and DOJ action requires
BancorpSouth Bank to pay millions to harmed
consumers, Consumer Financial Protection Bureau
(June 29, 2016), https://www.consumerfinance.gov/
about-us/blog/redlining-cfpb-and-doj-actionrequires-bancorpsouth-bank-pay-millions-harmedconsumers/.
78 Patrice Ficklin & Daniel Dodd-Ramirez, La
´
´
delimitacion ilegal: Accion del CFPB y del
Departamento de Justicia requiere que el banco
´
BancorpSouth pague millones de dolares a
consumidores perjudicados, Consumer Financial
Protection Bureau (July 6, 2016), https://
www.consumerfinance.gov/about-us/blog/ladelimitacion-ilegal-accion-del-cfpb-y-deldepartamento-de-justicia-requiere-que-el-bancobancorpsouth-pague-millones-de-dolaresconsumidores-perjudicados/.
79 Patrice Ficklin, Harmed Ally borrowers have
been sent $80 million in damages, Consumer
Financial Protection Bureau (Jan. 29, 2016), https://
www.consumerfinance.gov/about-us/blog/harmedally-borrowers-have-been-sent-80-million-indamages/.
80 Patrice Ficklin, Prestatarios perjudicados por
˜
Ally reciben $80 millones en danos, Consumer
Financial Protection Bureau (Feb. 4, 2016), https://
www.consumerfinance.gov/about-us/blog/
prestatarios-perjudicados-por-ally-reciben-80millones-en-danos/.
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settlement 81 82 and updates on the
American Honda Finance Corporation
settlement.83 84 Our consumer education
blog posts included reminding
consumers of their rights for fair
treatment in the financial
marketplace,85 86 a series of two blog
posts about the history of ECOA 87 and
what it means for consumers,88 a blog
post outlining the 2017 priorities for
Fair Lending,89 and a blog post about
shopping for an auto loan.90
81 Patrice Ficklin, Provident Settlement
Administrator to contact eligible borrowers soon,
Consumer Financial Protection Bureau (Sept. 28,
2016), https://www.consumerfinance.gov/about-us/
blog/provident-settlement-administrator-contacteligible-borrowers-soon/.
82 Patrice Ficklin, Administrador del Acuerdo de
Provident planea ponerse en contacto con
´
prestatarios elegibles proximamente, Consumer
Financial Protection Bureau (Oct. 6, 2016), https://
www.consumerfinance.gov/about-us/blog/
administrador-del-acuerdo-de-provident-planeaponerse-en-contacto-con-prestatarios-elegiblesproximamente/.
83 Patrice Ficklin, What you need to know to get
money from the settlement with Honda Finance for
overcharging minorities, Consumer Financial
Protection Bureau (Oct. 3, 2016), https://
www.consumerfinance.gov/about-us/blog/whatyou-need-know-get-money-settlement-hondafinance-overcharging-minorities/.
84 Patrice Ficklin, Lo que necesita saber para
´
recibir dinero del acuerdo de compensacion con
´
´
Honda Finance por cobrarles de mas a las minorıas,
Consumer Financial Protection Bureau (Oct. 11,
2016), https://www.consumerfinance.gov/about-us/
blog/lo-que-necesita-saber-para-recibir-dinero-delacuerdo-de-compensacion-con-honda-finance-porcobrarles-de-mas-las-minorias/.
85 Patrice Ficklin, You have the right to be treated
fairly in the financial marketplace, Consumer
Financial Protection Bureau (Apr. 29, 2016), https://
www.consumerfinance.gov/about-us/blog/you-haveright-be-treated-fairly-financial-marketplace/.
86 Patrice Ficklin, Usted tiene derecho a que lo
traten de manera justa en el mercado financiero,
Consumer Financial Protection Bureau (May 2,
2016), https://www.consumerfinance.gov/about-us/
blog/usted-tiene-derecho-que-lo-traten-de-manerajusta-en-el-mercado-financiero/.
87 Brian Kreiswirth & Anna-Marie Tabor, What
you need to know about the Equal Credit
Opportunity Act and how it can help you: Why it
was passed and what it is, Consumer Financial
Protection Bureau (Oct. 31, 2016), https://
www.consumerfinance.gov/about-us/blog/whatyou-need-know-about-equal-credit-opportunity-actand-how-it-can-help-you-why-it-was-passed-andwhat-it/.
88 Rebecca Gelfond & Frank Vespa-Papaleo, What
you need to know about the Equal Credit
Opportunity Act and how it can help you: Know
your rights, Consumer Financial Protection Bureau
(Nov. 2, 2016), https://www.consumerfinance.gov/
about-us/blog/what-you-need-know-about-equalcredit-opportunity-act-and-how-it-can-help-youknow-your-rights/.
89 Patrice Ficklin, Fair Lending priorities in the
new year, Consumer Financial Protection Bureau
(Dec. 16, 2016), https://www.consumerfinance.gov/
about-us/blog/fair-lending-priorities-new-year/.
90 Patrice Ficklin & Daniel Dodd-Ramirez, Don’t
get taken for a ride; protect yourself from an auto
loan you can’t afford, Consumer Financial
Protection Bureau (July 5, 2016), https://
www.consumerfinance.gov/about-us/blog/dont-gettaken-ride-protect-yourself-auto-loan-you-cantafford/.
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The blog posts may be accessed any
time at www.consumerfinance.gov/blog.
6.2
Supervisory Highlights
Supervisory Highlights reports anchor
the Bureau’s efforts to communicate
about the Bureau’s supervisory activity.
Because the Bureau’s supervisory
process is confidential, Supervisory
Highlights reports provide information
on supervisory trends the Bureau
observes, without identifying specific
entities, as well as information on
public enforcement matters that arise
from supervisory reviews. In 2016,
Supervisory Highlights covered many
topical issues pertaining to fair lending,
including mortgage servicing, HMDA
examinations where institutions
improperly coded actions taken on
conditionally-approved applications
with unmet underwriting conditions,
LEP consumers, redlining, and
settlement updates for recent
enforcement actions that originated in
the supervisory process.
More information about the topics
discussed this year in Supervisory
Highlights can be found in Section 2.1
of this Report. As with all Bureau
resources, all editions of Supervisory
Highlights are available on
www.consumerfinance.gov/reports.
6.3 Speaking Engagements &
Roundtables
To meet our mission of educating and
informing stakeholders about fair
lending, the Office of Fair Lending and
Equal Opportunity had the opportunity
to participate in a number of outreach
speaking events and roundtables
throughout 2016. In these events, we
shared information on fair lending
priorities, emerging issues, and heard
feedback from our stakeholders on the
work we do.
Fair Lending staff attended numerous
roundtables throughout the year on a
variety of issues related to fair lending.
Some examples of the topics covered
include student lending, language
access issues, HMDA, small business
lending, mortgage servicing, and credit
reporting.
7. Interagency Reporting
Pursuant to ECOA, the CFPB is
required to file a report to Congress
describing the administration of its
functions under ECOA, providing an
assessment of the extent to which
compliance with ECOA has been
achieved, and giving a summary of
public enforcement actions taken by
other agencies with administrative
enforcement responsibilities under
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ECOA.91 This section of this report
provides the following information:
• A description of the CFPB’s and
other agencies’ ECOA enforcement
efforts; and
• an assessment of compliance with
ECOA.
In addition, the CFPB’s annual HMDA
reporting requirement calls for the
CFPB, in consultation with HUD, to
report annually on the utility of
HMDA’s requirement that covered
lenders itemize certain mortgage loan
data.92
7.1 Equal Credit Opportunity Act
Enforcement
The enforcement efforts and
compliance assessments made by all the
agencies assigned enforcement authority
under section 704 of ECOA are
discussed in this section.
7.1.1 Public Enforcement Actions
In addition to the CFPB, the agencies
charged with administrative
enforcement of ECOA under section 704
include: The FRB, the FDIC, the OCC,
and the NCUA (collectively, the FFIEC
agencies); 93 the FTC, the Farm Credit
Administration (FCA), the Department
of Transportation (DOT), the Securities
25265
and Exchange Commission (SEC), the
Small Business Administration (SBA),
and the Grain Inspection, Packers and
Stockyards Administration (GIPSA) of
the Department of Agriculture.94 In
2016, CFPB had two public enforcement
actions for violations of ECOA, and the
OCC issued one public enforcement
action for violations of ECOA and/or
Regulation B.
7.1.2 Violations Cited During ECOA
Examinations
Among institutions examined for
compliance with ECOA and Regulation
B, the FFIEC agencies reported that the
most frequently cited violations were:
TABLE 1—MOST FREQUENTLY CITED REGULATION B VIOLATIONS BY FFIEC AGENCIES: 2016
FFIEC agencies reporting
Regulation B violations: 2016
CFPB, FDIC, FRB, NCUA, OCC ....
12 CFR 1002.4(a): Discrimination on a prohibited basis in a credit transaction.
12 C.F.R. 1002.6(b): Improperly considering age, receipt of public assistance, certain other income, or another prohibited basis in a system of evaluating applicant creditworthiness.
12 C.F.R. 1002.7(d)(1): Improperly requiring the signature of an applicant’s spouse or other person.
12 C.F.R. 1002.9(a)(1), (a)(1)(i), (a)(2), (b), (b)(2), (c): Failure to timely notify an applicant when an application is denied; failure to provide notice to the applicant 30 days after receiving a completed application
concerning the creditor’s approval of, counteroffer or adverse action on the application; failure to provide
sufficient information in an adverse action notification, including the specific reasons the application was
denied; failure to timely and/or appropriately notify an applicant of either action taken or of incompleteness after receiving an application that is incomplete.
12 C.F.R. 1002.12(b)(1), (b)(1)(ii)(A): Failure to preserve records on actions taken on an application or of
incompleteness.
12 C.F.R. 1002.13(a)(1)(i): Failure to request information on an application pertaining to an applicant’s ethnicity.
12 C.F.R. 14(a), (a)(1): Failure to routinely provide an applicant with a copy of all appraisals and other written valuations developed in connection with an application for credit that is to be secured by a first lien
on a dwelling, and/or failure to provide an applicant with a notice in writing of the applicant’s right to receive a copy of all written appraisals developed in connection with the application.
TABLE 2—MOST FREQUENTLY CITED REGULATION B VIOLATIONS BY OTHER ECOA AGENCIES, 2016
Regulation B violations: 2016
FCA .................................................
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Other ECOA agencies
12 CFR 1002.9: Failure to timely notify an applicant when an application is denied; failure to provide sufficient information in an adverse action notification, including the specific reasons the application was denied.
12 CFR 1002.13(a)(1): Failure to request and collect information about the race, ethnicity, sex, marital status, and age of applicants seeking certain types of mortgage loans.
The GIPSA, the SEC, and the SBA
reported that they received no
complaints based on ECOA or
Regulation B in 2016. In 2016, the DOT
reported that it received a ‘‘small
number of consumer inquiries or
complaints concerning credit matters
possibly covered by ECOA,’’ which it
‘‘processed informally.’’ The FTC is an
enforcement agency and does not
conduct compliance examinations.
7.2 Referrals to the Department of
Justice
In 2016, the FFIEC agencies including
the CFPB referred a total of 20 matters
to the DOJ. The FDIC referred four
matters to the DOJ. These matters
alleged discriminatory treatment of
persons in credit transactions due to
protected characteristics, including age,
race, national origin, and receipt of
public assistance income. The FRB
referred seven matters to the DOJ. These
matters alleged discriminatory treatment
of persons in credit transactions due to
protected characteristics, including race,
national origin, and marital status. The
OCC referred one matter to the DOJ on
the basis of marital status
discrimination. The CFPB referred eight
matters to the DOJ during 2016, finding
discrimination in credit transactions on
the following prohibited bases: Race,
national origin, age, receipt of public
assistance income, sex, and marital
status.
15 U.S.C. 1691f.
12 U.S.C. 2807.
93 The FFIEC is a ‘‘formal interagency body
empowered to prescribe uniform principles,
standards, and report forms for the Federal
examination of financial institutions’’ by the
member agencies listed above and the State Liaison
Committee ‘‘and to make recommendations to
promote uniformity in the supervision of financial
institutions.’’ Federal Financial Institutions
Examination Council, https://www.ffiec.gov (last
visited March 31, 2017).
94 15 U.S.C. 1691c.
91
92
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Federal Register / Vol. 82, No. 104 / Thursday, June 1, 2017 / Notices
7.3 Reporting on the Home Mortgage
Disclosure Act
The CFPB’s annual HMDA reporting
requirement calls for the CFPB, in
consultation with the Department of
Housing and Urban Development
(HUD), to report annually on the utility
of HMDA’s requirement that covered
lenders itemize loan data in order to
disclose the number and dollar amount
of certain mortgage loans and
applications, grouped according to
various characteristics.95 The CFPB, in
consultation with HUD, finds that
itemization and tabulation of these data
further the purposes of HMDA. For
more information on the Bureau’s
proposed amendments to HMDA’s
implementing regulation, Regulation C,
please see the Rulemaking section of
this report (Section 4).
8. Conclusion
In this, our fifth Fair Lending Report
to Congress, we outline our work in
furtherance of our statutory mandate to
ensure fair, equitable, and
nondiscriminatory access to credit. Our
work continues to reflect the areas that
pose the greatest risk of consumer harm,
and we continue to reprioritize our
approach to better position our work to
understand and address emerging
issues. Our multipronged approach uses
the full variety of tools at our disposal—
supervision, enforcement, rulemaking,
outreach, research, data-driven
prioritization, interagency coordination,
and more. We are pleased to present this
report as we continue to fulfill our
statutory mandate as well as the
Bureau’s mission to help consumer
finance markets work by making rules
more effective, by consistently and
fairly enforcing these rules, and by
empowering consumers to take more
control over their economic lives.
Appendix A: Defined Terms
Term
Definition
Bureau .............................................
CFPB ...............................................
CMS ................................................
CRA .................................................
Dodd-Frank Act ...............................
DOJ .................................................
DOT .................................................
ECOA ..............................................
FCA .................................................
FDIC ................................................
Federal Reserve Board ...................
FFIEC ..............................................
The Consumer Financial Protection Bureau.
The Consumer Financial Protection Bureau.
Compliance Management System.
Community Reinvestment Act.
The Dodd-Frank Wall Street Reform and Consumer Protection Act.
The U.S. Department of Justice.
The U.S. Department of Transportation.
The Equal Credit Opportunity Act.
Farm Credit Administration.
The U.S. Federal Deposit Insurance Corporation.
The U.S. Board of Governors of the Federal Reserve System.
The U.S. Federal Financial Institutions Examination Council—the FFIEC member agencies are the Board
of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC),
the National Credit Union Administration (NCUA), the Office of the Comptroller of the Currency (OCC),
and the Consumer Financial Protection Bureau (CFPB). The State Liaison Committee was added to
FFIEC in 2006 as a voting member.
The U.S. Board of Governors of the Federal Reserve System.
The U.S. Federal Trade Commission.
Grain Inspection, Packers and Stockyards Administration (GIPSA) of the U.S. Department of Agriculture.
The Home Mortgage Disclosure Act.
