Fair Lending Report of the Bureau of Consumer Financial Protection, December 2018, 2824-2833 [2019-01568]
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Federal Register / Vol. 84, No. 27 / Friday, February 8, 2019 / Notices
Agency Land And Maritime
Patricia Briscoe,
Deputy Director, Business Operations,
(Pricing and Information Management).
[FR Doc. 2019–01650 Filed 2–7–19; 8:45 am]
BILLING CODE 6353–01–P
BUREAU OF CONSUMER FINANCIAL
PROTECTION
Fair Lending Report of the Bureau of
Consumer Financial Protection,
December 2018
Bureau of Consumer Financial
Protection.
ACTION: Fair Lending Report of the
Bureau of Consumer Financial
Protection.
AGENCY:
The Bureau of Consumer
Financial Protection (Bureau) is issuing
its sixth Fair Lending Report of the
Bureau of Consumer Financial
Protection (Fair Lending Report) to
Congress. The Bureau is committed to
ensuring fair access to credit and
eliminating discriminatory lending
practices. This report describes the
Bureau’s fair lending activities in
prioritization, supervision, enforcement,
rulemaking, interagency coordination,
and outreach for calendar year 2017.
DATES: The Bureau released the
December 2018 Fair Lending Report on
its website on December 4, 2018.
FOR FURTHER INFORMATION CONTACT:
Anita Visser, Senior Policy Advisor to
the Director of Fair Lending, Office of
Fair Lending and Equal Opportunity, at
1–855–411–2372. If you require this
document in an alternative electronic
format, please contact CFPB_
Accessibility@cfpb.gov.
SUPPLEMENTARY INFORMATION:
SUMMARY:
1. Fair Lending Report of the Bureau of
Consumer Financial Protection,
December 2018
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Message from Mick Mulvaney, Acting
Director
This Fair Lending Report of the
Bureau of Consumer Financial
Protection describes the Bureau’s fair
lending activities for 2017, consistent
with its statutory mandate to ensure that
consumers are protected from
discrimination (12 U.S.C. 5511(b)(2)).
These efforts included:
• Providing oversight and
enforcement of Federal laws intended to
ensure the fair, equitable, and
nondiscriminatory access to credit for
both individuals and communities that
are enforced by the Bureau, including
the Equal Credit Opportunity Act
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(ECOA) 1 and the Home Mortgage
Disclosure Act (HMDA); 2
• Coordinating fair lending efforts of
the Bureau with other Federal agencies
and State regulators, as appropriate, to
promote consistent, efficient, and
effective enforcement of Federal fair
lending laws; and
• Working with private industry, fair
lending, civil rights, consumer and
community advocates on the promotion
of fair lending compliance and
education.
This report fulfills the Bureau’s
statutory responsibility to, among other
things, report annually to Congress on
public enforcement actions taken by
other agencies with administrative
enforcement responsibilities under
ECOA, and assessments of the extent to
which compliance with ECOA has been
achieved (15 U.S.C. 1691f). It also
fulfills the statutory requirement that
the Bureau, in consultation with HUD,
report annually on the utility of
HMDA’s requirement that covered
lenders itemize certain mortgage loan
data (12 U.S.C. 2807).
Sincerely,
Mick Mulvaney,
Message from Patrice Alexander Ficklin
Director, Office of Fair Lending and Equal
Opportunity.
In 2017, the Office of Fair Lending
and Equal Opportunity completed its
sixth full year of stewardship over the
Bureau’s efforts to fulfill its fair lending
mandate. 2017 was distinguished as a
year in which the Office continued to
focus on promoting fair, equitable and
nondiscriminatory access to credit in
mortgage lending, deepened its
supervisory work in servicing and small
business lending, and embarked on new
efforts to encourage innovation in
expanding credit access.
Mortgage lending remained a priority
for the Bureau’s fair lending supervisory
and enforcement activity, focusing on
redlining, underwriting, pricing,
steering, servicing and HMDA data
integrity. The Bureau announced a
significant HMDA enforcement action in
2017, reinforcing the importance of the
legal requirement that covered mortgage
lenders must report accurate data about
mortgage transactions. HMDA data is a
critical component of the effective
enforcement of fair lending laws.
Beyond mortgages, we know that
other lending markets play a vital role
in allowing consumers to fully
participate as stakeholders in our
economy, strengthening our
communities, and expanding
U.S.C. 1691 et seq.
2 12 U.S.C. 2801 et seq.
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Sincerely,
Patrice Alexander Ficklin
Executive Summary
The Dodd-Frank Wall Street Reform
and Consumer Protection Act (DoddFrank or Dodd-Frank Act) 4 established
the Office of Fair Lending and Equal
Opportunity (the Office of Fair Lending)
within the Bureau, and vested it with
such powers and duties as the Bureau’s
Director may delegate to it, including:
(A) Providing oversight and
enforcement of Federal laws intended to
ensure the fair, equitable, and
nondiscriminatory access to credit for
both individuals and communities that
are enforced by the Bureau, including
the Equal Credit Opportunity Act and
the Home Mortgage Disclosure Act;
(B) Coordinating fair lending efforts of
the Bureau with other Federal agencies
and State regulators, as appropriate, to
promote consistent, efficient, and
3 See Dodd-Frank Act section 1013(c)(2)(D)
(codified at 12 U.S.C. 5493(c)(2)(D)).
4 Public Law 111–203, 124 Stat. 1376 (2010).
1 15
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opportunities to build wealth for
businesses and consumers alike. In
2017, the Bureau announced an
enforcement action addressing
discrimination in the terms and
conditions of credit cards, and
conducted significant fair lending
supervisory activity in student loan
servicing and small business lending.
The Office continued to partner with
colleagues across the Bureau in outreach
to support innovation that promotes
‘‘fair, equitable, and nondiscriminatory
access to credit for both individuals and
communities,’’ culminating in the
Bureau’s issuance of its first no-action
letter (NAL) to Upstart Network, Inc., a
company that uses alternative data in
making credit and pricing decisions. I
led the Bureau’s engagement with
Upstart, in furtherance of our interest in
exploring methods of achieving fair
lending compliance in conjunction with
the use of alternative data and the
potential benefits of such data in
expanding credit access.
As 2017 drew to a close, the Office
welcomed Acting Director Mick
Mulvaney, and began work to
implement his commitment to enforce
the fair lending laws under the Bureau’s
jurisdiction.
I am proud of the Office’s work not
only in 2017, but also throughout its
history in fulfilling its Dodd-Frank
mandate to protect America’s
consumers from lending discrimination
and promote credit access. To that end,
I am excited to share our progress with
this, our sixth, Fair Lending Report.3
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effective enforcement of Federal fair
lending laws;
(C) Working with private industry,
fair lending, civil rights, consumer and
community advocates on the promotion
of fair lending compliance and
education; and
(D) Providing annual reports to
Congress on the efforts of the Bureau to
fulfill its fair lending mandate.5
The law also requires the Bureau to
file an annual report to Congress
describing the administration of its
functions under the Equal Credit
Opportunity Act (ECOA), summarizing
public enforcement actions taken by
other agencies with administrative
enforcement responsibilities under
ECOA, and providing an assessment of
the extent to which compliance with
ECOA has been achieved.6 In addition,
the law requires the Bureau, in
consultation with U.S. Department of
Housing and Urban Development
(HUD), to report annually on the utility
of the Home Mortgage Disclosure Act’s
(HMDA) requirement that covered
lenders itemize certain mortgage loan
data.7 This report to Congress from the
Office of Fair Lending is intended to
fulfill those requirements and report on
the Bureau’s efforts to fulfill its fair
lending mandate during calendar year
2017.8
1. Interagency Reporting on ECOA and
HMDA
The law requires the Bureau to file a
report to Congress annually describing
the administration of its functions under
ECOA, summarizing public enforcement
actions taken by other agencies with
administrative enforcement
responsibilities under ECOA, and
providing an assessment of the extent to
which compliance with ECOA has been
achieved.9 In addition, the Bureau’s
annual HMDA reporting requirement
calls for the Bureau, in consultation
with HUD, to report annually on the
utility of HMDA’s requirement that
covered lenders itemize certain
mortgage loan data.10
1.1 ECOA 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.
1.1.1
Public Enforcement Actions
In addition to the Bureau, the
agencies charged with administrative
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enforcement of ECOA under section 704
include: The Federal Deposit Insurance
Corporation (FDIC), the Federal Reserve
Board (FRB), the National Credit Union
Administration (NCUA), and the Office
of the Comptroller of the Currency
(OCC), (collectively, the Federal
Financial Institutions Examination
Council (FFIEC) agencies); 11
Agricultural Marketing Service (AMS) of
the U.S. Department of Agriculture
(USDA),12 the Department of
Transportation (DOT), the Farm Credit
Administration (FCA), the Federal
Trade Commission (FTC), the Securities
and Exchange Commission (SEC), and
the Small Business Administration
(SBA).13
In 2017, the Bureau brought one
public enforcement action for violations
of ECOA, and the other agencies
reported that they brought no public
enforcement actions related to ECOA in
2017.