The U.S. Department of Housing and Urban Development.
Limited English Proficiency.
Lesbian, gay, bisexual and transgender.
The National Credit Union Administration.
The U.S. Office of the Comptroller of the Currency.
Small Business Administration.
U.S. Securities and Exchange Commission.
FRB .................................................
FTC .................................................
GIPSA .............................................
HMDA ..............................................
HUD ................................................
LEP .................................................
LGBT ...............................................
NCUA ..............................................
OCC ................................................
SBA .................................................
SEC .................................................
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[2]. Regulatory Requirements
This Fair Lending Report of the
Consumer Financial Protection Bureau
summarizes existing requirements
under the law, and summarizes findings
made in the course of exercising the
Bureau’s supervisory and enforcement
authority. It is therefore exempt from
notice and comment rulemaking
requirements under the Administrative
Procedure Act pursuant to 5 U.S.C.
553(b). Because no notice of proposed
rulemaking is required, the Regulatory
Flexibility Act does not require an
initial or final regulatory flexibility
analysis. 5 U.S.C. 603(a), 604(a). The
Bureau has determined that this Fair
Lending Report does not impose any
new or revise any existing
recordkeeping, reporting, or disclosure
95 See
requirements on covered entities or
members of the public that would be
collections of information requiring
OMB approval under the Paperwork
Reduction Act, 44 U.S.C. 3501, et seq.
CORPORATION FOR NATIONAL AND
COMMUNITY SERVICE
Dated: May 24, 2017.
Richard Cordray,
Director, Bureau of Consumer Financial
Protection.
AGENCY:
[FR Doc. 2017–11318 Filed 5–31–17; 8:45 am]
BILLING CODE 4810–AM–P
Proposed Information Collection;
Comment Request
Corporation for National and
Community Service.
ACTION: Notice.
The Corporation for National
and Community Service (CNCS), as part
of its continuing effort to reduce
paperwork and respondent burden,
conducts a pre-clearance consultation
program to provide the general public
and Federal agencies with an
opportunity to comment on proposed
and/or continuing collections of
information in accordance with the
Paperwork Reduction Act of 1995. This
SUMMARY:
12 U.S.C. 2807.
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Agencies
[Federal Register Volume 82, Number 104 (Thursday, June 1, 2017)]
[Notices]
[Pages 25250-25266]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-11318]
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BUREAU OF CONSUMER FINANCIAL PROTECTION
Fair Lending Report of the Consumer Financial Protection Bureau,
April 2017
AGENCY: Bureau of Consumer Financial Protection.
[[Page 25251]]
ACTION: Fair Lending Report of the Consumer Financial Protection
Bureau.
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SUMMARY: The Bureau of Consumer Financial Protection (CFPB or Bureau)
is issuing its fifth Fair Lending Report of the Consumer Financial
Protection Bureau (Fair Lending Report) to Congress. We are committed
to ensuring fair access to credit and eliminating discriminatory
lending practices. This report describes our fair lending activities in
prioritization, supervision, enforcement, rulemaking, interagency
coordination, and outreach for calendar year 2016.
DATES: The Bureau released the April 2017 Fair Lending Report on its
Web site on April 14, 2017.
FOR FURTHER INFORMATION CONTACT: Anita Visser, Senior Policy Advisor to
the Director of Fair Lending, Office of Fair Lending and Equal
Opportunity, Consumer Financial Protection Bureau, 1-855-411-2372.
SUPPLEMENTARY INFORMATION:
1. Fair Lending Report of the Consumer Financial Protection Bureau,
April 2017
Message From Richard Cordray, Director of the CFPB
For over five years, the Consumer Financial Protection Bureau has
pursued its statutory mandate to provide ``oversight and enforcement''
of the fair lending laws under our jurisdiction. I am proud of all we
have accomplished in ensuring that creditworthy consumers are not
denied credit or charged more because of their race or ethnicity or any
other prohibited basis.
Our fair lending guidance, supervisory activity, and enforcement
actions have three goals: To strengthen industry compliance programs,
root out illegal activity, and ensure that harmed consumers are
remediated. Over these past five years, we have engaged in robust fair
lending dialogue with industry and this dialogue has served to
significantly strengthen industry compliance programs. Members of our
Fair Lending Office have logged over 300 outreach meetings and events,
not to mention preparing responses to the many calls and emails
received from compliance officials. We have invested significant
efforts toward strengthening industry compliance management systems
because they are critical first-line measures to protect consumers from
discriminatory lending policies and practices. As a result, our
examiners now often find that lenders have already implemented sound
policies and procedures to identify and address potential fair lending
violations, based on our prior guidance.
We also have achieved remarkable success in our fair lending
enforcement activities during this time period, reaching historic
resolution of the largest redlining, auto finance, and credit card fair
lending cases, and instituting relief that has halted illegal
practices. Our fair lending supervision and enforcement activities have
resulted in over $400 million in remediation to harmed consumers.
In the coming years, we will increase our focus on markets or
products where we see significant or emerging fair lending risk to
consumers, including redlining, mortgage loan servicing, student loan
servicing, and small business lending. Discrimination on prohibited
grounds in the financial marketplace, though squarely against the law,
is by no means a thing of the past. The Consumer Bureau will continue
to enforce existing fair lending laws at a steady and vigorous pace,
taking care to ensure broad-based industry engagement and consistent
oversight.
I am proud to present our 2016 Fair Lending Report.
Sincerely,
Richard Cordray
Message From Patrice Alexander Ficklin, Director, Office of Fair
Lending and Equal Opportunity
When I left private practice to join the CFPB in 2011, I carried
with me my experiences as industry counsel, advising bank and nonbank
clients on fair lending compliance. I knew from my work that many
lenders are interested in building and maintaining robust fair lending
self-monitoring systems that reflect best practices in consumer
protection. I advised my clients on their efforts to evaluate and
address fair lending risk not only in mortgage origination, but also in
mortgage servicing, credit cards, and other areas that had not been a
traditional fair lending focus. Together we enhanced the existing
methods of proxying for race and ethnicity; an essential step to allow
my clients to fully implement the mandate contained in the Equal Credit
Opportunity Act (ECOA), which prohibits discrimination in all manner of
consumer credit, not simply mortgages.
Shortly after arriving at the CFPB in 2011, I led a handful of
other public servants in founding the CFPB's Fair Lending Office, which
the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-
Frank Act) charged with ``oversight and enforcement'' of ECOA. We drew
from our experiences and dialogue with industry, the information
transferred to us from our sister prudential regulators, civil rights
and consumer advocate groups' perspectives, and the expertise of the
Bureau's markets teams to establish our first three fair lending
priorities: mortgage origination, auto finance, and credit cards. We
have accomplished much in these markets over these past five years, not
the least of which are the $400 million in remediation to harmed
consumers and the remarkable and robust dialogue we enjoy with many
financial services providers in support of their efforts to treat all
of their customers in a fair and responsible manner.
As outlined in my December 2016 blog post,\1\ my team has again
looked to our statutory mandate and relevant data to refresh the
Bureau's fair lending priorities. In 2017 we will increase our focus in
the areas of redlining and mortgage and student loan servicing to
ensure that creditworthy consumers have access to mortgage loans and to
the full array of appropriate options when they have trouble paying
their mortgages or student loans, regardless of their race or
ethnicity. In addition, we will focus more fully on pursuing our
statutory mandate to promote fair credit access for minority- and
women-owned businesses. We know that these businesses play an important
role in job creation for communities of color, while also strengthening
our economy.
---------------------------------------------------------------------------
\1\ Patrice Ficklin, Fair Lending priorities in the new year,
Consumer Financial Protection Bureau (Dec. 16, 2016),
http:www.consumerfinance.gov/about-us/blog/fair-lending-priorities-new-year/.
---------------------------------------------------------------------------
The Dodd-Frank Act mandated the creation of the CFPB's Office of
Fair Lending and Equal Opportunity and charged it with ensuring fair,
equitable, and nondiscriminatory access to credit to consumers;
coordinating our fair lending efforts with Federal and State agencies
and regulators; working with private industry, fair lending, civil
rights, consumer and community advocates to promote fair lending
compliance and education; and annually reporting to Congress on our
efforts.
I am proud to say that the Office continues to fulfill our Dodd-
Frank mandate and looks forward to continuing to work together with all
stakeholders in protecting America's consumers. To that end, I am
excited to share our progress in this, our fifth, Fair Lending
Report.\2\
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\2\ See Dodd-Frank Act section 1013(c)(2)(D), Public Law 111-
203, 124 Stat. 1376 (2010) (codified at 12 U.S.C. 5493(c)(2)(D)).
[[Page 25252]]
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Sincerely,
Patrice Alexander Ficklin
Executive Summary
The Dodd-Frank Wall Street Reform and Consumer Protection Act
(Dodd-Frank or Dodd-Frank Act) \3\ established the Bureau as the
Nation's first Federal agency with a mission focused solely on consumer
financial protection and making consumer financial markets work for all
Americans. Dodd-Frank established the Office of Fair Lending and Equal
Opportunity (the Office of Fair Lending) within the CFPB, and charged
it with ``providing oversight and enforcement of Federal laws intended
to ensure the fair, equitable, and nondiscriminatory access to credit
for both individuals and communities.'' \4\
---------------------------------------------------------------------------
\3\ Public Law 111-203, 124 Stat. 1376 (2010).
\4\ Dodd-Frank Act section 1013(c)(2)(A) (codified at 12 U.S.C.
5493(c)(2)(A)).
---------------------------------------------------------------------------
Prioritization. The Bureau's risk-based prioritization
process allows the Office of Fair Lending to focus our supervisory and
enforcement efforts on the markets, products, and institutions that
represent the greatest fair lending risk for consumers. Based on the
risks we identified, our market-level focus for the past five years has
been on ensuring that consumers are not excluded from or made to pay
more for mortgages, indirect auto loans, and credit cards because of
their race, ethnicity, sex, or age.
Going forward, because of emerging fair lending risks in other
areas, we are increasing our focus on redlining, mortgage and student
loan servicing, and small business lending. We remain committed to
assessing and evaluating fair lending risk in all credit markets under
the Bureau's jurisdiction. See Section 1 for more information.
Supervision and enforcement activity. In 2016, our fair
lending supervisory and public enforcement actions resulted in
approximately $46 million in remediation to harmed consumers.\5\
Mortgage lending continues to be a key priority for the Office of Fair
Lending for both supervision and enforcement. We have focused in
particular on redlining risk, evaluating whether lenders have
intentionally discouraged prospective applicants in minority
neighborhoods from applying for credit. Although statistics play an
important role in this work, we never look at numbers alone or in a
vacuum, but rather consider multiple factors, including potentially
nondiscriminatory explanations for differential lending patterns. See
Sections 2.1.6 and 3.1.1 for more information. Through 2016, our
mortgage origination work has covered institutions responsible for
close to half of the transactions reported pursuant to the Home
Mortgage Disclosure Act (HMDA), and more than 60% of the transactions
reported by institutions subject to the CFPB's supervision and
enforcement authority.\6\
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\5\ Figures represent estimates of monetary relief for consumers
ordered or required by the Bureau or a court as a result of
supervisory or enforcement actions on fair lending matters in 2016,
as well as other monetary payments such as loan subsidies, increased
consumer financial education, and civil money penalties.
\6\ CFPB analysis of HMDA data for 2015.
---------------------------------------------------------------------------
In 2016, the Bureau continued its work in overseeing and enforcing
compliance with ECOA in indirect auto lending through both supervisory
and enforcement activity, including monitoring compliance with our
previous supervisory and enforcement actions. Our indirect auto lending
work has covered institutions responsible for approximately 60% of the
auto loan market share by volume.\7\
---------------------------------------------------------------------------
\7\ CFPB analysis of 2015 AutoCount data from Experian
Automotive.
---------------------------------------------------------------------------
The Bureau also continued fair lending supervisory and enforcement
work in the credit card market. We have focused in particular on the
quality of fair lending compliance management systems (CMS) and on fair
lending risks in underwriting, line assignment, and servicing. Our work
in this highly-concentrated market has covered institutions responsible
for more than 85% of outstanding credit card balances in the United
States.\8\
---------------------------------------------------------------------------
\8\ CFPB analysis of 3Q 2016 call reports.
---------------------------------------------------------------------------
The Bureau has conducted supervision and enforcement work in other
markets as well. For example, this year we continued targeted ECOA
reviews of small-business lending, focusing in particular on the
quality of fair lending compliance management systems and on fair
lending risks in underwriting, pricing, and redlining. Our supervisory
work to date in small business lending has covered institutions
responsible for approximately 10% of the non-agricultural small
business market share. See Sections 2 and 3 for more information.
Rulemaking. In January 2016, in response to ongoing
conversations with industry about compliance with Regulation C, HMDA's
implementing Regulation, the Bureau issued a Request for Information
(RFI) on the Bureau's HMDA data resubmission guidelines, and is
considering whether to adjust its existing HMDA resubmission guidelines
and if so, how.\9\ On September 23, 2016, the Bureau published a Bureau
Official Approval pursuant to section 706(e) of the ECOA concerning the
new Uniform Residential Loan Application and the collection of expanded
HMDA information about ethnicity and race in 2017. On March 24, 2017,
the Bureau published a proposed rule concerning amendments to
Regulation B's ethnicity and race information collection
provisions.\10\ See Section 4 for more information.
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\9\ Consumer Financial Protection Bureau, Request for
Information Regarding Home Mortgage Disclosure Act Resubmission
Guidelines 2015-0058 (Jan. 7, 2016), https://files.consumerfinance.gov/f/201601_cfpb_request-for-information-regarding-home-mortgage-disclosure-act-resubmission.pdf.
\10\ Consumer Financial Protection Bureau, Amendments to Equal
Credit Opportunity Act (Regulation B) Ethnicity and Race Information
Collection 2017-0009 (March 24, 2017), https://files.consumerfinance.gov/f/documents/201703_cfpb_NPRM-to-amend-Regulation-B.pdf.
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Interagency coordination and collaboration. The Bureau
continues to coordinate with the Federal Financial Institutions
Examination Council (FFIEC) agencies,\11\ as well as the Department of
Justice (DOJ), the Federal Trade Commission (FTC), and the Department
of Housing and Urban Development (HUD), as we each play a role in
ensuring compliance with and enforcing our nation's fair lending laws
and regulations. See Section 5 for more information on our interagency
coordination and collaboration in 2016.
---------------------------------------------------------------------------
\11\ The FFIEC member agencies are the Board of Governors of the
Federal Reserve System (FRB), the Federal Deposit Insurance
Corporation (FDIC), the National Credit Union Administration (NCUA),
the Office of the Comptroller of the Currency (OCC), and the
Consumer Financial Protection Bureau (CFPB). The State Liaison
Committee was added to FFIEC in 2006 as a voting member.
---------------------------------------------------------------------------
Outreach to industry, advocates, consumers, and other
stakeholders. The Bureau continues to initiate and encourage industry
and consumer engagement opportunities to discuss fair lending
compliance and access to credit issues, including through speeches,
presentations, blog posts, webinars, rulemaking, and public comments.
See Section 6 for more information on our outreach activities in 2016.
This report generally covers the Bureau's fair lending work during
calendar year 2016.
1. Fair Lending Prioritization
1.1 Risk-Based Prioritization: A Data-Driven Approach to Prioritizing
Areas of Potential Fair Lending Harm to Consumers
To use the CFPB's fair lending resources most effectively, the
Office of Fair Lending, working with other offices in the Bureau, has
developed and
[[Page 25253]]
refined a risk-based prioritization approach that determines how best
to address areas of potential fair-lending-related consumer harm in the
entities, products, and markets under our jurisdiction.
One critical piece of information that we consider in the fair
lending prioritization process is the quality of an institution's
compliance management system, which the Bureau typically ascertains
through its supervisory work. The Bureau has previously identified
common features of a well-developed fair lending compliance management
system,\12\ though we recognize that the appropriate scope of an
institution's fair lending compliance management system will vary based
on its size, complexity, and risk profile. In our experience, the
higher the quality of an institution's fair lending compliance
management system, the lower the institution's fair lending risk to
consumers, other things being equal.
---------------------------------------------------------------------------
\12\ See Consumer Financial Protection Bureau, Fair Lending
Report of the Consumer Financial Protection Bureau at 13-14 (Apr.
2014), https://files.consumerfinance.gov/f/201404_cfpb_report_fair-lending.pdf.
---------------------------------------------------------------------------
As part of the prioritization process the Office of Fair Lending
also works closely with the Bureau's special population offices,
including the Office for Students and Young Consumers, the Office of
Older Americans, and the Bureau's Markets offices, which identify
emerging developments and trends by monitoring key consumer financial
markets. If this market intelligence identifies fair lending risks in a
particular market that require further attention, we incorporate that
information into our prioritization process to determine the type and
extent of attention required to address those risks. For instance, Fair
Lending's work with the Office of Consumer Lending, Reporting, and
Collections Markets and the Office for Students and Young Consumers
highlighted potential steering risks in student loan servicing, which
resulted in the prioritization of this market in our supervisory work.
The fair lending prioritization process incorporates a number of
additional factors as well, including; consumer complaints; tips and
leads from advocacy groups, whistleblowers, and government agencies;
supervisory and enforcement history; and results from analysis of HMDA
and other data.
Once the Bureau has evaluated these inputs to prioritize
institutions, products, and markets based on an assessment of fair
lending risk posed to consumers, the Office of Fair Lending considers
how best to address those risks as part of its strategic planning
process. For example, we can schedule an institution for a supervisory
review or, where appropriate, open an enforcement investigation. We can
also commit to further research, policy development, and/or outreach,
especially for new issues or risks. Once this strategic planning
process is complete, we regularly coordinate with other regulators so
we can inform each other's work, complement each other's efforts, and
reduce any burden on subject institutions.
Risk-based prioritization is an ongoing process, and we continue to
receive and evaluate relevant information even after priorities are
identified. At an institution level, such information may include new
tips and leads, consumer complaints, additional risks identified in
current supervisory and enforcement activities, and compliance issues
identified and brought to our attention by institutions themselves. In
determining how best to address this additional information, the Office
of Fair Lending considers several factors, including (1) the nature and
extent of the fair lending risk, (2) the degree of consumer harm, and
(3) whether the risk was self-identified and/or self-reported to the
Bureau. Fair Lending takes account of responsible conduct as set forth
in CFPB Bulletin 2013-06, Responsible Business Conduct: Self-Policing,
Self-Reporting, Remediation, and Cooperation.\13\
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\13\ Consumer Financial Protection Bureau, Responsible Business
Conduct: Self-Policing, Self-Reporting, Remediation, and
Cooperation, CFPB Bulletin 2013-06 (June 25, 2013), https://files.consumerfinance.gov/f/201306_cfpb_bulletin_responsible-conduct.pdf.
---------------------------------------------------------------------------
1.2 Fair Lending Priorities
Because the CFPB is responsible for overseeing so many products and
so many lenders, we re-prioritize our work from time to time to make
sure that we are focused on the areas of greatest risk to consumers. In
the coming year, we will increase our focus on the markets or products
listed below, which present substantial risk of credit discrimination
for consumers.
Redlining. We will continue to evaluate whether lenders have
intentionally discouraged prospective applicants in minority
neighborhoods from applying for credit.
Mortgage and Student Loan Servicing. We will evaluate whether some
borrowers who are behind on their mortgage or student loan payments may
have more difficulty working out a new solution with the servicer
because of their race, ethnicity, sex, or age.
Small Business Lending. Congress expressed concern that women-owned
and minority-owned businesses may experience discrimination when they
apply for credit, and has required the CFPB to take steps to ensure
their fair access to credit. Small business lending supervisory
activity will also help expand and enhance the Bureau's knowledge in
this area, including the credit process; existing data collection
processes; and the nature, extent, and management of fair lending risk.
The Bureau remains committed to ensuring that consumers are protected
from discrimination in all credit markets under its authority.
2. Fair Lending Supervision
The CFPB's Fair Lending Supervision program assesses compliance
with ECOA and HMDA at banks and nonbanks over which the Bureau has
supervisory authority. Supervision activities range from assessments of
institutions' fair lending compliance management systems to in-depth
reviews of products or activities that may pose heightened fair lending
risks to consumers. As part of its Fair Lending Supervision program,
the Bureau continues to conduct three types of fair lending reviews at
Bureau-supervised institutions: ECOA baseline reviews, ECOA targeted
reviews, and HMDA data integrity reviews.
When the CFPB identifies situations in which fair lending
compliance is inadequate, it directs institutions to establish fair
lending compliance programs commensurate with the size and complexity
of the institution and its lines of business. When fair lending
violations are identified, the CFPB may direct institutions to provide
remediation and restitution to consumers, and may pursue other
appropriate relief. The CFPB also refers a matter to the Justice
Department when it has reason to believe that a creditor has engaged in
a pattern or practice of lending discrimination in violation of
ECOA.\14\ The CFPB may also refer other potential ECOA violations to
the Justice Department.
---------------------------------------------------------------------------
\14\ 15 U.S.C. 1691e(g).
---------------------------------------------------------------------------
2.1 Fair Lending Supervisory Observations
Although the Bureau's supervisory process is confidential, the
Bureau publishes regular reports called Supervisory Highlights, which
provide information on supervisory trends the Bureau observes without
identifying specific entities. The Bureau may also draw on its
supervisory experience to publish compliance bulletins in order to
remind the institutions that we supervise of their legal obligations.
[[Page 25254]]
Industry participants can use this information to inform and assist in
complying with ECOA and HMDA.
2.1.1 Evaluating Mortgage Servicing Compliance Programs
Our supervisory work has included use of the ECOA Baseline Modules,
which are part of the CFPB Supervision and Examination Manual.
Examination teams use these modules to conduct ECOA Baseline Reviews,
which evaluate how well institutions' compliance management systems
identify and manage fair lending risks. The Mortgage Servicing Special
Edition of Supervisory Highlights,\15\ published in June 2016, reminded
institutions that Module 4 of the ECOA baseline review modules, ``Fair
Lending Risks Related to Servicing,'' is used by Bureau examiners to
evaluate compliance management systems under ECOA. Among other things,
Module 4 contains questions regarding fair lending training of
servicing staff, fair lending monitoring of servicing, and servicing of
consumers with limited English proficiency.
---------------------------------------------------------------------------
\15\ Consumer Financial Protection Bureau, Supervisory
Highlights Mortgage Servicing Special Edition 2016 at 5 (June 22,
2016), https://files.consumerfinance.gov/f/documents/Mortgage_Servicing_Supervisory_Highlights_11_Final_web_.pdf.
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2.1.2 Reporting Actions Taken for Conditionally-Approved Applications
With Unmet Underwriting Conditions
The Summer 2016 edition of Supervisory Highlights,\16\ published in
June 2016, highlighted findings from examinations where institutions
improperly coded actions taken in reported HMDA data. Among other
things, Regulation C requires covered depository and non-depository
institutions to submit to the appropriate Federal agency data they
collect and record pursuant to Regulation C, including the type of
action taken on reportable transactions.\17\ As reported in Supervisory
Highlights, examiners found that after issuing a conditional approval
subject to underwriting conditions, the institutions did not accurately
report the action taken on the loans or applications. As a result,
Supervision directed one or more institutions to enhance their policies
and procedures regarding their HMDA reporting of the actions taken on
loans and applications and, where necessary, provide adverse action
notices. Supervision also required one or more institutions to resubmit
their HMDA Loan Application Register (LAR) where the number of errors
exceeded the CFPB's HMDA resubmission thresholds.
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\16\ Consumer Financial Protection Bureau, Supervisory
Highlights Summer 2016 at 13-16 (June 30, 2016), https://files.consumerfinance.gov/f/documents/Supervisory_Highlights_Issue_12.pdf.
\17\ 12 CFR 1003.4(a), (a)(8); 12 CFR 1003.5(a)(1).
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2.1.3 Expanding Credit Through the Use of Special Purpose Credit
Programs
The Summer 2016 edition of Supervisory Highlights \18\
discussed supervisory observations of special purpose credit programs,
which are established and administered to extend credit to a class of
persons who otherwise probably would not receive such credit or would
receive it on less favorable terms. ECOA \19\ and Regulation B \20\
permit a creditor to extend special purpose credit to applicants who
meet eligibility requirements for certain types of credit programs.\21\
Regulation B specifically confers special purpose credit program status
upon:
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\18\ Consumer Financial Protection Bureau, Supervisory
Highlights Summer 2016 at 16-18 (June 30, 2016), https://files.consumerfinance.gov/f/documents/Supervisory_Highlights_Issue_12.pdf.
\19\ 15 U.S.C. 1691 et seq.
\20\ 12 CFR part 1002.
\21\ 15 U.S.C. 1691(c)(3) (providing that ECOA's prohibitions
against discrimination are not violated when a creditor refuses to
extend credit offered pursuant to certain special purpose credit
programs satisfying Regulation B-prescribed standards); 12 CFR
1002.8 (special purpose credit program standards).
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Any special purpose credit program offered by a for-profit
organization, or in which such an organization participates to meet
special social needs, if:
(i) The program is established and administered pursuant to a
written plan that identifies the class of persons that the program is
designed to benefit and sets forth the procedures and standards for
extending credit pursuant to the program; and
(ii) The program is established and administered to extend credit
to a class of persons who, under the organization's customary standards
of creditworthiness, probably would not receive such credit or would
receive it on less favorable terms than are ordinarily available to
other applicants applying to the organization for a similar type and
amount of credit.\22\
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\22\ 12 CFR 1002.8(a)(3).
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The commentary to Regulation B clarifies that, in order to satisfy
these requirements, ``a for-profit organization must determine that the
program will benefit a class of people who would otherwise be denied
credit or would receive it on less favorable terms. This determination
can be based on a broad analysis using the organization's own research
or data from outside sources, including governmental reports and
studies.'' \23\
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\23\ 12 CFR part 1002, Suppl. I, 1002.8, comment 8(a) at 5.
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As Supervisory Highlights noted, during the course of the Bureau's
supervisory activity, examination teams have observed credit decisions
made pursuant to the terms of programs that for-profit institutions
have described as special purpose credit programs. Examination teams
have reviewed the terms of the programs, including the written plan
required by Regulation B, and the institution's determination that the
program would benefit a class of people who would otherwise be denied
credit or would receive it on less favorable terms.
In every case, special purpose credit program status depends upon
adherence to the ECOA and Regulation B requirements for special purpose
credit programs. A program, for example, offering more favorable
pricing or products exclusively to a particular class of persons
without evidence that such individuals would otherwise be denied credit
or would receive it on less favorable terms would not satisfy the ECOA
and Regulation B requirements for a special purpose credit program.
With that in mind, however, the Bureau generally takes a favorable view
of conscientious efforts that institutions may undertake to develop
special purpose credit programs to promote extensions of credit to any
class of persons who would otherwise be denied credit or would receive
it on less favorable terms.
2.1.4 Offering Language Services to Limited English Proficient (LEP)
Consumers
The Fall 2016 edition of Supervisory Highlights,\24\ published in
October 2016, discussed supervisory observations about the provision of
language services to consumers with limited English proficiency (LEP).
The Dodd-Frank Act, ECOA,\25\ and Regulation B \26\ mandate that the
Office of Fair Lending ``ensure the fair, equitable, and
nondiscriminatory access to credit'' \27\ and ``promote the
availability of credit.'' \28\ Consistent with that mandate, the CFPB,
including through its Office of Fair Lending, continues to encourage
lenders to provide assistance to LEP consumers.\29\ Financial
institutions may
[[Page 25255]]
provide access to credit in languages other than English in a manner
that is beneficial to consumers as well as the institution, while
taking steps to ensure their actions are compliant with ECOA and other
applicable laws.
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\24\ Consumer Financial Protection Bureau, Supervisory
Highlights Fall 2016 at 20 (Oct. 31, 2016), https://files.consumerfinance.gov/f/documents/Supervisory_Highlights_Issue_13__Final_10.31.16.pdf.
\25\ 12 U.S.C. 1691 et seq.
\26\ 12 CFR part 1002 et seq.
\27\ 12 U.S.C. 5493(c)(2)(A).
\28\ 12 CFR 1002.1(b).
\29\ According to recent American Community Survey estimates,
there are approximately 25 million people in the United States who
speak English less than ``very well.'' U.S. Census Bureau, Language
Spoken at Home, 2011-2015 American Community Survey 5-Year
Estimates, https://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=ACS_15_5YR_S1601&prodType=table.
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As reported in Supervisory Highlights, in the course of conducting
supervisory activity, examiners have observed one or more financial
institutions providing services in languages other than English,
including to consumers with limited English proficiency,\30\ in a
manner that did not result in any adverse supervisory or enforcement
action under the facts and circumstances of the reviews. Specifically,
examiners observed:
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\30\ The Bureau recently updated its ECOA baseline review
modules. See Consumer Financial Protection Bureau, Supervisory
Highlights: Winter 2016 at 28-29 (Mar. 8, 2016), https://files.consumerfinance.gov/f/201603_cfpb_supervisory-highlights.pdf.
Among other updates, the modules include new questions related to
the provision of language services, including to LEP consumers, in
the context of origination and servicing. See Consumer Financial
Protection Bureau, CFPB Examination Procedures, ECOA Baseline Review
Modules 13, 21-22 (Oct. 2015), https://files.consumerfinance.gov/f/201510_cfpb_ecoa-baseline-review-modules.pdf. These modules are used
by examiners during ECOA baseline reviews to identify and analyze
risks of ECOA violations, to facilitate the identification of
certain types of ECOA and Regulation B violations, and to inform
fair lending prioritization decisions for future CFPB reviews. Id.
at 1.