1.1.2 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:
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TABLE 1—REGULATION B VIOLATIONS CITED BY FFIEC AGENCIES: 2017
FFIEC Agencies reporting
Regulation B violations: 2017
The Bureau, FDIC, FRB, NCUA, OCC .....
12 CFR 1002.4(a): Discrimination on a prohibited basis in a credit transaction.
12 CFR 1002.5(b): Improperly inquiring about the race, color, religion, national origin, or sex of an
applicant or any other person in connection with a credit transaction.
12 CFR 1002.7(d)(1), (d)(6): Improperly requiring the signature of an applicant’s spouse or other person if the applicant qualifies under the creditor’s standards of creditworthiness for the amount and
terms of the credit requested; improperly imposing requirements upon an additional party that the
creditor is prohibited from imposing upon an applicant.
12 CFR 1002.9(a)(1), (a)(1)(i), (a)(2), (b), (b)(2), (c)(1)(i): 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 appropriate notice to the applicant 30 days
after taking adverse action on an incomplete application; failure to provide sufficient information in
an adverse action notification, including the specific reasons for the action taken.
12 CFR 1002.12(b)(1): Failure to preserve records of actions taken on an application or of incompleteness.
12 CFR 1002.13(a)(1)(i), (b): Failure to request information on an application regarding an applicant’s ethnicity, race, sex, marital status, and age, or note, to the extent possible, the ethnicity,
race, and sex of an applicant on the basis of visual observation or surname if not provided by the
applicant.
12 CFR 1002.14(a), (a)(2): 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 copy of an appraisal report upon an applicant’s written request.
5 Dodd-Frank Act section 1013(c)(2)(A), (B) and
(C) (codified at 12 U.S.C. 5493(c)(2)(A), (B), and
(C)).
6 15 U.S.C. 1691f.
7 12 U.S.C. 2807.
8 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)).
9 15 U.S.C. 1691f.
10 12 U.S.C. 2807.
11 The FFIEC is a ‘‘formal interagency body
empowered to prescribe uniform principles,
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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 April 5, 2018). 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 Bureau
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of Consumer Financial Protection (Bureau). The
State Liaison Committee was added to FFIEC in
2006 as a voting member.
12 The Grain Inspection, Packers and Stockyards
Administration (GIPSA) was eliminated as a standalone agency within USDA in 2017. The functions
previously performed by GIPSA have been
incorporated into the Agricultural Marketing
Service (AMS), and ECOA reporting now comes
from the Packers and Stockyards Division, Fair
Trade Practices Program, AMS.
13 15 U.S.C. 1691c.
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TABLE 2—REGULATION B VIOLATIONS CITED BY OTHER ECOA AGENCIES: 2017
Other ECOA agencies
Regulation B violations: 2017
FCA ...........................................................
12 CFR 1002.9(a)(1)(i): 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.
12 CFR 1002.13: Failure to request and collect information for monitoring purposes.
The AMS, the SEC, and the SBA
reported that they received no
complaints based on ECOA or
Regulation B in 2017. In 2017, 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.
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1.2 Referrals to the Department of
Justice
In 2017, the FFIEC agencies including
the Bureau, referred a total of 11 ECOA
matters involving discrimination in
violation of ECOA to the Department of
Justice (DOJ or Justice Department). The
FDIC referred four matters to the DOJ
involving discrimination in credit
transactions on the prohibited bases of
age, marital status, sex, and national
origin. The FRB referred three matters to
the DOJ involving discrimination in
credit transactions on the prohibited
basis of marital status. The NCUA
referred two matters to the DOJ
involving discrimination in credit
transactions on the prohibited bases of
marital status, receipt of public
assistance income, and sex. The Bureau
referred two matters to the DOJ
involving discrimination in mortgage
servicing on the prohibited basis of the
receipt of public assistance income, and
discrimination in credit card account
management, installment lending, and
mortgage servicing on the prohibited
bases of national origin and race.
1.3 Reporting on the Home Mortgage
Disclosure Act
The Bureau’s annual HMDA reporting
requirement calls for the Bureau, in
consultation with 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.14 The Bureau, in
consultation with HUD, finds that
itemization and tabulation of these data
further the purposes of HMDA. For
more information on HMDA and its
implementing regulation, Regulation C
14 See
12 U.S.C. 2807.
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with regard to guidance and rulemaking,
please see the Rulemaking section of
this report (Section 5).15
2. The Bureau’s Fair Lending
Prioritization
2.1 Risk-Based Prioritization
Because Congress charged the Bureau
with responsibility for overseeing many
lenders and products, the Office uses a
risk-based approach to prioritize
supervisory examinations and
enforcement activity, to help ensure
focus on areas that present substantial
risk of credit discrimination for
consumers.
As part of the prioritization process,
the Bureau identifies 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, that
information is incorporated into the
prioritization process to determine the
type and extent of attention required to
address those risks. For instance, our
monitoring highlighted potential
steering risks in student loan servicing,
which resulted in the prioritization of
this market in our supervisory work in
2017.
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 Fair Lending has evaluated
these inputs to prioritize institutions,
products, and markets based on an
assessment of fair lending risk posed to
consumers, it considers how best to
address those risks as part of its annual
strategic planning process. Potential
actions include scheduling an
institution for a supervisory review,
opening an enforcement investigation
where appropriate, conducting further
research, policy development, or
outreach. Once this strategic planning
15 For more information on recent developments
in HMDA and Regulation C, see: https://
www.consumerfinance.gov/about-us/newsroom/
bureau-consumer-financial-protection-issuesstatement-implementation-economic-growthregulatory-relief-and-consumer-protection-actamendments-home-mortgage-disclosure-act/.
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process is complete, we regularly
coordinate with other regulators so we
can inform each other’s work,
complement each other’s efforts where
appropriate, and reduce burden on
subject institutions.
Risk-based prioritization is an
ongoing process, and the Bureau
continues to receive and evaluate
relevant information even after
priorities are identified. Such
information may include new tips and
leads about specific institutions,
consumer complaints, additional risks
identified in current supervisory and
enforcement activities, and compliance
issues self-identified by institutions. In
determining how best to address this
additional information, 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 selfidentified and/or self-reported to the
Bureau. It also takes account of welldeveloped fair lending compliance
management systems 16 and other
responsible conduct as set forth in CFPB
Bulletin 2013–06, Responsible Business
Conduct: Self-Policing, Self-Reporting,
Remediation, and Cooperation.17
2.2 Fair Lending Priorities
As a result of its annual risk-based
prioritization analyses, in 2017 the
Bureau focused on: 18
• Redlining: Whether lenders
intentionally discouraged prospective
applicants in minority neighborhoods
from applying for credit.
• Mortgage and Student Loan
Servicing: Whether some borrowers who
were behind on their mortgage or
student loan payments may have been
negatively impacted in their ability to
16 The Bureau previously has identified common
features of a well-developed fair lending
compliance management system: 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.
17 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.
18 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/.
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work out a new solution with the
servicer because of their race, ethnicity,
sex, or age.
• Small Business Lending: Whether
institutions are complying with the
Congressional mandate to not
discriminate on a prohibited basis in
small business lending. Focus in this
area includes improving Bureau
understanding of: Small business
lending credit processes; existing data
collection processes; and the nature,
extent, and management of fair lending
risk in small business lending. Congress
required the Bureau to promulgate a
regulation governing small business
loan data collection in order to
‘‘facilitate enforcement of fair lending
laws and enable communities,
governmental entities, and creditors to
identify business and community
development needs and opportunities of
women-owned, minority-owned, and
small businesses.’’ 19 Small business
lending supervisory activity has helped
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 legal authority.