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Marketing and servicing of loans in languages other than
English;
Collection of customer language information to facilitate
communication with LEP consumers in a language other than English;
Translation of certain financial institution documents
sent to borrowers, including monthly statements and payment assistance
forms, into languages other than English;
Use of bilingual and/or multilingual customer service
agents, including single points of contact,\31\ and other forms of oral
customer assistance in languages other than English; and
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\31\ See 12 CFR 1024.40(a)(1) & (2) (requiring mortgage
servicers to assign personnel to a delinquent borrower within a
certain time after delinquency and make assigned personnel available
by phone in order to respond to borrower inquiries and assist with
loss mitigation options, as applicable).
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Quality assurance testing and monitoring of customer
assistance provided in languages other than English.
Examiners have observed a number of factors that financial
institutions consider in determining whether to provide services in
languages other than English and the extent of those services, some of
which include: Census Bureau data on the demographics or prevalence of
non-English languages within the financial institution's footprint;
communications and activities that most significantly impact consumers
(e.g., loss mitigation and/or default servicing); and compliance with
Federal, State, and other regulatory provisions that address
obligations pertaining to languages other than English.\32\ Factors
relevant in the compliance context may vary depending on the
institution and circumstances.
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\32\ See, e.g., 12 CFR 1005.31(g)(1)(i) (requiring disclosures
in languages other than English in certain circumstances involving
remittance transfers); 12 CFR 1026.24(i)(7) (addressing obligations
relating to advertising and disclosures in languages other than
English for closed-end credit); 12 CFR 1002.4(e) (providing that
disclosures made in languages other than English must be available
in English upon request); Cal. Civ. Code Sec.1632(b) (requiring that
certain agreements ``primarily'' negotiated in Spanish, Chinese,
Tagalog, Vietnamese, or Korean must be translated to the language of
the negotiation under certain circumstances); Or. Rev. Stat. Sec.
86A.198 (requiring a mortgage banker, broker, or originator to
provide translations of certain notices related to the mortgage
transaction if the banker, broker, or originator advertises and
negotiates in a language other than English under certain
circumstances); Tex. Fin. Code Ann. Sec. 341.502(a-1) (providing
that for certain loan contracts negotiated in Spanish, a summary of
the loan terms must be made available to the debtor in Spanish in a
form identical to required TILA disclosures for closed-end credit).
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Examiners also have observed situations in which financial
institutions' treatment of LEP and non-English-speaking consumers posed
fair lending risk. For example, examiners observed one or more
institutions marketing only some of their available credit card
products to Spanish-speaking consumers, while marketing several
additional credit card products to English-speaking consumers. One or
more such institutions also lacked documentation describing how they
decided to exclude those products from Spanish language marketing,
raising questions about the adequacy of their compliance management
systems related to fair lending. To mitigate any compliance risks
related to these practices, one or more financial institutions revised
their marketing materials to notify consumers in Spanish of the
availability of other credit card products and included clear and
timely disclosures to prospective consumers describing the extent and
limits of any language services provided throughout the product
lifecycle. Institutions were not required to provide Spanish language
services to address this risk beyond the Spanish language services they
were already providing.
As reported in Supervisory Highlights, the Bureau's supervisory
activity resulted in public enforcement actions related to the
treatment of LEP and non-English-speaking consumers, including actions
against Synchrony Bank and American Express Centurion Bank. The Fall
2016 edition of Supervisory Highlights also discussed common features
of a well-developed compliance management system that can mitigate fair
lending and other risks associated with providing services to LEP and
non-English-speaking consumers.
2.1.5 HMDA Data Collection and Reporting Reminders for 2017
The Fall 2016 edition of Supervisory Highlights \33\ noted HMDA
data collection and reporting reminders for 2017. Please see Section
4.1.4 for detail on changes to HMDA data collection and reporting in
2017 and later years.
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\33\ Consumer Financial Protection Bureau, Supervisory
Highlights Fall 2016 at 25-26 (Oct. 31, 2016), https://files.consumerfinance.gov/f/documents/Supervisory_Highlights_Issue_13__Final_10.31.16.pdf.
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2.1.6 Assessing Redlining Risks
The Fall 2016 edition of Supervisory Highlights \34\ noted that the
Office of Fair Lending has identified redlining as a priority area in
the Bureau's fair lending work. Redlining is a form of unlawful lending
discrimination under ECOA. Historically, actual red lines were drawn on
maps around neighborhoods to which credit would not be provided, giving
this practice its name. The Federal prudential banking regulators have
collectively defined redlining as ``a form of illegal disparate
treatment in which a lender provides unequal access to credit, or
unequal terms of credit, because of the race, color, national origin,
or other prohibited characteristic(s) of the residents of the area in
which the credit seeker resides or will reside or in which the
residential property to be mortgaged is located.'' \35\
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\34\ Consumer Financial Protection Bureau, Supervisory
Highlights Fall 2016 at 27 (Oct. 31, 2016), https://files.consumerfinance.gov/f/documents/Supervisory_Highlights_Issue_13__Final_10.31.16.pdf.
\35\ FFIEC Interagency Fair Lending Examination Procedures
Manual (Aug. 2009), https://www.ffiec.gov/pdf/fairlend.pdf. CFPB
Supervision and Examination Manual (Oct. 2012), https://files.consumerfinance.gov/f/201210_cfpb_supervision-and-examination-manual-v2.pdf.
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The Bureau considers various factors, as appropriate, in assessing
redlining risk in its supervisory activity. These factors, and the
scoping process, are described in detail in the Interagency Fair
Lending Examination Procedures. These factors generally include (but
are not limited to):
[[Page 25256]]
Strength of an institution's CMS, including underwriting
guidelines and policies;
Unique attributes of relevant geographic areas (population
demographics, credit profiles, housing market);
Lending patterns (applications and originations, with and
without purchased loans);
Peer and market comparisons;
Physical presence (full service branches, ATM-only
branches, brokers, correspondents, loan production offices), including
consideration of services offered;
Marketing;
Mapping;
Community Reinvestment Act (CRA) assessment area and
market area more generally;
An institution's lending policies and procedures record;
Additional evidence (whistleblower tips, loan officer
diversity, testing evidence, comparative file reviews); and
An institution's explanations for apparent differences in
treatment.
The Bureau has observed that institutions with strong compliance
programs examine lending patterns regularly, look for any
statistically-significant disparities, evaluate physical presence,
monitor marketing campaigns and programs, and assess CRA assessment
areas and market areas more generally. Our supervisory experience
reveals that institutions may reduce fair lending risk by documenting
risks they identify and by taking appropriate steps in response to
identified risks, as components of their fair lending compliance
management programs.
Examination teams typically assess redlining risk, at the initial
phase, at the Metropolitan Statistical Area (MSA) level for each
supervised entity, and consider the unique characteristics of each MSA
(population demographics, etc.).
To conduct the initial analysis, examination teams use HMDA data
and Census data \36\ to assess the lending patterns at institutions
subject to the Bureau's supervisory authority. To date, examination
teams have used these publicly available data to conduct this initial
risk assessment. These initial analyses typically compare a given
institution's lending patterns to other lenders in the same MSA to
determine whether the institution received significantly fewer
applications from minority \37\ areas \38\ relative to other lenders in
the MSA. Examination teams may consider the difference between the
subject institution and other lenders in the percentage of their
applications or originations that come from minority areas, both in
absolute terms (for example, 10% vs. 20%) and relative terms (for
example, the subject institution is half as likely to have applications
or originations in minority areas as other lenders).\39\
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\36\ The Bureau uses the most current United States national
census data that apply to the HMDA data--for example, to date it has
used 2010 census data for HMDA data 2011 and later. Specifically,
the ``Demographic Profiles'' are used.
\37\ For these purposes, the term ``minority'' ordinarily refers
to anyone who identifies with any combination of race or ethnicity
other than non-Hispanic White. Examination teams have also focused
on African-American and Hispanic consumers, and could foreseeably
focus on other more specific minority communities such as Asian,
Native Hawaiian, or Native Alaskan populations, if appropriate for
the specific geography. In one examination that escalated to an
enforcement matter, the statistical evidence presented focused on
African-American and Hispanic census tracts, rather than all
minority consumers, because the harmed consumers were primarily
African-American and Hispanic.
\38\ Examination teams typically look at majority minority areas
(>50% minority) and high minority areas (>80% minority), although
sometimes one metric is more appropriate than another, and sometimes
other metrics need to be used to account for the population
demographics of the specific MSA.
\39\ This relative analysis may be expressed as an odds ratio:
The given lender's odds of receiving an application or originating a
loan in a minority area divided by other lenders' comparable odds.
An odds ratio greater than one means that the institution is more
likely to receive applications or originate loans in minority areas
than other lenders; an odds ratio lower than one means that the
institution is less likely do so. Odds ratios show greater risk as
they approach zero.
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Examination teams may also compare an institution to other more
refined groups of peer institutions. Refined peers can be defined in a
number of ways, and past Bureau redlining examinations and enforcement
matters have relied on multiple peer comparisons. The examination team
often starts by compiling a refined set of peer institutions to find
lenders of a similar size--for example, lenders that received a similar
number of applications or originated a similar number of loans in the
MSA. The examination team may also consider an institution's mix of
lending products. For example, if an institution participates in the
Federal Housing Administration (FHA) loan program, it may be compared
to other institutions that also originate FHA loans; if not, it may be
compared to other lenders that do not offer FHA loans. Additional
refinements may incorporate loan purpose (for example, focusing only on
home purchase loans) or action taken (for example, incorporating
purchased loans into the analysis). Examination teams have also taken
suggestions, as appropriate, from institutions about appropriate peers
in specific markets.
In considering lending patterns, examination teams generally
consider marketing activities and physical presence, including
locations of branches, loan production offices, ATMs, brokers, or
correspondents. As noted in Supervisory Highlights, in one or more
supervisory matters, the institutions concentrated marketing in
majority-White suburban counties of a Metropolitan Statistical Area
(MSA) and avoided a more urban county with the greatest minority
population in the MSA. In one or more other exams, examiners observed
that, although there were disparities in branch locations, the location
of branches did not affect access to credit in that case because, among
other things, the branches did not accept ``walk-in'' traffic and all
applications were submitted online. The results of the examinations
were also dependent on other factors that showed equitable access to
credit, and there could be cases in which branch locations in
combination with other risk-based factors escalate redlining risk.
For redlining analyses, examination teams generally map
information, including data on lending patterns (applications and
originations), marketing, and physical presence, against census data to
see if there are differences based on the predominant race/ethnicity of
the census tract, county, or other geographic designation.
Additionally, examination teams will consider any other available
evidence about the nature of the lender's business that might help
explain the observed lending patterns.
Examination teams have considered numerous factors in each
redlining examination, and have invited institutions to identify
explanations for any apparent differences in treatment.
Although redlining examinations are generally scheduled at
institutions where the Bureau has identified statistical disparities,
statistics are never considered in a vacuum. The Bureau will always
work with institutions to understand their markets, business models,
and other information that could provide nondiscriminatory explanations
for lending patterns that would otherwise raise a fair lending risk of
redlining.
2.1.7 Enforcement Actions Arising From Supervisory Activity
In addition to providing information on supervisory trends,
Supervisory Highlights also provides information on enforcement actions
that resulted from supervisory activity. See Section 3.3.1
[[Page 25257]]
for more information on such public enforcement actions.
3. Fair Lending Enforcement
The Bureau conducts investigations of potential violations of HMDA
and ECOA, and if it believes a violation has occurred, can file a
complaint either through its administrative enforcement process or in
Federal court. Like the other Federal bank regulators, the Bureau
refers matters to the DOJ when it has reason to believe that a creditor
has engaged in a pattern or practice of lending discrimination.\40\
However, when the Bureau makes a referral to the DOJ, the Bureau can
still take its own independent action to address a violation. In 2016,
the Bureau announced two fair lending enforcement actions in mortgage
origination and indirect auto lending. The Bureau also has a number of
ongoing fair lending investigations and has authority to settle or sue
in a number of matters. In addition, the Bureau issued warning letters
to mortgage lenders and mortgage brokers that may be in violation of
HMDA requirements to report on housing-related lending activity.
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\40\ 15 U.S.C. 1691e(g).
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3.1 Fair Lending Public Enforcement Actions
3.1.1 Mortgage
BancorpSouth Bank
On June 29, 2016, the CFPB and the DOJ announced a joint action
against BancorpSouth Bank (BancorpSouth) for discriminatory mortgage
lending practices that harmed African Americans and other minorities.
The complaint filed by the CFPB and DOJ \41\ alleged that BancorpSouth
engaged in numerous discriminatory practices, including illegal
redlining in Memphis; denying certain African Americans mortgage loans
more often than similarly situated non-Hispanic White applicants;
charging African-American borrowers more for certain mortgage loans
than non-Hispanic White borrowers with similar loan qualifications; and
implementing an explicitly discriminatory loan denial policy. The
consent order, which was entered by the court on July 25, 2016,
requires BancorpSouth to pay $4 million in direct loan subsidies in
minority neighborhoods \42\ in Memphis, at least $800,000 for community
programs, advertising, outreach, and credit repair, $2.78 million to
African-American consumers who were unlawfully denied or overcharged
for loans, and a $3 million penalty.\43\
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\41\ Complaint, United States v. BancorpSouth Bank, No. 1:16-cv-
00118-GHD-DAS (N.D. Miss. June 29, 2016), ECF No. 1, https://files.consumerfinance.gov/f/documents/201606_cfpb_bancorpsouth-joint-complaint.pdf.
\42\ Majority-minority neighborhoods or minority neighborhoods
refers to census tracts with a minority population greater than 50%.
\43\ Consent Order, United States v. BancorpSouth Bank, No.
1:16-cv-00118-GHD-DAS (N.D. Miss. July 25, 2016), ECF No. 8, https://files.consumerfinance.gov/f/documents/201606_cfpb_bancorpSouth-consent-order.pdf.
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BancorpSouth is a regional depository institution headquartered in
Tupelo, Mississippi that operates branches in eight States: Alabama,
Arkansas, Florida, Louisiana, Mississippi, Missouri, Tennessee, and
Texas. In the complaint, CFPB and DOJ alleged that BancorpSouth:
Illegally redlined in Memphis: The agencies alleged that,
at least from 2011 to 2013, BancorpSouth illegally redlined in the
Memphis area--the market from which the bank received the most
applications--by structuring its business to avoid and discourage
consumers in minority neighborhoods from accessing mortgages.
Specifically, the agencies alleged that the bank placed its branches
outside of minority neighborhoods, excluded nearly all minority
neighborhoods from the area it chose to serve under the Community
Reinvestment Act, and directed nearly all of its marketing away from
minority neighborhoods. As a result, BancorpSouth generated relatively
few applications from minority neighborhoods as compared to its peers.
Discriminated in underwriting certain mortgages: The
agencies also alleged that one of BancorpSouth's lending units
discriminated against African-American applicants by denying them
mortgage loans--including loans with consumer as well as business
purposes--more often than similarly situated non-Hispanic White
applicants. Specifically, the agencies alleged that BancorpSouth
granted its employees wide discretion to make credit decisions on
mortgage loans. This discretion resulted in African-American applicants
being denied certain mortgages at rates more than two times higher than
expected if they had been non-Hispanic White.