3. Fair Lending Supervision
The Bureau’s Fair Lending
Supervision program assesses
compliance with ECOA and HMDA at
banks and nonbanks over which the
Bureau has supervisory authority.
Supervision activities in 2017 ranged
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 conducted three types of fair
lending reviews: ECOA baseline
reviews, ECOA targeted reviews, and
HMDA data integrity reviews.
As a general matter, if such a review
finds that an institution’s fair lending
compliance is inadequate, the Bureau
communicates its supervisory
expectations to the institution to help
the institution establish fair lending
compliance programs commensurate
with the size and complexity of the
institution and its lines of business.20
Institutions may provide remediation
19 See Dodd-Frank Act, Public Law 111–203, sec.
1071, 704B(a).
20 For recent updates to the types of supervisory
communications, see https://s3.amazonaws.com/
files.consumerfinance.gov/f/documents/bcfp_
bulletin-2018-01_changes-to-supervisorycommunications.pdf.
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and restitution to consumers in
response to violations of fair lending
laws identified in the review, and the
Bureau may pursue other appropriate
relief. The Bureau also refers matters 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.21 The Bureau also may refer
other potential ECOA violations to the
Justice Department.22
3.1 Fair Lending Supervisory
Observations
The Bureau published results of
certain 2017 supervisory exams in
Supervisory Highlights. Those findings
are also summarized below.
3.1.1
Update to Proxy Methodology
The Spring 2017 edition of
Supervisory Highlights,23 published in
April 2017, discussed updates to the
Bayesian Improved Surname Geocoding
(BISG) proxy methodology for race and
ethnicity,24 which relies in part on
publically available information from
the Census. In December 2016, the U.S.
Census Bureau released a list of the
most frequently-occurring surnames
based on the most recent census, which
includes values for total counts and race
and ethnicity shares associated with
each surname. In total, the list provides
information on the 162,253 surnames
that appear at least 100 times in the
most recent census, covering
approximately 90% of the population.25
In April 2017, examination teams began
relying on an updated proxy
methodology that reflected the newly
available surname data from the Census
Bureau.26
21 15
U.S.C. 1691e(g).
22 Id.
23 Consumer Financial Protection Bureau,
Supervisory Highlights Spring 2017 at 14–15 (April
26, 2017), https://www.consumerfinance.gov/
documents/4608/201704_cfpb_SupervisoryHighlights_Issue-15.pdf.
24 For more information on the Bureau’s use of
BISG in 2017 and previously, see Consumer
Financial Protection Bureau, Supervisory Highlights
Summer 2014 at 10–13 (September 17, 2014),
https://files.consumerfinance.gov/f/201409_cfpb_
supervisory-highlights_auto-lending_summer2014.pdf.
25 The surname data are available on the Census
Bureau’s website, see Frequently Occurring
Surnames from the 2010 Census (last revised
December 27, 2016), https://www.census.gov/
topics/population/genealogy/data/2010_
surnames.html.
26 The new surname list; statistical software code,
written in Stata; and other publicly available data
used to build the BISG proxy are available at:
https://github.com/cfpb/proxy-methodology.
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3.1.2 Mortgage Servicing
The Summer 2017 edition of
Supervisory Highlights 27 reported on
the Bureau’s fair lending work in
mortgage servicing. As part of its fair
lending work, the Bureau seeks to
ensure that creditors do not
discriminate on any prohibited bases.
Mortgage servicing, and specifically
default servicing, may introduce fair
lending risks because of the complexity
of certain processes, the range of default
servicing options, and the discretion
that can sometimes exist in evaluating
and selecting among available default
servicing options.
In mortgage servicing, the Bureau’s
supervisory work has included use of
the Mortgage Servicing Exam
Procedures and the ECOA Baseline
Modules, both of which are part of the
Bureau’s publically-available
Supervision and Examination Manual.
Bureau examination teams use these
procedures to conduct ECOA Baseline
Reviews, which evaluate institutions’
compliance management systems
(CMS), or ECOA Targeted Reviews,
which are more in-depth reviews of
activities that may pose heightened fair
lending risks to consumers. These exam
procedures contain questions about,
among other things, the fair lending
training of servicing staff, fair lending
monitoring of servicing, and servicing of
consumers with limited English
proficiency.
In one or more ECOA targeted reviews
of mortgage servicers, Bureau examiners
found weaknesses in fair lending CMS.
In general, examiners found deficiencies
in oversight by board and senior
management, monitoring and corrective
action processes, compliance audits,
and oversight of third-party service
providers.
In one or more examinations, data
quality issues, which were related to a
lack of complete and accurate loan
servicing records, made certain fair
lending analyses difficult or impossible
to perform. Examiners attributed these
data quality issues to significant
weaknesses in CMS-related policies,
procedures, and service provider
oversight.
Separately, fair lending analysis at
one or more mortgage servicers was
affected by a lack of readily-accessible
information concerning a borrower’s
ethnicity, race, and sex information that
had been collected pursuant to
Regulation C and transferred to the
27 Consumer Financial Protection Bureau,
Supervisory Highlights Summer 2017 at 32–33
(September 12, 2017), https://
www.consumerfinance.gov/documents/5386/
201709_cfpb_Supervisory-Highlights_Issue-16.pdf.
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servicer. One or more mortgage servicers
acknowledged the importance of
retaining in readily-accessible format—
for the express purpose of performing
future fair lending analyses—ethnicity,
race, and sex data that it had received
in the borrower’s origination file.
4. 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.28 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.
4.1 Fair Lending Public Enforcement
Actions
4.1.1
Mortgage
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Nationstar Mortgage LLC
On March 15, 2017, the Bureau
resolved an enforcement action against
Nationstar Mortgage LLC (Nationstar)
for violating HMDA by submitting
mortgage loan data for 2012 through
2014 containing substantial errors.
HMDA requires many mortgage lenders
to collect and report data about their
mortgage lending to appropriate Federal
agencies and make it available to the
public. The consent order requires
Nationstar to pay a $1.75 million
penalty to the Bureau’s Civil Penalty
Fund. The Nationstar action is the
largest HMDA civil penalty imposed to
date by the Bureau, which stems from
Nationstar’s market size, the substantial
magnitude of its errors, and its history
of previous violations.
In addition to paying the civil
penalty, Nationstar must take the
necessary steps to improve its
compliance management and prevent
28 15
U.S.C. 1691e(g).
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future violations.29 Nationstar also must
review, correct, and make available its
corrected HMDA data from 2012–14.
Since the Bureau’s examination,
Nationstar has been taking steps to
improve its HMDA compliance
management system and increase the
accuracy of its HMDA reporting.
Nationstar, a nationwide nonbank
mortgage lender headquartered in
Coppell, Texas (now doing business as
Mr. Cooper), is a wholly-owned
subsidiary of Nationstar Mortgage
Holdings Inc. With nearly 3 million
customers, Nationstar Mortgage
Holdings is a major participant in the
mortgage servicing and origination
markets. According to 2014 data,
Nationstar was the ninth-largest HMDA
reporter by total mortgage originations,
the sixth largest by applications
received, and the thirteenth largest by
money lent. From 2010 to 2014,
Nationstar’s number of HMDA mortgage
loans increased by nearly 900 percent.
In its supervision process, the Bureau
found that Nationstar’s HMDA
compliance systems were deficient, and
not reasonably adapted to avoid the
identified errors. Specifically,
Nationstar failed to maintain detailed
HMDA data collection and validation
procedures, and failed to implement
adequate compliance procedures, even
after it knew was required to improve its
HMDA compliance. It also produced
HMDA data discrepancies by failing to
consistently define data among its
various lines of business. Nationstar has
a history of HMDA non-compliance. In
2011, the Commonwealth of
Massachusetts Division of Banks
reached a settlement with Nationstar to
address HMDA compliance deficiencies.
The samples reviewed by the Bureau
showed substantial error rates in three
consecutive reporting years, even after
the Massachusetts settlement was
reached. In the samples reviewed, the
Bureau found error rates of 13 percent
in 2012, 33 percent in 2013, and 21
percent in 2014.