Discriminated in pricing certain mortgage loans: The
agencies also alleged that one of BancorpSouth's lending units
discriminated against African-American borrowers that it did approve by
charging them higher annual percentage rates than non-Hispanic White
borrowers with similar loan qualifications. Specifically, the agencies
alleged that BancorpSouth granted its employees wide discretion to set
the prices of mortgage loans. This discretion resulted in African-
American borrowers paying significantly higher annual percentage rates
than similarly situated non-Hispanic White borrowers, costing African-
American consumers hundreds of dollars more each year they held the
loan.
Implemented an explicitly discriminatory denial policy:
The complaint alleged that BancorpSouth required its employees to deny
applications from minorities and other ``protected class'' applicants
more quickly than those from other applicants and not to provide credit
assistance to ``borderline'' applicants, which may have improved their
chances of getting a loan. The bank generally permitted loan officers
to assist marginal applicants, but the explicitly race-based denial
policy departed from that practice. An audio recording of a 2012
internal meeting at BancorpSouth clearly articulates this
discriminatory policy, as well as negative and stereotyped perceptions
of African Americans.
The consent order requires BancorpSouth to take a number of
remedial measures, including paying $4 million into a loan subsidy
program to increase access to affordable credit, by offering qualified
applicants in majority-minority neighborhoods in Memphis mortgage loans
on a more affordable basis than otherwise available from BancorpSouth.
The loan subsidies can include interest rate reductions, closing cost
assistance, and down payment assistance. In addition, the consent order
requires BancorpSouth to spend $500,000 to partner with community-based
or governmental organizations that provide education, credit repair,
and other assistance in minority neighborhoods in Memphis, and to spend
at least $300,000 on a targeted advertising and outreach campaign to
generate applications for mortgage loans from qualified consumers in
majority-minority neighborhoods in Memphis. The consent order also
requires BancorpSouth to pay $2.78 million to African-American
consumers who were improperly denied mortgage loans or overcharged for
their loans because of BancorpSouth's allegedly discriminatory pricing
and underwriting policies. Finally, BancorpSouth paid a $3 million
penalty to the CFPB's Civil Penalty Fund.
In addition to the monetary requirements, the court decree orders
BancorpSouth to expand its physical presence by opening one new branch
or loan production office in a high-minority neighborhood (a census
tract with a minority population greater than 80%) in Memphis. The bank
is also
[[Page 25258]]
required to offer African-American consumers who were denied mortgage
loans while BancorpSouth's allegedly discriminatory underwriting policy
was in place the opportunity to apply for a new loan at a subsidized
interest rate. Among other revisions to its policies, BancorpSouth is
also required by the consent order to implement policies that require
its employees to provide equal levels of information and assistance to
individuals who inquire about mortgage loans, regardless of race or any
other prohibited characteristic.
When investigating identified redlining risks, the Bureau's
approach is consistent with that of other Federal agencies, including
other Federal law enforcement agencies and bank regulators. For
example, the Bureau looks to risk indicators described in the
Interagency Fair Lending Examination Procedures, which were initially
issued by the prudential regulators and later adopted by the
Bureau.\44\ The Bureau also looks to the types of evidence that DOJ has
cited in support of its complaints alleging redlining. These sources
identify multiple factors that the Bureau considers during a redlining
investigation, detailed above in Section 2.1.6 on Redlining.
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\44\ See CFPB Supervision and Examination Manual (Oct. 2012),
https://files.consumerfinance.gov/f/201210_cfpb_supervision-and-examination-manual-v2.pdf (CFPB Examination Procedures, Equal Credit
Opportunity Act Baseline Review Modules).
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As part of its investigation, the CFPB also sent testers to several
BancorpSouth branches to inquire about mortgages, and the results of
that testing support the CFPB and DOJ allegations. The agencies alleged
that, in several instances, a BancorpSouth loan officer treated the
African-American tester less favorably than a non-Hispanic White
counterpart. Specifically, the complaint alleged that BancorpSouth
employees treated African-American testers who sought information about
mortgage loans worse than non-Hispanic White testers with similar
credit qualifications. For example, BancorpSouth employees provided
information that would restrict African-American consumers to smaller
loans than non-Hispanic White testers. This investigation was the
CFPB's first use of testing to support an allegation of discrimination.
Testing is a tool the Bureau employs in its enforcement investigative
activity. Other government agencies, including the DOJ and HUD, as well
as private fair housing organizations and State and local agencies,
have used testers for decades as a method of identifying
discrimination. Courts have long recognized testing as a reliable
investigative tool.
3.1.2 Auto Finance
Toyota Motor Credit Corporation
On February 2, 2016, the CFPB resolved an action with Toyota Motor
Credit Corporation (Toyota Motor Credit) \45\ that requires Toyota
Motor Credit to change its pricing and compensation system by
substantially reducing or eliminating discretionary markups to minimize
the risks of discrimination. On that same date, the DOJ also filed a
complaint and proposed consent order in the U.S. District Court for the
Central District of California addressing the same conduct. That
consent order was entered by the court on February 11, 2016. Toyota
Motor Credit's past practices resulted in thousands of African-American
and Asian and Pacific Islander borrowers paying higher interest rates
than similarly-situated non-Hispanic White borrowers for their auto
loans. The consent order requires Toyota Motor Credit to pay up to
$21.9 million in restitution to affected borrowers.
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\45\ Consent Order, In re Toyota Motor Credit Corp., CFPB No.
2016-CFPB-0002 (Feb. 2, 2016), https://files.consumerfinance.gov/f/201602_cfpb_consent-order-toyota-motor-credit-corporation.pdf.
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Toyota Motor Credit is the U.S. financing arm of Toyota Financial
Services, which is a subsidiary of Toyota Motor Corporation. As of the
second quarter of 2015, Toyota Motor Credit was the largest captive
auto lender \46\ in the United States and the fifth largest auto lender
overall. As an indirect auto lender, Toyota Motor Credit sets risk-
based interest rates, or ``buy rates,'' that it conveys to auto
dealers. Indirect auto lenders like Toyota Motor Credit then allow auto
dealers to charge a higher interest rate when they finalize the deal
with the consumer. This policy or practice is typically called
``discretionary markup.'' Markups can generate compensation for dealers
while giving them the discretion to charge similarly-situated consumers
different rates. Over the time period under review, Toyota Motor Credit
permitted dealers to mark up consumers' interest rates as much as 2.5%.
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\46\ Captive auto lenders are indirect auto lenders that are
directly affiliated with a particular automobile manufacturer.
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The enforcement action was the result of a joint CFPB and DOJ
investigation that began in April 2013. The agencies investigated
Toyota Motor Credit's indirect auto lending activities' compliance with
ECOA. The Bureau found that Toyota Motor Credit violated ECOA by
adopting policies that resulted in African-American and Asian and
Pacific Islander borrowers paying higher interest rates for their auto
loans than non-Hispanic White borrowers as a result of the dealer
markups that Toyota Motor Credit permitted and incentivized. Toyota
Motor Credit's pricing and compensation structure meant that for the
period covered in the order, thousands of African-American borrowers
were charged, on average, over $200 more for their auto loans, and
thousands of Asian and Pacific Islander borrowers were charged, on
average, over $100 more for their auto loans.
The CFPB's administrative action and DOJ's consent order require
Toyota Motor Credit to reduce dealer discretion to mark up the interest
rate to only 1.25% above the buy rate for auto loans with terms of five
years or less, and 1% for auto loans with longer terms, or to move to
non-discretionary dealer compensation. Toyota Motor Credit is also
required to pay $19.9 million in remediation to affected African-
American and Asian and Pacific Islander borrowers whose auto loans were
financed by Toyota Motor Credit between January 2011 and February 2,
2016. Toyota Motor Credit is required to pay up to an additional $2
million into the settlement fund to compensate any affected African-
American and Asian and Pacific Islander borrowers in the time period
between February 2, 2016, and when Toyota Motor Credit implements its
new pricing and compensation structure. The Bureau did not assess
penalties against Toyota Motor Credit because of its responsible
conduct, namely the proactive steps the institution is taking to
directly address the fair lending risk of discretionary pricing and
compensation systems by substantially reducing or eliminating that
discretion altogether. In addition, Toyota Motor Credit is required to
hire a settlement administrator who will contact consumers, distribute
the funds, and ensure that affected borrowers receive compensation.
3.2 HMDA Warning Letters--Potential Mortgage Lending Reporting Failures
On October 27, 2016, the CFPB issued warning letters to 44 mortgage
lenders and mortgage brokers. The Bureau had information that appeared
to show these financial institutions may be required to collect,
record, and report data about their housing-related lending activity,
and that they may be in violation of those requirements. The CFPB, in
sending these letters, made no determination that a legal violation
did, in fact, occur.
HMDA, which was originally enacted in 1975, requires many financial
[[Page 25259]]
institutions to collect data about their housing-related lending
activity, including home purchase loans, home improvement loans, and
refinancings that they originate or purchase, or for which they receive
applications. Annually, these financial institutions must report to the
appropriate Federal agencies and make the data available to the public.
The public and regulators can use the information to monitor whether
financial institutions are serving the housing needs of their
communities, to assist in distributing public-sector investment so as
to attract private investment to areas where it is needed, and to
identify possible discriminatory lending patterns.
Data transparency helps to ensure that financial institutions are
not engaging in discriminatory lending or failing to meet the credit
needs of the entire community, including low- and moderate-income
neighborhoods. Financial institutions that avoid their responsibility
to collect and report mortgage loan data hinder regulatory efforts to
enforce fair lending laws.
The CFPB identified the 44 companies by reviewing available bank
and nonbank mortgage data. The warning letters flag that entities that
meet certain requirements are required to collect, record, and report
mortgage lending data. The letters say that recipients should review
their practices to ensure they comply with all relevant laws. The
companies are encouraged to respond to the Bureau to advise if they
have taken, or will take, steps to ensure compliance with the law. They
can also tell the Bureau if they think the law does not apply to
them.\47\
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\47\ More information on HMDA reporting requirements and a
sample warning letter are available at https://www.consumerfinance.gov/about-us/newsroom/cfpb-warns-financial-institutions-about-potential-mortgage-lending-reporting-failures/.
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3.3 Implementing Enforcement Orders
When an enforcement action is resolved through a public enforcement
order, the Bureau (and the DOJ, when relevant) takes steps to ensure
that the respondent or defendant complies with the requirements of the
order. As appropriate to the specific requirements of individual public
enforcement orders, the Bureau may take steps to ensure that borrowers
who are eligible for compensation receive remuneration and that the
defendant has implemented a comprehensive fair lending compliance
management system. Throughout 2016, the Office of Fair Lending worked
to implement and oversee compliance with the pending public enforcement
orders that were entered by Federal courts or entered by the Bureau's
Director in prior years.
3.3.1 Settlement Administration
Ally Financial Inc. and Ally Bank
On December 19, 2013, working in close coordination with the DOJ,
the CFPB ordered Ally Financial Inc. and Ally Bank (Ally) to pay $80
million in damages to harmed African-American, Hispanic, and Asian and/
or Pacific Islander borrowers. The DOJ simultaneously filed a consent
order in the United States District Court for the Eastern District of
Michigan, which was entered by the court on December 23, 2013. This
public enforcement action represented the Federal government's largest
auto loan discrimination settlement in history.\48\
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\48\ Consent Order, In re Ally Financial Inc., CFPB No. 2013-
CFPB-0010 (Dec. 20, 2013), https://files.consumerfinance.gov/f/201312_cfpb_consent-order_ally.pdf.
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On January 29, 2016, approximately 301,000 harmed borrowers
participating in the settlement--representing approximately 235,000
loans--were mailed checks by the Ally settlement administrator,
totaling $80 million plus interest, which the Bureau announced in a
blog post in English and Spanish.49 50 In addition, and
pursuant to its continuing obligations under the terms of the orders,
Ally has also made ongoing payments to consumers affected after the
consent orders were entered. Specifically, Ally paid approximately
$38.9 million in September 2015 and an additional $51.5 million in May
2016, to consumers that Ally determined were both eligible and
overcharged on auto loans issued during 2014 and 2015, respectively.
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\49\ Patrice Ficklin, Harmed Ally Borrowers Have Been Sent $80
Million in Damages, Consumer Financial Protection Bureau (Jan. 29,
2016), https://www.consumerfinance.gov/blog/harmed-ally-borrowers-have-been-sent-80-million-in-damages/.
\50\ Patrice Ficklin, Prestatarios perjudicados por Ally reciben
$80 millones en da[ntilde]os, Consumer Financial Protection Bureau
(Feb. 4, 2016), https://www.consumerfinance.gov/about-us/blog/prestatarios-perjudicados-por-ally-reciben-80-millones-en-danos/.
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Provident Funding Associates
As previously reported, on May 28, 2015, the CFPB and the DOJ filed
a joint complaint against Provident Funding Associations (Provident)
for discrimination in mortgage lending, along with a proposed order to
settle the complaint in the United States District Court for the
Northern District of California. The complaint alleged that from 2006
to 2011, Provident discriminated in violation of ECOA by charging over
14,000 African-American and Hispanic borrowers more in brokers' fees
than similarly situated non-Hispanic White borrowers on the basis of
race and national origin. The consent order, which the court entered on
June 18, 2015, requires Provident to pay $9 million in damages to
harmed borrowers, to hire a settlement administrator to distribute
funds to the harmed borrowers identified by the CFPB and DOJ, and not
to discriminate against borrowers in assessing total broker fees.\51\
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\51\ Consent Order, United States v. Provident Funding Assocs.,
L.P., No. 3:15-cv-023-73 (N.D. Cal. May 28, 2015), ECF No. 2, https://files.consumerfinance.gov/f/201505_cfpb_consent-order-provident-funding-associates.pdf.
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In Fall 2016, the Bureau published a blog post in English and
Spanish announcing the selection of the settlement administrator and
its mailing of participation packets to eligible
consumers.52 53 The blog post also provided information to
consumers on how to contact the administrator, participate in the
settlement, and submit settlement forms.
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\52\ Patrice Ficklin, Provident Settlement Administrator to
Contact Eligible Borrowers Soon, Consumer Financial Protection
Bureau (Sept. 28, 2016), https://www.consumerfinance.gov/about-us/blog/provident-settlement-administrator-contact-eligible-borrowers-soon/.
\53\ Patrice Ficklin, Administrador del Acuerdo de Provident
planea ponerse en contacto con prestatarios elegibles
pr[oacute]ximamente, Consumer Financial Protection Bureau (Oct. 6,
2016), https://www.consumerfinance.gov/about-us/blog/administrador-del-acuerdo-de-provident-planea-ponerse-en-contacto-con-prestatarios-elegibles-proximamente/.
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American Honda Finance Corporation
As previously reported, on July 14, 2015, the CFPB and the DOJ
resolved an action with American Honda Finance Corporation (Honda) to
put new measures in place to address discretionary auto loan pricing
and compensation practices. Honda's past practices resulted in
thousands of African-American, Hispanic, and Asian and Pacific Islander
borrowers paying higher interest rates than non-Hispanic White
borrowers for their auto loans between January 1, 2011, and July 14,
2015, without regard to their creditworthiness. The consent order
requires Honda to change its pricing and compensation system to
substantially reduce dealer discretion and minimize the risks of
discrimination, and pay $24 million in restitution to affected
borrowers.\54\
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\54\ Consent Order, In re American Honda Finance Corp., CFPB No.
2015-CFPB-0014 (July 14, 2015), https://files.consumerfinance.gov/f/201507_cfpb_consent-order_honda.pdf.
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In October 2016, the Bureau published a blog post in English and
Spanish announcing that the settlement administrator was mailing
participation
[[Page 25260]]
packets to potentially eligible consumers, and providing information to
consumers on how to contact the administrator, participate in the
settlement, and submit settlement forms.55 56
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\55\ Patrice Ficklin, What you need to know to get money from
the settlement with Honda Finance for overcharging minorities,
Consumer Financial Protection Bureau (Oct. 3, 2016), https://www.consumerfinance.gov/about-us/blog/what-you-need-know-get-money-settlement-honda-finance-overcharging-minorities/.
\56\ Patrice Ficklin, Lo que necesita saber para recibir dinero
del acuerdo de compensaci[oacute]n con Honda Finance por cobrarles
de m[aacute]s a las minor[iacute]as, Consumer Financial Protection
Bureau (Oct. 11, 2016), https://www.consumerfinance.gov/about-us/blog/lo-que-necesita-saber-para-recibir-dinero-del-acuerdo-de-compensacion-con-honda-finance-por-cobrarles-de-mas-las-minorias/.
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3.4 Equal Credit Opportunity Act Referrals to the Department of Justice
The CFPB must refer to the DOJ a matter when it has reason to
believe that a creditor has engaged in a pattern or practice of lending
discrimination in violation of ECOA.\57\ The CFPB also may refer other
potential ECOA violations to the DOJ. In 2016, the CFPB referred eight
matters to the DOJ. In four of the eight matters, the DOJ declined to
open an independent investigation and deferred to the Bureau's handling
of the matter. The CFPB's referrals to the DOJ in 2016 covered a
variety of practices, specifically discrimination in mortgage lending
on the bases of the age, marital status, receipt of public assistance
income, and sex; discrimination in indirect auto lending on the bases
of national origin, race, and receipt of public assistance income; and
discrimination in credit card account management on the bases of
national origin and race.
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\57\ 15 U.S.C. 1691e(g).
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3.5 Pending Fair Lending Investigations
In 2016, the Bureau had a number of ongoing fair lending
investigations and authorized enforcement actions against a number of
institutions involving a variety of consumer financial products.
Consistent with the Bureau's priorities and the Office of Fair
Lending's risk-based prioritization, one key area on which the Bureau
focused its fair lending enforcement efforts was addressing potential
discrimination in mortgage lending, including the unlawful practice of
redlining. Redlining occurs when a lender provides unequal access to
credit, or unequal terms of credit, because of the racial or ethnic
composition of a neighborhood. At the end of 2016, the Bureau had a
number of pending investigations in this area. Additionally, at the end
of 2016, the Bureau had a number of pending investigations in other
areas.
4. Rulemaking and Related Guidance
4.1 Home Mortgage Disclosure Act and Regulation C
On October 2015, the Bureau issued and published in the Federal
Register a final rule to implement the Dodd-Frank amendments to
HMDA.\58\ The rule also finalizes certain amendments that the Bureau
believes are necessary to improve the utility of HMDA data, further the
purposes of HMDA, improve the quality of HMDA data, and create a more
transparent mortgage market.
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\58\ Home Mortgage Disclosure, 80 FR 66128 (Oct. 28, 2015)
(codified at 12 CFR pt. 1003), https://www.gpo.gov/fdsys/pkg/FR-2015-10-28/pdf/2015-26607.pdf.
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4.1.1 HMDA History
HMDA, as implemented by Regulation C, is intended to provide the
public with loan data that can be used to help determine whether
financial institutions are serving the housing needs of their
communities; to assist public officials in distributing public-sector
investment to attract private investment in communities where it is
needed; and to assist in identifying possible discriminatory lending
patterns and enforcing anti-discrimination statutes.\59\ HMDA data are
also used for a range of mortgage market monitoring purposes by
community groups, public officials, the financial industry, economists,
academics, social scientists, regulators, and the media. Bank
regulators and other agencies use HMDA to monitor compliance with and
enforcement of the CRA and Federal anti-discrimination laws, including
ECOA and the Fair Housing Act (FHA).
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\59\ 12 U.S.C. 2801; 12 CFR 1003.1(b).
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The Dodd-Frank Act transferred rulemaking authority for HMDA to the
Bureau, effective July 2011. It also amended HMDA to require financial
institutions to report new data points and authorized the Bureau to
require financial institutions to collect, record, and report
additional information.
4.1.2 Summary of Regulation C Changes
The HMDA Rule changes institutional coverage in two phases. First,
to reduce burden on industry, certain lower-volume depository
institutions will no longer be required to collect and report HMDA data
beginning in 2017. A bank, savings association, or credit union will
not be subject to Regulation C in 2017 unless it meets the asset-size,
location, federally related, and loan activity tests under current
Regulation C and it originates at least 25 home purchase loans,
including refinancings of home purchase loans, in both 2015 and 2016.
Second, effective January 1, 2018, the HMDA Rule adopts a uniform loan-
volume threshold for all institutions. Beginning in 2018, an
institution will be subject to Regulation C if it originated at least
25 covered closed-end mortgage loan originations in each of the two
preceding calendar years or at least 100 covered open-end lines of
credit in each of the two preceding calendar years. Other applicable
coverage requirements will apply, depending on the type of covered
entity.
The Rule also modifies the types of transactions covered under
Regulation C. In general, the HMDA Rule adopts a dwelling-secured
standard for transactional coverage. Beginning on January 1, 2018,
covered loans under the HMDA Rule generally will include closed-end
mortgage loans and open-end lines of credit secured by a dwelling and
will not include unsecured loans.
For HMDA data collected on or after January 1, 2018, covered
institutions will collect, record, and report additional information on
covered loans. New data points include those specifically identified in
Dodd-Frank as well as others the Bureau determined will assist in
carrying out HMDA's purposes. The HMDA Rule adds new data points for
applicant or borrower age, credit score, automated underwriting system
information, debt-to-income ratio, combined loan-to-value ratio, unique
loan identifier, property value, application channel, points and fees,
borrower-paid origination charges, discount points, lender credits,
loan term, prepayment penalty, non-amortizing loan features, interest
rate, and loan originator identifier as well as other data points. The
HMDA Rule also modifies several existing data points.
For data collected on or after January 1, 2018, the HMDA Rule
amends the requirements for collection and reporting of information
regarding an applicant's or borrower's ethnicity, race, and sex. First,
a covered institution will report whether or not it collected the
information on the basis of visual observation or surname. Second,
covered institutions must permit applicants to self-identify their
ethnicity and race using disaggregated ethnic and racial subcategories.
However, the HMDA Rule will not require or permit covered institutions
to use the disaggregated subcategories when identifying the applicant's
or borrower's ethnicity and race based on visual observation or
surname.
[[Page 25261]]
The Bureau is developing a new web-based submission tool for
reporting HMDA data, which covered institutions will use beginning in
2018. Regulation C's appendix A is amended effective January 1, 2018 to
include new transition requirements for data collected in 2017 and
reported in 2018. Covered institutions will be required to
electronically submit their loan application registers (LARs).
Beginning with data collected in 2018 and reported in 2019, covered
institutions will report the new dataset required by the HMDA Rule,
using revised procedures that will be available at
www.consumerfinance.gov/hmda.
Beginning in 2020, the HMDA Rule requires quarterly reporting for
covered institutions that reported a combined total of at least 60,000
applications and covered loans in the preceding calendar year. An
institution will not count covered loans that it purchased in the
preceding calendar year when determining whether it is required to
report on a quarterly basis. The first quarterly submission will be due
by May 30, 2020.
Beginning in 2018, covered institutions will no longer be required
to provide a disclosure statement or a modified LAR to the public upon
request. Instead, in response to a request, a covered institution will
provide a notice that its disclosure statement and modified LAR are
available on the Bureau's Web site. These revised disclosure
requirements will apply to data collected on or after January 1, 2017
and reported in or after 2018.
For data collected in or after 2018 and reported in or after 2019,
the Bureau will use a balancing test to determine whether and, if so,
how HMDA data should be modified prior to its disclosure in order to
protect applicant and borrower privacy while also fulfilling HMDA's
disclosure purposes. At a later date, the Bureau will provide a process
for the public to provide input regarding the application of this
balancing test to determine the HMDA data to be publicly disclosed.
4.1.3 Reducing Industry Burden
The Bureau took a number of steps to reduce industry burden while
ensuring HMDA data are useful and reflective of the current housing
finance market. A key part of this balancing is ensuring an adequate
implementation period. Most provisions of the HMDA Rule go into effect
on January 1, 2018--more than two years after publication of the Rule--
and apply to data collected in 2018 and reported in 2019 or later
years. At the same time, an institutional coverage change that will
reduce the number of depository institutions that need to report is
effective earlier: On January 1, 2017. Institutions subject to the new
quarterly reporting requirement will have additional time to prepare:
That requirement is effective on January 1, 2020, and the first
quarterly submission will be due by May 30, 2020.
As with all of its rules, the Bureau continues to look for ways to
help the mortgage industry implement the new mortgage lending data
reporting rules, and has created regulatory implementation resources
that are available online. These resources include an overview of the
final rule, a plain-language compliance guide, a timeline with various
effective dates, a decision tree to help institutions determine whether
they need to report mortgage lending data, a chart that provides a
summary of the reportable data, a chart that describes when to report
data as not applicable, a chart that describes what transactions are
reportable, a webinar on the HMDA Rule, and a Technology Preview for
the Bureau's new web-based submission tool. In addition, the Bureau has
published Filing Instruction Guides (FIG) for 2017 and 2018 that
include file specifications. The Bureau will monitor implementation
progress and will be publishing additional regulatory implementation
tools and resources on its Web site to support implementation
needs.\60\ Since the HMDA rule was issued on October 15, 2015, the
Bureau has focused on outreach by sharing information about the
regulatory changes, including webinars, responding to industry
inquiries, and issuing press releases and emails to stakeholder groups.
In addition, Bureau staff has spoken at numerous industry-focused
conferences and mortgage events. Since the HMDA rule has been released,
the Bureau's Web site has had over 50,000 visits to the HMDA
implementation page and over 18,000 downloads of our plain-language
HMDA compliance guide.
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\60\ These resources are available at Consumer Financial
Protection Bureau, Home Mortgage Disclosure Act rule implementation,
https://www.consumerfinance.gov/regulatory-implementation/hmda/.
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4.1.4 Filing 2017 HMDA Data
Beginning with the HMDA data collected in 2017 and submitted in
2018, responsibility to receive and process HMDA data will transfer
from the Federal Reserve Board (FRB) to the CFPB. The HMDA agencies
have agreed that a covered institution filing HMDA data collected in or
after 2017 with the CFPB will be deemed to have submitted the HMDA data
to the appropriate Federal agency.\61\ The effective date of the change
in the Federal agency that receives and processes the HMDA data does
not coincide with the effective date for the new HMDA data to be
collected and reported under the Final Rule amending Regulation C
published in the Federal Register on October 28, 2015. The Final Rule's
new data requirements will apply to data collected beginning on January
1, 2018. The data fields for data collected in 2017 have not changed.
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\61\ The HMDA agencies refer collectively to the CFPB, the
Office of the Comptroller of the Currency (OCC), the Federal Deposit
Insurance Corporation (FDIC), the FRB, the National Credit Union
Administration (NCUA), and the Department of Housing and Urban
Development (HUD).
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Also beginning with data collected in 2017, filers will submit
their HMDA data using a web interface referred to as the ``HMDA
Platform.'' In addition, beginning with the data collected in 2017, as
part of the submission process, a HMDA reporter's authorized
representative with knowledge of the data submitted shall certify to
the accuracy and completeness of the data submitted. Additional
information about HMDA, the FIG, and other data submission resources is
located at the Bureau's Web site.\62\
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\62\ See Consumer Financial Protection Bureau, Filing
instructions guide for HMDA data collected in 2017 (July 2016),
https://www.consumerfinance.gov/data-research/hmda/static/for-filers/2017/2017-HMDA-FIG.pdf.
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4.1.5 HMDA Data Resubmission RFI
In response to dialogue with industry and other stakeholders, the
Bureau is considering modifications to its current HMDA resubmission
guidelines. In comments on the Bureau's proposed changes to Regulation
C, some stakeholders asked that the Bureau adjust its existing HMDA
resubmission guidelines to reflect the expanded data the Bureau will
collect under the HMDA Rule.
Accordingly, on January 7, 2016, the Bureau published on its Web
site a Request for Information (RFI) asking for public comment on the
Bureau's HMDA resubmission guidelines.\63\ Specifically, the Bureau
requested feedback on the Bureau's use of resubmission error
thresholds; how they should be calculated; whether they should vary
with the size of the HMDA submission or kind of data; and the
consequences for exceeding a threshold, among other
[[Page 25262]]
topics. Some examples of questions posed to the public include:
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\63\ See Consumer Financial Protection Bureau, CFPB Seeks Public
Input on Mortgage Lending Information Resubmission Guidelines (Jan.
7, 2016), https://www.consumerfinance.gov/newsroom/cfpb-seeks-public-input-on-mortgage-lending-information-resubmission-guidelines/.
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Should the Bureau continue to use error percentage
thresholds to determine the need for data resubmission? If not, how
else may the Bureau ensure data integrity and compliance with HMDA and
Regulation C?
If the Bureau retains error percentage thresholds, should
the thresholds be calculated differently than they are today? If so,
how and why?
If the Bureau retains error percentage thresholds, should
it continue to maintain separate error thresholds for the entire HMDA
LAR sample and individual data fields within the LAR sample? If not,
why?
The RFI was published in the Federal Register on January 12,
2016.\64\ The 60-day comment period ended on March 14, 2016. As of this
report's publication date, in light of feedback received, the Bureau
was considering whether to adjust its existing HMDA resubmission
guidelines and if so, how.
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\64\ Request for Info. Regarding Home Mortgage Disclosure Act
Resubmission Guidelines, 81 F.R. 1405 (Jan. 12, 2016), https://www.gpo.gov/fdsys/pkg/FR-2016-01-12/pdf/2016-00442.pdf.
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4.1.6 HMDA Rule Technical Corrections and Clarifying Amendments
Since issuing the 2015 HMDA Final Rule, the Bureau has identified
and received information about some areas of uncertainty about
requirements under the rule. This spring, the Bureau plans to seek
comment on a proposal to amend certain provisions of Regulation C to
make technical corrections and to clarify certain requirements under
Regulation C.
4.2 ECOA and Regulation B
In 2016, with regard to ECOA, the CFPB published a Bureau Official
Approval and was in the proposed rule stage to amend certain sections
of Regulation B.