4.1.2
Credit Cards
American Express Centurion Bank and
American Express Bank, FSB
On August 23, 2017, the Bureau took
action against American Express
Centurion Bank and American Express
Bank, FSB (collectively referred to as
American Express), for violating ECOA
by discriminating against consumers in
Puerto Rico, the U.S. Virgin Islands, and
29 Consent
Order, In the Matter of Nationstar
Mortgage LLC, File No. 2017–CFPB–0011 (Mar. 15,
2017), https://files.consumerfinance.gov/f/
documents/201703_cfpb_Nationstar-Mortgageconsent-order.pdf.
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other U.S. territories by providing them
with credit and charge card terms that
were inferior in many respects to those
available in the 50 U.S. states. American
Express also discriminated against
certain consumers with Spanishlanguage preferences by not providing
them certain charge card collection
offers that were provided to similarlysituated consumers without Spanishlanguage preferences. Over the course of
at least ten years, more than 200,000 of
these consumers were harmed by
American Express’s discriminatory
practices. American Express has paid
approximately $95 million in consumer
redress during the course of the
Bureau’s review and American
Express’s review, and the Bureau Order
requires it to pay at least another $1
million to fully compensate harmed
consumers.30
Beginning in 2013, American Express
self-reported to the Bureau differences
between terms associated with its
Puerto Rico and U.S. Virgin Islands
cards (collectively, Puerto Rico cards)
and its cards offered in the 50 U.S.
states (U.S. cards), as well as differences
with respect to certain consumers with
a Spanish-language preference. Through
the course of a supervisory review, the
Bureau concluded that, from at least
2005 to 2015, American Express’s
Puerto Rico cards had different, and
often worse, pricing, rebates,
promotional offers, underwriting,
customer and account management
services, and collections practices than
its U.S. cards. These differences
spanned the product lifecycle and
included: Charging higher fees and
interest rates and offering less
advantageous pricing on promotional
offers; imposing more stringent credit
score cutoffs and lower credit limits;
applying certain inferior servicing
policies; and requiring more money to
settle debt. The Bureau’s review found
that these differences constituted
discrimination on the prohibited bases
of race and national origin in violation
of ECOA.
Under the terms of the Bureau Order,
American Express must develop and
implement a comprehensive compliance
plan to ensure that it provides credit
and charge cards in a nondiscriminatory manner to consumers in
Puerto Rico, the U.S. territories, and
customers in collection who prefer
Spanish-language communications. The
compliance plan must include any
30 Consent Order, In the Matter of American
Express Centurion Bank and American Express
Bank, FSB, File No. 2017–CFPB–0016 (Aug. 23,
2017), https://s3.amazonaws.com/
files.consumerfinance.gov/f/documents/201708_
cfpb_american-express_content-order.pdf.
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necessary additional improvements to
its compliance management system;
compliance audit program; credit and
charge card business structure, policies,
and procedures; employee training
procedures; and complaints procedures.
During the Bureau’s review, American
Express provided monetary and nonmonetary relief to harmed consumers,
resulting in approximately $95 million
of remediation. The Bureau did not
assess penalties based on a number of
factors, including that American
Express self-reported the violations to
the Bureau, self-initiated remediation
for the harm done to affected
consumers, and fully cooperated with
the Bureau’s review and investigation.
4.2 Implementing Enforcement Orders
When an enforcement action is
resolved through a public enforcement
order, the Bureau (together with the
Justice Department, 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 complied with
the injunctive provisions of the order,
including implementing a
comprehensive fair lending compliance
management system. Throughout 2017,
the Bureau worked to implement and
oversee compliance with the pending
public enforcement orders that were
entered by Federal courts or issued by
the Bureau’s Director in prior years.
4.2.1
Settlement Administration
Settlement Administration
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Toyota Motor Credit Corporation
On December 29, 2017, participation
materials were mailed to potentially
eligible African-American and Asian
and Pacific Islander borrowers whom
Toyota Motor Credit overcharged for
their auto loans notifying them how to
participate in the settlement, resulting
from a 2016 enforcement action brought
by the Bureau and Justice Department
against Toyota for alleged
discrimination in auto lending.31
Provident Funding Associates
On November 2, 2017, the Bureau
announced the mailing of remuneration
checks to consumers, totaling $9
million, plus accrued interest, to eligible
borrowers resulting from a 2015
31 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.
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enforcement action brought by the
Bureau and Justice Department against
Provident for alleged discrimination in
mortgage lending.32
American Honda Finance Corporation
On October 2, 2017, participating
African-American, Hispanic, and Asian
and/or Pacific Islander borrowers,
whom Honda Finance overcharged for
their auto loans, were mailed checks
totaling $24 million, plus accrued
interest, resulting from a 2015
enforcement action brought by the
Bureau and Justice Department against
Honda for alleged discrimination in
auto lending.33
Ally Financial Inc. and Ally Bank
In 2017, Ally Financial Inc. and Ally
Bank completed their payments totaling
$48.8 million to consumers whom Ally
determined were both eligible and
overcharged on auto loans booked
during 2016 pursuant to the December
2013 enforcement actions and consent
orders with the Justice Department and
the Bureau.
4.3 ECOA Referrals to the Department
of Justice
The Bureau must refer to the Justice
Department 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.34
The Bureau also may refer other
potential ECOA violations to the DOJ.35
In 2017, the Bureau referred two matters
with ECOA violations to the Justice
Department. In both of the matters, the
DOJ deferred to the Bureau’s handling of
the matters and declined to open its
own investigation. The Bureau’s
referrals to the DOJ in 2017 involved
discrimination in mortgage servicing on
the basis of the receipt of public
assistance income, and discrimination
in credit card account management,
installment lending, and mortgage
servicing on the bases of national origin
and race.
4.4 Pending Fair Lending
Investigations
In 2017, the Bureau had a number of
ongoing fair lending investigations of a
32 Patrice Alexander Ficklin, African-American
and Hispanic borrowers harmed by Provident will
receive $9 million in compensation, Consumer
Financial Protection Bureau (Nov. 2, 2017), https://
www.consumerfinance.gov/about-us/blog/africanamerican-and-hispanic-borrowers-harmedprovident-will-receive-9-million-compensation/.
33 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.
34 15 U.S.C. 1691e(g).
35 Id.
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number of institutions involving a
variety of consumer financial products.
Consistent with the Bureau’s risk-based
priorities, 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 2017, the Bureau had a number
of pending investigations in this and
other areas.
5. Guidance and Rulemaking
5.1
HMDA and Regulation C
Consistent with the Bureau’s
obligation to work with private industry
to ‘‘promot[e] fair lending . . .
compliance,’’ in 2017 the Bureau
published several regulatory and
guidance documents related to HMDA
and Regulation C, as reported below.36
On August 22, 2017, the Bureau,
together with the other member agencies
of the FFIEC, announced new FFIEC
HMDA Examiner Transaction Testing
Guidelines (Guidelines) for all financial
institutions that report HMDA data.37
The Guidelines will apply to the
examination of HMDA data collected
beginning in 2018, and reported
beginning in 2019.
The Bureau issued a proposed rule in
April 2017 38 seeking comment on
amendments to certain provisions of the
2015 HMDA Final Rule to make
technical corrections and to clarify
certain requirements under Regulation
C, and issued a second proposal in July
2017 39 to increase temporarily the
institutional and transactional coverage
thresholds for open-end lines of credit.
On August 24, 2017, after reviewing the
36 See Dodd-Frank Act section 1013(c)(2)(C),
Public Law 111–203, 124 Stat. 1376 (2010) (codified
at 12 U.S.C. 5493(c)(2)(C)).
37 FFIEC HMDA Examiner Transaction Testing
Guidelines, https://s3.amazonaws.com/
files.consumerfinance.gov/f/documents/201708_
cfpb_ffiec-hmda-examiner-transaction-testingguidelines.pdf.
38 Technical Corrections and Clarifying
Amendments to the Home Mortgage Disclosure
(Regulation C) October 2015 Final Rule, https://
www.consumerfinance.gov/policy-compliance/
rulemaking/rules-under-development/technicalcorrections-and-clarifying-amendments-homemortgage-disclosure-october-2015-final-rule/.