4.2.1 Status of New Uniform Residential Loan Application and Collection
of Expanded Home Mortgage Disclosure Act Information About Ethnicity
and Race in 2017 Under Regulation B
On September 23, 2016, the Bureau published a Bureau Official
Approval pursuant to section 706(e) of the ECOA concerning the new
Uniform Residential Loan Application and the collection of expanded
HMDA information about ethnicity and race in 2017.\65\
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\65\ Consumer Financial Protection Bureau, Status of New Uniform
Residential Loan Application and Collection of Expanded Home
Mortgage Disclosure Act Information about Ethnicity and Race in 2017
under Regulation B (Sept. 23, 2016), https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/092016_cfpb_HMDAEthinicityRace.pdf.
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In accordance with the request by Federal Housing Finance Agency
and the Federal Home Loan Mortgage Corporation (Freddie Mac) and the
Federal National Mortgage Association (Fannie Mae), the Bureau reviewed
the revised and redesigned Uniform Residential Loan Application issued
on August 23, 2016 (2016 URLA). Under the terms provided in the
Bureau's notice, the Bureau determined that the relevant language in
the 2016 URLA is in compliance with the specified provisions of
Regulation B. A creditor's use of the 2016 URLA is not required under
Regulation B. However, the notice provides that, a creditor that uses
the 2016 URLA without any modification that would violate Sec.
1002.5(b) through (d) would act in compliance with Sec. 1002.5(b)
through (d).
The notice also addressed collection of information concerning the
ethnicity and race of applicants in conformity with Regulation B from
January 1, 2017, through December 31, 2017. The Bureau's official
approval provided that at any time from January 1, 2017, through
December 31, 2017, a creditor may, at its option, permit applicants to
self-identify using disaggregated ethnic and racial categories as
instructed in appendix B to Regulation C, as amended by the 2015 HMDA
final rule. The Bureau believes such authorization may provide
creditors time to begin to implement the regulatory changes and improve
their compliance processes before the new requirement becomes
effective, and therefore mandatory, on January 1, 2018. Allowing for
this increased implementation period will, in the Bureau's view, reduce
compliance burden and further the purposes of HMDA and Regulation C.
4.2.2 Amendments to the Equal Credit Opportunity Act (Regulation B)
Ethnicity and Race Information Collection
Regulation C currently requires financial institutions to collect
and report information about the ethnicity and race, as well as certain
other characteristics, of applicants and borrowers. Regulation C, as
amended by 2015 HMDA Final Rule, generally effective January 1, 2018,
will require financial institutions to permit applicants and borrowers
to self-identify using disaggregated ethnic and racial categories
beginning January 1, 2018. Regulation B also currently requires
creditors to request and retain information about the ethnicity and
race, as well as certain other characteristics, of applicants for
certain dwelling-secured loans, but uses only aggregate ethnic and
racial categories. On March 24, 2017, the Bureau issued a proposed rule
seeking comment on amendments to Regulation B to permit creditors
additional flexibility in complying with Regulation B in order to
facilitate compliance with Regulation C, to add certain model forms and
remove others from Regulation B, and to make various other amendments
to Regulation B and its commentary to facilitate the collection and
retention of information about the ethnicity, sex, and race of certain
mortgage applicants.\66\
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\66\ Consumer Financial Protection Bureau, Amendments to Equal
Credit Opportunity Act (Regulation B) Ethnicity and Race Information
Collection 2017-0009 (March 24, 2017), https://files.consumerfinance.gov/f/documents/201703_cfpb_NPRM-to-amend-Regulation-B.pdf.
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4.3 Small Business Data Collection
Section 1071 of the Dodd-Frank Act requires financial institutions
to compile, maintain, and submit to the Bureau certain data on credit
applications for women-owned, minority-owned, and small businesses.\67\
Congress enacted section 1071 for the purpose of facilitating
enforcement of fair lending laws and identifying business and community
development needs and opportunities for women-owned, minority-owned,
and small businesses. The amendments to ECOA made by the Dodd-Frank Act
require that certain data be collected and maintained, including the
number of the application and date the application was received; the
type and purpose of loan or credit applied for; the amount of credit
applied for and approved; the type of action taken with regard to each
application and the date of such action; the census tract of the
principal place of business; the gross annual revenue of the business;
and the race, sex, and ethnicity of the principal owners of the
business. The Bureau's Fall 2016 Unified Agenda and Regulatory Plan
indicates that rulemaking pursuant to Section 1071 is now in the pre-
rule stage.\68\ This first stage of the Bureau's work will be focused
on outreach and research and on the potential ways to implement section
1071, after which the Bureau will begin developing proposed rules
concerning the data to be collected and determining the appropriate
operational procedures and privacy protections needed for information-
gathering and public disclosure.
---------------------------------------------------------------------------
\67\ Dodd-Frank Act section 1071 (codified at 15 U.S.C. 1691c-
2).
\68\ Semiannual Regulatory Agenda, 81 FR 94844, 94846 (Dec. 23,
2016).
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[[Page 25263]]
The Bureau has begun to explore some of the issues involved in the
rulemaking, including through ongoing engagement with industry and
other stakeholders. In addition, current and future small business
lending supervisory activity will help expand and enhance the Bureau's
knowledge in this area, including the credit application process;
existing data collection processes; and the nature, extent, and
management of fair lending risk. The Bureau is also considering how
best to work with other agencies to, in part, gain insight into
existing business lending data collection efforts and to explore
possible ways to cooperate in future efforts.
4.4 Amicus Program
The Bureau's Amicus Program files amicus, or friend-of-the-court,
briefs in court cases concerning the Federal consumer financial
protection laws that the Bureau is charged with implementing, including
ECOA. These amicus briefs provide the courts with our views on
significant consumer financial protection issues and help ensure that
consumer financial protection statutes and regulations are correctly
and consistently interpreted by the courts.
In 2016, the Bureau filed an amicus brief in Alexander v. AmeriPro
Funding, Inc., in which a group of consumer plaintiffs appealed the
dismissal by the United States District Court for the Southern District
of Texas of an ECOA complaint alleging discrimination by mortgage
lenders on the basis that all or part of the plaintiffs' income derived
from a public assistance program. The District Court held that the
complaint failed to allege facts that gave rise to a prima facie
showing of discrimination under the McDonnell-Douglas framework and
also failed to allege direct evidence of discrimination because the
allegations were ``conclusory'' and did not allege hostility or
animus.\69\ The Bureau filed its amicus brief on February 23, 2016, and
argued that the District Court's decision imposed pleading burdens on
ECOA plaintiffs that were not required by ECOA or the Federal Rules of
Civil Procedure.\70\
---------------------------------------------------------------------------
\69\ Alexander v. AmeriPro Funding, Inc., No. H-14-2947, 2015 WL
4545625 at *4-5 (S.D. Tex. July 28, 2015).
\70\ Br. of Amicus Curiae Consumer Financial Protection Bureau
in Supp. of Appellants and Reversal, Alexander, et al. v. AmeriPro
Funding, Inc., et al., No. 15-20710 (5th Cir. Feb. 23, 2016), ECF
No. 00513394181, https://www.consumerfinance.gov/policy-compliance/amicus/briefs/alexander-ameripro-funding/
---------------------------------------------------------------------------
On February 16, 2017, in a unanimous decision, the United States
Court of Appeals for the Fifth Circuit reversed the dismissal with
respect to some of the plaintiffs but affirmed the dismissal with
respect to others.\71\ Reversing the District Court, the court held
that one set of plaintiffs stated an ECOA claim because they alleged
that they applied for credit, that the creditor refused to consider
public assistance income in considering their credit applications, and
that the applicants as a result received less favorable mortgages.
Unlike the District Court's decision, the court did not require the
plaintiffs to also allege hostility or animus or to make a prima facie
showing of discrimination under the McDonnell-Douglas framework.
Affirming the District Court, the court also held that another set of
plaintiffs failed to state a claim under ECOA because they either
failed to allege sufficient facts of discriminatory conduct, failed to
allege facts indicating that they had applied for credit, or failed to
allege facts indicating that one defendant was a ``creditor'' under
ECOA.
---------------------------------------------------------------------------
\71\ Alexander v. AmeriPro Funding, Inc., 848 F.3d 698 (5th Cir.
2017).
---------------------------------------------------------------------------
5. Interagency Coordination
5.1 Interagency Coordination and Engagement
The Office of Fair Lending regularly coordinates the CFPB's fair
lending regulatory, supervisory and enforcement activities with those
of other Federal agencies and State regulators to promote consistent,
efficient, and effective enforcement of Federal fair lending laws.\72\
Through our interagency engagement, we work to address current and
emerging fair lending risks.
---------------------------------------------------------------------------
\72\ Dodd-Frank Act section 1013(c)(2)(B) (codified at 12 U.S.C.
5493(c)(2)(B)).
---------------------------------------------------------------------------
On November 14, 2016, along with other members of the FFIEC, the
Bureau issued an updated Uniform Interagency Consumer Compliance Rating
System.\73\ The revisions reflect the regulatory, supervisory,
technological, and market changes that have occurred since the system
was established. The previous rating system was adopted in 1980, and
the proposed revisions aim to address the broad array of risks in the
market that can cause consumer harm, including fair lending violations.
The Bureau plans to implement the updated rating system on consumer
compliance examinations that begin on or after March 31, 2017.
---------------------------------------------------------------------------
\73\ Uniform Interagency Consumer Compliance Rating System, 81
FR 79473 (Nov. 14, 2016), https://www.federalregister.gov/documents/2016/11/14/2016-27226/uniform-interagency-consumer-compliance-rating-system.
---------------------------------------------------------------------------
The CFPB, along with the FTC, DOJ, HUD, FDIC, FRB, NCUA, OCC, and
the Federal Housing Finance Agency, comprise the Interagency Task Force
on Fair Lending. The Task Force meets regularly to discuss fair lending
enforcement efforts, share current methods of conducting supervisory
and enforcement fair lending activities, and coordinate fair lending
policies.
The CFPB belongs to a standing working group of Federal agencies--
with the DOJ, HUD, and FTC--that meets regularly to discuss issues
relating to fair lending enforcement. These agencies comprise the
Interagency Working Group on Fair Lending Enforcement. The agencies use
these meetings to discuss fair lending developments and trends,
methodologies for evaluating fair lending risks and violations, and
coordination of fair lending enforcement efforts. In addition to these
interagency working groups, we meet periodically and on an ad hoc basis
with the prudential regulators to coordinate our fair lending work.
The CFPB takes part in the FFIEC HMDA/Community Reinvestment Act
Data Collection Subcommittee, which is a subcommittee of the FFIEC Task
Force on Consumer Compliance, as its work relates to the collection and
processing of HMDA data, and the Bureau is one of the agencies to which
HMDA data is submitted by financial institutions.
6. Outreach: Promoting Fair Lending Compliance and Education
Pursuant to Dodd-Frank,\74\ the Office of Fair Lending regularly
engages in outreach with industry, bar associations, consumer
advocates, civil rights organizations, other government agencies, and
other stakeholders to help educate and inform about fair lending. The
Bureau is committed to communicating directly with all stakeholders on
its policies, compliance expectations, and fair lending priorities. As
part of this commitment to outreach and education in the area of fair
lending, equal opportunity, and ensuring fair access to credit, Bureau
personnel have engaged in dialogue with stakeholders on issues
including the use of public assistance income in underwriting,
redlining, disparate treatment, disparate impact, HMDA data collection
and reporting, indirect auto financing, the use of proxy methodology,
and the unique challenges facing LEP and lesbian, gay, bisexual and
transgender (LGBT) consumers in accessing credit. Outreach is
accomplished through issuance of Reports to Congress, Interagency
[[Page 25264]]
Statements, Supervisory Highlights, Compliance Bulletins, letters, blog
posts, speeches and presentations at conferences and trainings, and
participation in meetings to discuss fair lending and access to credit
matters.
---------------------------------------------------------------------------
\74\ Dodd-Frank Act section 1013(c)(2)(C) (codified at 12 U.S.C.
5493(c)(2)(C)).
---------------------------------------------------------------------------
6.1 Blog Posts
The Bureau firmly believes that an informed consumer is the best
defense against discriminatory lending practices. When issues arise
that consumers need to know about, the Bureau uses many tools to aid
consumers in financial decision-making.75 76 The Bureau
regularly uses its blog as a tool to communicate effectively to
consumers on timely issues, emerging areas of concern, Bureau
initiatives, and more. In 2016 we published 14 blog posts related to
two main fair lending topics: Providing consumers updated information
about our fair lending enforcement actions and providing consumer
education on fair lending. Our enforcement update blog posts included
the announcement (in both English and Spanish) of the BancorpSouth Bank
settlement,77 78 updates on the Ally Financial Inc. and Ally
Bank settlement,79 80 updates on the Provident Funding
Association, L.P. settlement 81 82 and updates on the
American Honda Finance Corporation settlement.83 84 Our
consumer education blog posts included reminding consumers of their
rights for fair treatment in the financial marketplace,85 86
a series of two blog posts about the history of ECOA \87\ and what it
means for consumers,\88\ a blog post outlining the 2017 priorities for
Fair Lending,\89\ and a blog post about shopping for an auto loan.\90\
---------------------------------------------------------------------------
\75\ For helpful information on shopping for auto loans, please
see the Bureau's Know Before You Owe: Auto Loans toolkit, at
Consumer Financial Protection Bureau, Take control of your auto
loan, https://www.consumerfinance.gov/consumer-tools/auto-loans/.
\76\ For helpful information on shopping for home loans, please
see the Bureau's toolkit, at Consumer Financial Protection Bureau,
Owning a Home: Tools and resources for homebuyers, https://www.consumerfinance.gov/owning-a-home/.
\77\ Patrice Ficklin & Daniel Dodd-Ramirez, Redlining: CFPB and
DOJ action requires BancorpSouth Bank to pay millions to harmed
consumers, Consumer Financial Protection Bureau (June 29, 2016),
https://www.consumerfinance.gov/about-us/blog/redlining-cfpb-and-doj-action-requires-bancorpsouth-bank-pay-millions-harmed-consumers/.
\78\ Patrice Ficklin & Daniel Dodd-Ramirez, La
delimitaci[oacute]n ilegal: Acci[oacute]n del CFPB y del
Departamento de Justicia requiere que el banco BancorpSouth pague
millones de d[oacute]lares a consumidores perjudicados, Consumer
Financial Protection Bureau (July 6, 2016), https://www.consumerfinance.gov/about-us/blog/la-delimitacion-ilegal-accion-del-cfpb-y-del-departamento-de-justicia-requiere-que-el-banco-bancorpsouth-pague-millones-de-dolares-consumidores-perjudicados/.
\79\ Patrice Ficklin, Harmed Ally borrowers have been sent $80
million in damages, Consumer Financial Protection Bureau (Jan. 29,
2016), https://www.consumerfinance.gov/about-us/blog/harmed-ally-borrowers-have-been-sent-80-million-in-damages/.
\80\ Patrice Ficklin, Prestatarios perjudicados por Ally reciben
$80 millones en da[ntilde]os, Consumer Financial Protection Bureau
(Feb. 4, 2016), https://www.consumerfinance.gov/about-us/blog/prestatarios-perjudicados-por-ally-reciben-80-millones-en-danos/.