39 Home Mortgage Disclosure (Regulation C),
Temporary Increase in Institutional and
Transactional Coverage Thresholds for Open-End
Lines of Credit, https://www.consumerfinance.gov/
policy-compliance/rulemaking/rules-underdevelopment/home-mortgage-disclosure-regulationc-temporary-increase-institutional-andtransactional-coverage-thresholds-open-end-linescredit/.
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comments received, the Bureau issued a
final rule amending Regulation C.40
On September 20, 2017, the Bureau
issued proposed policy guidance
regarding the data the Bureau may make
available to the public beginning in
2019 from the HMDA data collected by
financial institutions in or after 2018.
The proposal described the
modifications that the Bureau intends to
apply to the loan-level HMDA data to
protect applicant and borrower privacy,
and it sought comment on those
proposals.41
In December 2017, the FFIEC agencies
issued public statements on HMDA
implementation announcing that the
Bureau does not intend to require data
resubmission unless data errors are
material or assess penalties with respect
to errors in data collected in 2018 and
reported in 2019 under HMDA. The
Bureau’s statement also announced that
the Bureau intends to engage in a
rulemaking to reconsider various
aspects of the 2015 HMDA Rule such as
the institutional and transactional
coverage tests and the rule’s
discretionary data points.42
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5.1.1 HMDA Announcement
On December 21, 2017, the Bureau
issued the following public statement
regarding HMDA implementation:
Recognizing the impending January 1,
2018 effective date of the Bureau’s
amendments to Regulation C and the
significant systems and operational
challenges needed to adjust to the
revised regulation, for HMDA data
collected in 2018 and reported in 2019
the Bureau does not intend to require
data resubmission unless data errors are
material. Furthermore, the Bureau does
not intend to assess penalties with
respect to errors in data collected in
2018 and reported in 2019. Collection
and submission of the 2018 HMDA data
will provide financial institutions an
opportunity to identify any gaps in their
implementation of amended Regulation
C and make improvements in their
HMDA compliance management
systems for future years. Any
examinations of 2018 HMDA data will
be diagnostic to help institutions
40 Consumer Financial Protection Bureau, Home
Mortgage Disclosure (Regulation C) Final Rule,
https://www.consumerfinance.gov/policycompliance/rulemaking/final-rules/regulation-chome-mortgage-disclosure-act/.
41 Disclosure of Loan-Level HMDA Data, https://
files.consumerfinance.gov/f/documents/201709_
cfpb_hmda-disclosure-policy-guidance.pdf.
42 Consumer Financial Protection Bureau, CFPB
Issues Public Statement On Home Mortgage
Disclosure Act Compliance, (December 21, 2017),
https://www.consumerfinance.gov/about-us/
newsroom/cfpb-issues-public-statement-homemortgage-disclosure-act-compliance/.
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identify compliance weaknesses and
will credit good faith compliance
efforts. The Bureau intends to engage in
a rulemaking to reconsider various
aspects of the 2015 HMDA Rule such as
the institutional and transactional
coverage tests and the rule’s
discretionary data points.
For data collected in 2017, financial
institutions will submit their reports in
2018 in accordance with the current
Regulation C using the Bureau’s HMDA
Platform.43
5.2 ECOA and Regulation B
On March 24, 2017, the Bureau issued
a proposed rule seeking comment on
amendments to Regulation B providing
creditors additional flexibility in
complying with Regulation B in order to
facilitate compliance with Regulation C,
adding certain model forms and
removing others from Regulation B, and
making 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.44 After considering the
comments received, the Bureau issued a
final rule on September 20, 2017,
amending Regulation B.45
On November 20, 2017, the Bureau
issued an official approval pursuant to
section 706(e) of ECOA of the final
redesigned Uniform Residential Loan
Application that included a question
asking applicant language preference.46
Bureau staff determined that the final
redesigned URLA is in compliance with
Regulation B § 1002.5(b) through (d),
which provide rules regarding requests
for information.47
43 CFPB Issues Public Statement On Home
Mortgage Disclosure Act Compliance (December 21,
2017), https://www.consumerfinance.gov/about-us/
newsroom/cfpb-issues-public-statement-homemortgage-disclosure-act-compliance/.
44 Proposed Amendments to Equal Credit
Opportunity Act (Regulation B) Ethnicity and Race
Information Collection, https://s3.amazonaws.com/
files.consumerfinance.gov/f/documents/201703_
cfpb_NPRM-to-amend-Regulation-B.pdf.
45 Amendments to Equal Credit Opportunity Act
(Regulation B) Ethnicity and Race Information
Collection, https://www.consumerfinance.gov/
policy-compliance/rulemaking/final-rules/
amendments-equal-credit-opportunity-actregulation-b-ethnicity-and-race-informationcollection/.
46 Consumer Financial Protection Bureau, Final
Redesigned Uniform Residential Loan Application
Status under Regulation B, (Nov. 20, 2017), https://
s3.amazonaws.com/files.consumerfinance.gov/f/
documents/cfpb_urla-language-preferencequestion_bureau-official-approval_112017.pdf.
47 Regulation B § 1002.5(b) provides rules
concerning requests for information about race,
color, religion, national origin, or sex. Section
1002.5(c) provides rules concerning requests for
information about a spouse or former spouse.
Section 1002.5(d) provides rules concerning
requests for information regarding marital status;
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5.3 Small Business Data Collection
Section 1071 of the Dodd-Frank Act
amends ECOA to require financial
institutions to collect, report, and make
public certain information concerning
credit applications made by womenowned, minority-owned, and small
businesses. The amendments to ECOA
made by the Dodd-Frank Act require
that specific data be collected,
maintained, and reported, including but
not limited to the type of loan applied
for, the amount of credit applied for, the
type of action taken with regard to each
application, the census tract of the
principal place of business of the loan
applicant, and the race, sex, and
ethnicity of the principal owners of the
business. The Dodd-Frank Act also
provides authority for the Bureau to
require any additional data that the
Bureau determines would aid in
fulfilling the purposes of section 1071.
The Bureau issued a Request for
Information in 2017 seeking public
comment on, among other things, the
types of credit products offered and the
types of data currently collected by
small business lenders and the potential
complexity, cost of, and privacy issues
related to, small business lending data
collection. The information received
will help the Bureau determine how to
implement efficiently the Dodd-Frank
Act’s mandate regarding small business
lending data reporting, while
minimizing burdens on lenders.
5.4 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
Bureau 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.
On September 13, 2017, the Bureau
filed an amicus brief in Regions Bank v.
Legal Outsource PA, in the United
States Court of Appeals for the Eleventh
Circuit.48 This case involves claims
under ECOA against a bank that
allegedly required a business owner’s
spouse to guarantee a loan to the
business because of the fact that the
business owner was married. The
income from alimony, child support, or separate
maintenance; and childbearing or childrearing.
48 A copy of the Bureau’s amicus brief is available
on its amicus web page, https://
www.consumerfinance.gov/policy-compliance/
amicus/briefs/regions-bank-v-legal-outsource-pa/.
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Bureau filed an amicus brief arguing
that the district court erred in rejecting
claims by the business and various
guarantors of the loan. First, the brief
argued that a business entity can state
a claim for ECOA discrimination based
on its owner’s marital status. Second,
the brief argued that regulations issued
pursuant to ECOA reasonably interpret
the term ‘‘applicant’’ to encompass
guarantors such that non-borrowers who
are required to guarantee their spouse’s
loans can state claims for marital-status
discrimination.
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5.5 No-Action Letter
In 2017, the Bureau maintained a ‘‘No
Action Letter’’ policy 49 that allowed
companies to apply for a statement from
Bureau staff regarding an innovative
product or service that offers the
potential for significant consumer
benefit where there is substantial
uncertainty about whether or how
specific provisions of law would be
applied. A no-action letter issued
pursuant to that policy would advise a
recipient that staff has no present
intention to recommend initiation of an
enforcement or supervisory action with
respect to the specific matter.
On September 14, 2017, Bureau staff
issued its first no-action letter to Upstart
Network, Inc., a company that uses
alternative data in making credit and
pricing decisions.50 The Bureau’s noaction letter stated that Bureau staff had
no present intention to recommend
initiation of an enforcement or
supervisory action against Upstart with
regard to application of ECOA and
Regulation B. The letter applies to
Upstart’s automated model for
underwriting applicants for unsecured
non-revolving credit, as that model is
described in the company’s application
materials. The letter is specific to the
facts and circumstances of Upstart and
does not serve as an endorsement of the
use of any particular variables or
modeling techniques in credit
underwriting.
Upstart Network, Inc. is based in San
Carlos, California, and provides an
online lending platform for consumers
to apply for personal loans, including
credit card refinancing, student loans,
and debt consolidation. Upstart
evaluates consumer loan applications
using traditional factors such as credit
49 See proposed policy at: https://
www.consumerfinance.gov/policy-compliance/
notice-opportunities-comment/archive-closed/
proposed-policy-on-no-action-letters/.
50 CFPB Announces First No-Action Letter to
Upstart Network, Consumer Financial Protection
Bureau (Sept. 14, 2017), https://
www.consumerfinance.gov/about-us/newsroom/
cfpb-announces-first-no-action-letter-upstartnetwork/.
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score and income, as well as
incorporating non-traditional sources of
data such as education and employment
history.
Under the terms of the no-action
letter, Upstart will share certain
information with the Bureau regarding
the loan applications it receives, how it
decides which loans to approve, and
how it will mitigate risk to consumers,
as well as information on how its model
expands access to credit for
traditionally-underserved populations.
The Bureau expects that this
information will further its
understanding of the use of alternative
data in credit decision-making.
The Upstart no-action letter was part
of the Bureau’s continued exploration in
2017 of innovation through the use of
alternative data to help expand
responsible and fair credit access for
consumers who are credit invisible or
lack sufficient credit history to provide
them traditional access to credit
markets.
6. Interagency Coordination
6.1 Interagency Coordination and
Engagement
The Office of Fair Lending regularly
coordinates the Bureau’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.51 Through our
interagency engagement, we work to
address current and emerging fair
lending risks.
On August 22, 2017, the FFIEC
agencies announced new HMDA
Examiner Transaction Testing
Guidelines (Guidelines).52 The new
Guidelines were accompanied by the
release of a blog post by the Bureau.53
The Guidelines represent a joint effort
led by the Bureau, together with the
FDIC, the FRB, the NCUA, and the OCC
to provide—for the first time—uniform
guidelines across all Federal HMDA
supervisory agencies. This collaboration
began with the Bureau issuing a Request
51 Dodd-Frank Act section 1013(c)(2)(B) (codified
at 12 U.S.C. 5493(c)(2)(B)).
52 FFIEC HMDA Examiner Transaction Testing
Guidelines, https://s3.amazonaws.com/
files.consumerfinance.gov/f/documents/201708_
cfpb_ffiec-hmda-examiner-transaction-testingguidelines.pdf.
53 Tim Lambert & Eric Wang, Here’s what you
need to know about the new FFIEC HMDA
Examiner Transaction Testing Guidelines,
Consumer Financial Protection Bureau (Aug. 22,
2017), https://www.consumerfinance.gov/about-us/
blog/heres-what-you-need-know-about-new-ffiechmda-examiner-transaction-testing-guidelines/.
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for Information 54 and holding outreach
meetings in which the other supervisory
agencies participated. The agencies then
worked together to develop the
Guidelines.
The Bureau, 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 Bureau 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 constitute 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 Justice
Department and prudential regulators to
coordinate our fair lending work.
In 2017, the Bureau chaired the FFIEC
HMDA/Community Reinvestment Act
Data Collection Subcommittee, a
subcommittee of the FFIEC Task Force
on Consumer Compliance (Task Force),
that oversees FFIEC projects and
programs involving HMDA data
collection and dissemination, the
preparation of the annual FFIEC budget
for processing services, and the
development and implementation of
other related HMDA processing projects
as directed by the Task Force.
7. Outreach: Promoting Fair Lending
Compliance and Education
Pursuant to Dodd-Frank,55 the Office
of Fair Lending regularly engages in
outreach with industry, bar associations,
consumer advocates, civil rights
organizations, academia, and other
government agencies, to help educate
and inform our stakeholders about fair
lending as well as learn about emerging
trends or products that pose fair lending
risk. The Bureau is committed to
communicating directly with all
stakeholders on its policies, compliance
expectations, and fair lending priorities,
and to receiving valuable input on fair
54 Request for Info. Regarding Home Mortgage
Disclosure Act Resubmission Guidelines, 81 FR
1,405 (Jan. 12, 2016), https://www.gpo.gov/fdsys/
pkg/FR-2016-01-12/pdf/2016-00442.pdf.
55 Dodd-Frank Act section 1013(c)(2)(C) (codified
at 12 U.S.C. 5493(c)(2)(C)).
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lending issues. Outreach is
accomplished through issuance of
Reports to Congress, Interagency
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.
7.1
Blog Posts
The Bureau regularly uses its blog as
a tool to communicate effectively to
consumers and other stakeholders on
timely issues, emerging areas of
concern, Bureau initiatives, and more.
In 2017 we published five blog posts
related to fair lending topics including:
Providing consumers updated
information about a fair lending
enforcement action,56 announcing the
Bureau’s first no-action letter,57
announcing new guidelines on HMDA
examiner transaction testing,58 issuing
an official approval of the final
redesigned Uniform Residential Loan
Application,59 and noting the release of
the fair lending annual report on 2016
activities.60
The blog posts may be accessed at
www.consumerfinance.gov/blog.
7.2 Supervisory Highlights
Supervisory Highlights reports anchor
the Bureau’s efforts to communicate
about the Bureau’s supervisory activity.
More information about the topics
discussed this year in Supervisory
Highlights can be found in Section 3.1
of this Report. As with all Bureau
resources, all editions of Supervisory
Highlights are available on
www.consumerfinance.gov/reports.
7.3 Speaking Engagements &
Roundtables
Staff from the Bureau’s Office of Fair
Lending and Equal Opportunity
participated in a number of outreach
speaking events and roundtables
throughout 2017 to further the Bureau’s
mission of educating and informing
stakeholders about fair lending and
receiving input from stakeholders. In
these events, staff shared information on
fair lending priorities, emerging issues,
and heard feedback from stakeholders
on Bureau fair-lending work. Some
examples of the topics covered include
fair lending priorities, fair lending
modeling and governance, redlining,
HMDA, small business lending,
alternative data, and installment lending
contracts.
APPENDIX A: DEFINED TERMS
Term
Definition
AMS ..........................................................
Bureau .......................................................
CMS ..........................................................
CRA ...........................................................
Dodd-Frank Act .........................................
DOJ ...........................................................
DOT ...........................................................
ECOA ........................................................
FCA ...........................................................
FDIC ..........................................................
Federal Reserve Board .............................
FFIEC ........................................................
Agricultural Marketing Service of the U.S. Department of Agriculture.
The Bureau of Consumer Financial Protection.
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 Bureau of Consumer Financial Protection (BCFP). 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.
The National Credit Union Administration.
The U.S. Office of the Comptroller of the Currency.
Small Business Administration.
U.S. Securities and Exchange Commission.
U.S. Department of Agriculture.
FRB ...........................................................
FTC ...........................................................
GIPSA .......................................................
HMDA ........................................................
HUD ..........................................................
NCUA ........................................................
OCC ..........................................................
SBA ...........................................................
SEC ...........................................................
USDA ........................................................
[2]. Regulatory Requirements
amozie on DSK3GDR082PROD with NOTICES1
This Fair Lending Report of the
Bureau of Consumer Financial
Protection summarizes existing
56 Patrice Alexander Ficklin, African-American
and Hispanic borrowers harmed by Provident will
receive $9 million in compensation, Consumer
Financial Protection Bureau (Nov. 2, 2017), https://
www.consumerfinance.gov/about-us/blog/africanamerican-and-hispanic-borrowers-harmedprovident-will-receive-9-million-compensation/.
57 Patrice Alexander Ficklin and Dan Quan,
Supporting consumer-friendly innovation:
Announcing our first no-action letter, Consumer
Financial Protection Bureau (Sept. 14, 2017),
https://www.consumerfinance.gov/about-us/blog/
VerDate Sep<11>2014
17:18 Feb 07, 2019
Jkt 247001
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
supporting-consumer-friendly-innovationannouncing-our-first-no-action-letter/.