\81\ Patrice Ficklin, Provident Settlement Administrator to
contact eligible borrowers soon, Consumer Financial Protection
Bureau (Sept. 28, 2016), https://www.consumerfinance.gov/about-us/blog/provident-settlement-administrator-contact-eligible-borrowers-soon/.
\82\ Patrice Ficklin, Administrador del Acuerdo de Provident
planea ponerse en contacto con prestatarios elegibles
pr[oacute]ximamente, Consumer Financial Protection Bureau (Oct. 6,
2016), https://www.consumerfinance.gov/about-us/blog/administrador-del-acuerdo-de-provident-planea-ponerse-en-contacto-con-prestatarios-elegibles-proximamente/.
\83\ Patrice Ficklin, What you need to know to get money from
the settlement with Honda Finance for overcharging minorities,
Consumer Financial Protection Bureau (Oct. 3, 2016), https://www.consumerfinance.gov/about-us/blog/what-you-need-know-get-money-settlement-honda-finance-overcharging-minorities/.
\84\ Patrice Ficklin, Lo que necesita saber para recibir dinero
del acuerdo de compensaci[oacute]n con Honda Finance por cobrarles
de m[aacute]s a las minor[iacute]as, Consumer Financial Protection
Bureau (Oct. 11, 2016), https://www.consumerfinance.gov/about-us/blog/lo-que-necesita-saber-para-recibir-dinero-del-acuerdo-de-compensacion-con-honda-finance-por-cobrarles-de-mas-las-minorias/.
\85\ Patrice Ficklin, You have the right to be treated fairly in
the financial marketplace, Consumer Financial Protection Bureau
(Apr. 29, 2016), https://www.consumerfinance.gov/about-us/blog/you-have-right-be-treated-fairly-financial-marketplace/.
\86\ Patrice Ficklin, Usted tiene derecho a que lo traten de
manera justa en el mercado financiero, Consumer Financial Protection
Bureau (May 2, 2016), https://www.consumerfinance.gov/about-us/blog/usted-tiene-derecho-que-lo-traten-de-manera-justa-en-el-mercado-financiero/.
\87\ Brian Kreiswirth & Anna-Marie Tabor, What you need to know
about the Equal Credit Opportunity Act and how it can help you: Why
it was passed and what it is, Consumer Financial Protection Bureau
(Oct. 31, 2016), https://www.consumerfinance.gov/about-us/blog/what-you-need-know-about-equal-credit-opportunity-act-and-how-it-can-help-you-why-it-was-passed-and-what-it/.
\88\ Rebecca Gelfond & Frank Vespa-Papaleo, What you need to
know about the Equal Credit Opportunity Act and how it can help you:
Know your rights, Consumer Financial Protection Bureau (Nov. 2,
2016), https://www.consumerfinance.gov/about-us/blog/what-you-need-know-about-equal-credit-opportunity-act-and-how-it-can-help-you-know-your-rights/.
\89\ Patrice Ficklin, Fair Lending priorities in the new year,
Consumer Financial Protection Bureau (Dec. 16, 2016), https://www.consumerfinance.gov/about-us/blog/fair-lending-priorities-new-year/.
\90\ Patrice Ficklin & Daniel Dodd-Ramirez, Don't get taken for
a ride; protect yourself from an auto loan you can't afford,
Consumer Financial Protection Bureau (July 5, 2016), https://www.consumerfinance.gov/about-us/blog/dont-get-taken-ride-protect-yourself-auto-loan-you-cant-afford/.
_____________________________________-
The blog posts may be accessed any time at www.consumerfinance.gov/blog.
6.2 Supervisory Highlights
Supervisory Highlights reports anchor the Bureau's efforts to
communicate about the Bureau's supervisory activity. Because the
Bureau's supervisory process is confidential, Supervisory Highlights
reports provide information on supervisory trends the Bureau observes,
without identifying specific entities, as well as information on public
enforcement matters that arise from supervisory reviews. In 2016,
Supervisory Highlights covered many topical issues pertaining to fair
lending, including mortgage servicing, HMDA examinations where
institutions improperly coded actions taken on conditionally-approved
applications with unmet underwriting conditions, LEP consumers,
redlining, and settlement updates for recent enforcement actions that
originated in the supervisory process.
More information about the topics discussed this year in
Supervisory Highlights can be found in Section 2.1 of this Report. As
with all Bureau resources, all editions of Supervisory Highlights are
available on www.consumerfinance.gov/reports.
6.3 Speaking Engagements & Roundtables
To meet our mission of educating and informing stakeholders about
fair lending, the Office of Fair Lending and Equal Opportunity had the
opportunity to participate in a number of outreach speaking events and
roundtables throughout 2016. In these events, we shared information on
fair lending priorities, emerging issues, and heard feedback from our
stakeholders on the work we do.
Fair Lending staff attended numerous roundtables throughout the
year on a variety of issues related to fair lending. Some examples of
the topics covered include student lending, language access issues,
HMDA, small business lending, mortgage servicing, and credit reporting.
7. Interagency Reporting
Pursuant to ECOA, the CFPB is required to file a report to Congress
describing the administration of its functions under ECOA, providing an
assessment of the extent to which compliance with ECOA has been
achieved, and giving a summary of public enforcement actions taken by
other agencies with administrative enforcement responsibilities under
[[Page 25265]]
ECOA.\91\ This section of this report provides the following
information:
---------------------------------------------------------------------------
\91\ 15 U.S.C. 1691f.
---------------------------------------------------------------------------
A description of the CFPB's and other agencies' ECOA
enforcement efforts; and
an assessment of compliance with ECOA.
In addition, the CFPB's annual HMDA reporting requirement calls for
the CFPB, in consultation with HUD, to report annually on the utility
of HMDA's requirement that covered lenders itemize certain mortgage
loan data.\92\
---------------------------------------------------------------------------
\92\ 12 U.S.C. 2807.
---------------------------------------------------------------------------
7.1 Equal Credit Opportunity Act Enforcement
The enforcement efforts and compliance assessments made by all the
agencies assigned enforcement authority under section 704 of ECOA are
discussed in this section.
7.1.1 Public Enforcement Actions
In addition to the CFPB, the agencies charged with administrative
enforcement of ECOA under section 704 include: The FRB, the FDIC, the
OCC, and the NCUA (collectively, the FFIEC agencies); \93\ the FTC, the
Farm Credit Administration (FCA), the Department of Transportation
(DOT), the Securities and Exchange Commission (SEC), the Small Business
Administration (SBA), and the Grain Inspection, Packers and Stockyards
Administration (GIPSA) of the Department of Agriculture.\94\ In 2016,
CFPB had two public enforcement actions for violations of ECOA, and the
OCC issued one public enforcement action for violations of ECOA and/or
Regulation B.
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\93\ The FFIEC is a ``formal interagency body empowered to
prescribe uniform principles, standards, and report forms for the
Federal examination of financial institutions'' by the member
agencies listed above and the State Liaison Committee ``and to make
recommendations to promote uniformity in the supervision of
financial institutions.'' Federal Financial Institutions Examination
Council, https://www.ffiec.gov (last visited March 31, 2017).
\94\ 15 U.S.C. 1691c.
---------------------------------------------------------------------------
7.1.2 Violations Cited During ECOA Examinations
Among institutions examined for compliance with ECOA and Regulation
B, the FFIEC agencies reported that the most frequently cited
violations were:
Table 1--Most Frequently Cited Regulation B Violations by FFIEC
Agencies: 2016
------------------------------------------------------------------------
FFIEC agencies reporting Regulation B violations: 2016
------------------------------------------------------------------------
CFPB, FDIC, FRB, NCUA, OCC........ 12 CFR 1002.4(a): Discrimination on
a prohibited basis in a credit
transaction.
12 C.F.R. 1002.6(b): Improperly
considering age, receipt of public
assistance, certain other income,
or another prohibited basis in a
system of evaluating applicant
creditworthiness.
12 C.F.R. 1002.7(d)(1): Improperly
requiring the signature of an
applicant's spouse or other person.
12 C.F.R. 1002.9(a)(1), (a)(1)(i),
(a)(2), (b), (b)(2), (c): Failure
to timely notify an applicant when
an application is denied; failure
to provide notice to the applicant
30 days after receiving a completed
application concerning the
creditor's approval of,
counteroffer or adverse action on
the application; failure to provide
sufficient information in an
adverse action notification,
including the specific reasons the
application was denied; failure to
timely and/or appropriately notify
an applicant of either action taken
or of incompleteness after
receiving an application that is
incomplete.
12 C.F.R. 1002.12(b)(1),
(b)(1)(ii)(A): Failure to preserve
records on actions taken on an
application or of incompleteness.
12 C.F.R. 1002.13(a)(1)(i): Failure
to request information on an
application pertaining to an
applicant's ethnicity.
12 C.F.R. 14(a), (a)(1): Failure to
routinely provide an applicant with
a copy of all appraisals and other
written valuations developed in
connection with an application for
credit that is to be secured by a
first lien on a dwelling, and/or
failure to provide an applicant
with a notice in writing of the
applicant's right to receive a copy
of all written appraisals developed
in connection with the application.
------------------------------------------------------------------------
TABLE 2--Most Frequently Cited Regulation B Violations by Other ECOA
Agencies, 2016
------------------------------------------------------------------------
Other ECOA agencies Regulation B violations: 2016
------------------------------------------------------------------------
FCA............................... 12 CFR 1002.9: Failure to timely
notify an applicant when an
application is denied; failure to
provide sufficient information in
an adverse action notification,
including the specific reasons the
application was denied.
12 CFR 1002.13(a)(1): Failure to
request and collect information
about the race, ethnicity, sex,
marital status, and age of
applicants seeking certain types of
mortgage loans.
------------------------------------------------------------------------
The GIPSA, the SEC, and the SBA reported that they received no
complaints based on ECOA or Regulation B in 2016. In 2016, the DOT
reported that it received a ``small number of consumer inquiries or
complaints concerning credit matters possibly covered by ECOA,'' which
it ``processed informally.'' The FTC is an enforcement agency and does
not conduct compliance examinations.
7.2 Referrals to the Department of Justice
In 2016, the FFIEC agencies including the CFPB referred a total of
20 matters to the DOJ. The FDIC referred four matters to the DOJ. These
matters alleged discriminatory treatment of persons in credit
transactions due to protected characteristics, including age, race,
national origin, and receipt of public assistance income. The FRB
referred seven matters to the DOJ. These matters alleged discriminatory
treatment of persons in credit transactions due to protected
characteristics, including race, national origin, and marital status.
The OCC referred one matter to the DOJ on the basis of marital status
discrimination. The CFPB referred eight matters to the DOJ during 2016,
finding discrimination in credit transactions on the following
prohibited bases: Race, national origin, age, receipt of public
assistance income, sex, and marital status.
[[Page 25266]]
7.3 Reporting on the Home Mortgage Disclosure Act
The CFPB's annual HMDA reporting requirement calls for the CFPB, in
consultation with the Department of Housing and Urban Development
(HUD), to report annually on the utility of HMDA's requirement that
covered lenders itemize loan data in order to disclose the number and
dollar amount of certain mortgage loans and applications, grouped
according to various characteristics.\95\ The CFPB, in consultation
with HUD, finds that itemization and tabulation of these data further
the purposes of HMDA. For more information on the Bureau's proposed
amendments to HMDA's implementing regulation, Regulation C, please see
the Rulemaking section of this report (Section 4).
---------------------------------------------------------------------------
\95\ See 12 U.S.C. 2807.
---------------------------------------------------------------------------
8. Conclusion
In this, our fifth Fair Lending Report to Congress, we outline our
work in furtherance of our statutory mandate to ensure fair, equitable,
and nondiscriminatory access to credit. Our work continues to reflect
the areas that pose the greatest risk of consumer harm, and we continue
to reprioritize our approach to better position our work to understand
and address emerging issues. Our multipronged approach uses the full
variety of tools at our disposal--supervision, enforcement, rulemaking,
outreach, research, data-driven prioritization, interagency
coordination, and more. We are pleased to present this report as we
continue to fulfill our statutory mandate as well as the Bureau's
mission to help consumer finance markets work by making rules more
effective, by consistently and fairly enforcing these rules, and by
empowering consumers to take more control over their economic lives.
Appendix A: Defined Terms
------------------------------------------------------------------------
Term Definition
------------------------------------------------------------------------
Bureau............................ The Consumer Financial Protection
Bureau.
CFPB.............................. The Consumer Financial Protection
Bureau.
CMS............................... Compliance Management System.
CRA............................... Community Reinvestment Act.
Dodd-Frank Act.................... The Dodd-Frank Wall Street Reform
and Consumer Protection Act.
DOJ............................... The U.S. Department of Justice.
DOT............................... The U.S. Department of
Transportation.
ECOA.............................. The Equal Credit Opportunity Act.
FCA............................... Farm Credit Administration.
FDIC.............................. The U.S. Federal Deposit Insurance
Corporation.
Federal Reserve Board............. The U.S. Board of Governors of the
Federal Reserve System.
FFIEC............................. The U.S. Federal Financial
Institutions Examination Council--
the FFIEC member agencies are the
Board of Governors of the Federal
Reserve System (FRB), the Federal
Deposit Insurance Corporation
(FDIC), the National Credit Union
Administration (NCUA), the Office
of the Comptroller of the Currency
(OCC), and the Consumer Financial
Protection Bureau (CFPB). The State
Liaison Committee was added to
FFIEC in 2006 as a voting member.
FRB............................... The U.S. Board of Governors of the
Federal Reserve System.
FTC............................... The U.S. Federal Trade Commission.
GIPSA............................. Grain Inspection, Packers and
Stockyards Administration (GIPSA)
of the U.S. Department of
Agriculture.
HMDA.............................. The Home Mortgage Disclosure Act.
HUD............................... The U.S. Department of Housing and
Urban Development.
LEP............................... Limited English Proficiency.
LGBT.............................. Lesbian, gay, bisexual and
transgender.
NCUA.............................. The National Credit Union
Administration.
OCC............................... The U.S. Office of the Comptroller
of the Currency.
SBA............................... Small Business Administration.
SEC............................... U.S. Securities and Exchange
Commission.
------------------------------------------------------------------------
[2]. Regulatory Requirements
This Fair Lending Report of the Consumer Financial Protection
Bureau summarizes existing requirements under the law, and summarizes
findings made in the course of exercising the Bureau's supervisory and
enforcement authority. It is therefore exempt from notice and comment
rulemaking requirements under the Administrative Procedure Act pursuant
to 5 U.S.C. 553(b). Because no notice of proposed rulemaking is
required, the Regulatory Flexibility Act does not require an initial or
final regulatory flexibility analysis. 5 U.S.C. 603(a), 604(a). The
Bureau has determined that this Fair Lending Report does not impose any
new or revise any existing recordkeeping, reporting, or disclosure
requirements on covered entities or members of the public that would be
collections of information requiring OMB approval under the Paperwork
Reduction Act, 44 U.S.C. 3501, et seq.
Dated: May 24, 2017.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2017-11318 Filed 5-31-17; 8:45 am]
BILLING CODE 4810-AM-P