58 Tim Lambert & Eric Wang, Here’s what you
need to know about the new FFIEC HMDA
Examiner Transaction Testing Guidelines,
Consumer Financial Protection Bureau (Aug. 22,
2017), https://www.consumerfinance.gov/about-us/
blog/heres-what-you-need-know-about-new-ffiechmda-examiner-transaction-testing-guidelines/.
59 J. Frank Vespa-Papaleo, Identification of
language preference on the Uniform Residential
Loan Application, Consumer Financial Protection
Bureau (Nov. 20, 2017), https://
www.consumerfinance.gov/about-us/blog/
identification-language-preference-uniformresidential-loan-application/.
60 Patrice Alexander Ficklin, Safeguarding
against credit discrimination: 2016 Fair Lending
Report (April 14, 2017), https://
www.consumerfinance.gov/about-us/blog/
safeguarding-against-credit-discrimination-2016fair-lending-report/.
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Federal Register / Vol. 84, No. 27 / Friday, February 8, 2019 / Notices
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: February 1, 2019.
Kathleen L. Kraninger,
Director, Bureau of Consumer Financial
Protection.
COMMUNICATIONS,’’ filed May 18,
2011, and issued January 5, 2016.
The Department of the Air Force may
grant the prospective license unless a
timely objection is received that
sufficiently shows the grant of the
license would be inconsistent with the
Bayh-Dole Act or implementing
regulations. A competing application for
a patent license agreement, completed
in compliance with 35 U.S.C. 209; 37
CFR 404.8 and received by the Air Force
within the period for timely objections,
will be treated as an objection and may
be considered as an alternative to the
proposed license.
[FR Doc. 2019–01568 Filed 2–7–19; 8:45 am]
Henry Williams,
Acting Air Force Federal Register Liaison
Officer.
BILLING CODE 4810–AM–P
[FR Doc. 2019–01590 Filed 2–7–19; 8:45 am]
BILLING CODE 5001–10–P
DEPARTMENT OF DEFENSE
DEPARTMENT OF DEFENSE
Department of the Air Force
Department of the Army
Notice of Intent To Grant an Exclusive
Patent License
Department of the Air Force,
Department of Defense.
ACTION: Notice of Intent.
Proposed Collection; Comment
Request
Pursuant to the Bayh-Dole Act
and implementing regulations, the
Department of the Air Force hereby
gives notice of its intent to grant an
exclusive patent license agreement to
VyrticalXpress LLC, a corporation of the
State of Ohio, having a place of business
at 5200 Springfield Road, Suite 300,
Dayton, Ohio 45431.
DATES: Written objections must be filed
no later than fifteen (15) calendar days
after the date of publication of this
Notice.
ACTION:
AGENCY:
Submit written objections to
the Air Force Materiel Command Law
Office, AFMCLO/JAZ, 2240 B Street,
Room 260, Wright-Patterson AFB, OH
45433–7109; Facsimile: (937) 255–3733;
or Email: afmclo.jaz.tech@us.af.mil.
Include Docket No. ARH–190107B–PL
in the subject line of the message.
FOR FURTHER INFORMATION CONTACT: Air
Force Materiel Command Law Office,
AFMCLO/JAZ, 2240 B Street, Rm. 260,
Wright-Patterson AFB, OH 45433–7109;
Facsimile: (937) 255–3733; Email:
afmclo.jaz.tech@us.af.mil.
SUPPLEMENTARY INFORMATION: The
Department of the Air Force intends to
grant an exclusive patent license
agreement for the invention described
in:
—U.S. Patent No. 9,230,549, entitled,
‘‘MULTI-MODAL
ADDRESSES:
VerDate Sep<11>2014
17:18 Feb 07, 2019
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Department of the Army, DoD.
Information collection notice.
AGENCY:
SUMMARY:
amozie on DSK3GDR082PROD with NOTICES1
[Docket ID: USA–2019–HQ–0004]
In compliance with the
Paperwork Reduction Act of 1995, the
Department of the Army announces a
proposed public information collection
and seeks public comment on the
provisions thereof. Comments are
invited on: Whether the proposed
collection of information is necessary
for the proper performance of the
functions of the agency, including
whether the information shall have
practical utility; the accuracy of the
agency’s estimate of the burden of the
proposed information collection; ways
to enhance the quality, utility, and
clarity of the information to be
collected; and ways to minimize the
burden of the information collection on
respondents, including through the use
of automated collection techniques or
other forms of information technology.
DATES: Consideration will be given to all
comments received by April 9, 2019.
ADDRESSES: You may submit comments,
identified by docket number and title,
by any of the following methods:
Federal eRulemaking Portal: https://
www.regulations.gov. Follow the
instructions for submitting comments.
Mail: Department of Defense, Office of
the Chief Management Officer,
Directorate for Oversight and
Compliance, 4800 Mark Center Drive,
SUMMARY:
PO 00000
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Mailbox #24, Suite 08D09, Alexandria,
VA 22350–1700.
Instructions: All submissions received
must include the agency name, docket
number and title for this Federal
Register document. The general policy
for comments and other submissions
from members of the public is to make
these submissions available for public
viewing on the internet at https://
www.regulations.gov as they are
received without change, including any
personal identifiers or contact
information.
FOR FURTHER INFORMATION CONTACT:
To request more information on this
proposed information collection or to
obtain a copy of the proposal and
associated collection instruments,
please write to the Department of the
Army, Military Surface Deployment and
Distribution Command, 1 Soldier Way,
Scott AFB IL 62225–5006, ATTN: Mr.
J.D. Ranbarger, or call Department of the
Army Reports Clearance Officer at (703)
428–6440.
SUPPLEMENTARY INFORMATION:
Title; Associated Form; and OMB
Number: Department of Defense
Standard Tender of Freight Services;
SDDC Form 364–R; OMB Control
Number 0704–0261.
Needs and Uses: The information
derived from the DoD tenders on file
with the Military Surface Deployment
and Distribution Command (SDDC) is
used by SDDC subordinate commands
and DoD shippers to select the best
value carriers to transport surface freight
shipments. Freight carriers furnish
information in a uniform format so that
the Government can determine the cost
of transportation, accessorial, and
security services, and select the best
value carriers for 1.1 million Bill of
Lading shipments annually. The DoD
tender is the source document for the
General Services Administration postshipment audit of carrier freight bills.
Affected Public: Business or other forprofit.
Annual Burden Hours: 27,351.
Number of Respondents: 82,053.
Responses per Respondent: 1.
Annual Responses: 82,053.
Average Burden per Response: 20
minutes.
Frequency: On occasion.
The DoD tender format was developed
to take advantage of improved
information collection technology and
to connect with ongoing initiatives to
implement automated systems to file
tenders, select carriers, quote rates, and
audits. The disciplined data fields of the
tenders will facilitate the Electronic
Data Interchange of tender data between
carriers and SDDC, also between SDDC
E:\FR\FM\08FEN1.SGM
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]]>Agencies
[Federal Register Volume 84, Number 27 (Friday, February 8, 2019)]
[Notices]
[Pages 2824-2833]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-01568]
=======================================================================
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BUREAU OF CONSUMER FINANCIAL PROTECTION
Fair Lending Report of the Bureau of Consumer Financial
Protection, December 2018
AGENCY: Bureau of Consumer Financial Protection.
ACTION: Fair Lending Report of the Bureau of Consumer Financial
Protection.
-----------------------------------------------------------------------
SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is
issuing its sixth Fair Lending Report of the Bureau of Consumer
Financial Protection (Fair Lending Report) to Congress. The Bureau is
committed to ensuring fair access to credit and eliminating
discriminatory lending practices. This report describes the Bureau's
fair lending activities in prioritization, supervision, enforcement,
rulemaking, interagency coordination, and outreach for calendar year
2017.
DATES: The Bureau released the December 2018 Fair Lending Report on its
website on December 4, 2018.
FOR FURTHER INFORMATION CONTACT: Anita Visser, Senior Policy Advisor to
the Director of Fair Lending, Office of Fair Lending and Equal
Opportunity, at 1-855-411-2372. If you require this document in an
alternative electronic format, please contact
CFPB_Accessibility@cfpb.gov.
SUPPLEMENTARY INFORMATION:
1. Fair Lending Report of the Bureau of Consumer Financial Protection,
December 2018
Message from Mick Mulvaney, Acting Director
This Fair Lending Report of the Bureau of Consumer Financial
Protection describes the Bureau's fair lending activities for 2017,
consistent with its statutory mandate to ensure that consumers are
protected from discrimination (12 U.S.C. 5511(b)(2)). These efforts
included:
Providing oversight and enforcement of Federal laws
intended to ensure the fair, equitable, and nondiscriminatory access to
credit for both individuals and communities that are enforced by the
Bureau, including the Equal Credit Opportunity Act (ECOA) \1\ and the
Home Mortgage Disclosure Act (HMDA); \2\
---------------------------------------------------------------------------
\1\ 15 U.S.C. 1691 et seq.
\2\ 12 U.S.C. 2801 et seq.
---------------------------------------------------------------------------
Coordinating fair lending efforts of the Bureau with other
Federal agencies and State regulators, as appropriate, to promote
consistent, efficient, and effective enforcement of Federal fair
lending laws; and
Working with private industry, fair lending, civil rights,
consumer and community advocates on the promotion of fair lending
compliance and education.
This report fulfills the Bureau's statutory responsibility to,
among other things, report annually to Congress on public enforcement
actions taken by other agencies with administrative enforcement
responsibilities under ECOA, and assessments of the extent to which
compliance with ECOA has been achieved (15 U.S.C. 1691f). It also
fulfills the statutory requirement that the Bureau, in consultation
with HUD, report annually on the utility of HMDA's requirement that
covered lenders itemize certain mortgage loan data (12 U.S.C. 2807).
Sincerely,
Mick Mulvaney,
Message from Patrice Alexander Ficklin
Director, Office of Fair Lending and Equal Opportunity.
In 2017, the Office of Fair Lending and Equal Opportunity completed
its sixth full year of stewardship over the Bureau's efforts to fulfill
its fair lending mandate. 2017 was distinguished as a year in which the
Office continued to focus on promoting fair, equitable and
nondiscriminatory access to credit in mortgage lending, deepened its
supervisory work in servicing and small business lending, and embarked
on new efforts to encourage innovation in expanding credit access.
Mortgage lending remained a priority for the Bureau's fair lending
supervisory and enforcement activity, focusing on redlining,
underwriting, pricing, steering, servicing and HMDA data integrity. The
Bureau announced a significant HMDA enforcement action in 2017,
reinforcing the importance of the legal requirement that covered
mortgage lenders must report accurate data about mortgage transactions.
HMDA data is a critical component of the effective enforcement of fair
lending laws.
Beyond mortgages, we know that other lending markets play a vital
role in allowing consumers to fully participate as stakeholders in our
economy, strengthening our communities, and expanding opportunities to
build wealth for businesses and consumers alike. In 2017, the Bureau
announced an enforcement action addressing discrimination in the terms
and conditions of credit cards, and conducted significant fair lending
supervisory activity in student loan servicing and small business
lending.
The Office continued to partner with colleagues across the Bureau
in outreach to support innovation that promotes ``fair, equitable, and
nondiscriminatory access to credit for both individuals and
communities,'' culminating in the Bureau's issuance of its first no-
action letter (NAL) to Upstart Network, Inc., a company that uses
alternative data in making credit and pricing decisions. I led the
Bureau's engagement with Upstart, in furtherance of our interest in
exploring methods of achieving fair lending compliance in conjunction
with the use of alternative data and the potential benefits of such
data in expanding credit access.
As 2017 drew to a close, the Office welcomed Acting Director Mick
Mulvaney, and began work to implement his commitment to enforce the
fair lending laws under the Bureau's jurisdiction.
I am proud of the Office's work not only in 2017, but also
throughout its history in fulfilling its Dodd-Frank mandate to protect
America's consumers from lending discrimination and promote credit
access. To that end, I am excited to share our progress with this, our
sixth, Fair Lending Report.\3\
---------------------------------------------------------------------------
\3\ See Dodd-Frank Act section 1013(c)(2)(D) (codified at 12
U.S.C. 5493(c)(2)(D)).
---------------------------------------------------------------------------
Sincerely,
Patrice Alexander Ficklin
Executive Summary
The Dodd-Frank Wall Street Reform and Consumer Protection Act
(Dodd-Frank or Dodd-Frank Act) \4\ established the Office of Fair
Lending and Equal Opportunity (the Office of Fair Lending) within the
Bureau, and vested it with such powers and duties as the Bureau's
Director may delegate to it, including:
---------------------------------------------------------------------------
\4\ Public Law 111-203, 124 Stat. 1376 (2010).
---------------------------------------------------------------------------
(A) Providing oversight and enforcement of Federal laws intended to
ensure the fair, equitable, and nondiscriminatory access to credit for
both individuals and communities that are enforced by the Bureau,
including the Equal Credit Opportunity Act and the Home Mortgage
Disclosure Act;
(B) Coordinating fair lending efforts of the Bureau with other
Federal agencies and State regulators, as appropriate, to promote
consistent, efficient, and
[[Page 2825]]
effective enforcement of Federal fair lending laws;
(C) Working with private industry, fair lending, civil rights,
consumer and community advocates on the promotion of fair lending
compliance and education; and
(D) Providing annual reports to Congress on the efforts of the
Bureau to fulfill its fair lending mandate.\5\
---------------------------------------------------------------------------
\5\ Dodd-Frank Act section 1013(c)(2)(A), (B) and (C) (codified
at 12 U.S.C. 5493(c)(2)(A), (B), and (C)).
---------------------------------------------------------------------------
The law also requires the Bureau to file an annual report to
Congress describing the administration of its functions under the Equal
Credit Opportunity Act (ECOA), summarizing public enforcement actions
taken by other agencies with administrative enforcement
responsibilities under ECOA, and providing an assessment of the extent
to which compliance with ECOA has been achieved.\6\ In addition, the
law requires the Bureau, in consultation with U.S. Department of
Housing and Urban Development (HUD), to report annually on the utility
of the Home Mortgage Disclosure Act's (HMDA) requirement that covered
lenders itemize certain mortgage loan data.\7\ This report to Congress
from the Office of Fair Lending is intended to fulfill those
requirements and report on the Bureau's efforts to fulfill its fair
lending mandate during calendar year 2017.\8\
---------------------------------------------------------------------------
\6\ 15 U.S.C. 1691f.
\7\ 12 U.S.C. 2807.
\8\ 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)).
---------------------------------------------------------------------------
1. Interagency Reporting on ECOA and HMDA
The law requires the Bureau to file a report to Congress annually
describing the administration of its functions under ECOA, summarizing
public enforcement actions taken by other agencies with administrative
enforcement responsibilities under ECOA, and providing an assessment of
the extent to which compliance with ECOA has been achieved.\9\ In
addition, the Bureau's annual HMDA reporting requirement calls for the
Bureau, in consultation with HUD, to report annually on the utility of
HMDA's requirement that covered lenders itemize certain mortgage loan
data.\10\
---------------------------------------------------------------------------
\9\ 15 U.S.C. 1691f.
\10\ 12 U.S.C. 2807.
---------------------------------------------------------------------------
1.1 ECOA 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.
1.1.1 Public Enforcement Actions
In addition to the Bureau, the agencies charged with administrative
enforcement of ECOA under section 704 include: The Federal Deposit
Insurance Corporation (FDIC), the Federal Reserve Board (FRB), the
National Credit Union Administration (NCUA), and the Office of the
Comptroller of the Currency (OCC), (collectively, the Federal Financial
Institutions Examination Council (FFIEC) agencies); \11\ Agricultural
Marketing Service (AMS) of the U.S. Department of Agriculture
(USDA),\12\ the Department of Transportation (DOT), the Farm Credit
Administration (FCA), the Federal Trade Commission (FTC), the
Securities and Exchange Commission (SEC), and the Small Business
Administration (SBA).\13\
---------------------------------------------------------------------------
\11\ 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 April 5, 2018). 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 Bureau of Consumer
Financial Protection (Bureau). The State Liaison Committee was added
to FFIEC in 2006 as a voting member.
\12\ The Grain Inspection, Packers and Stockyards Administration
(GIPSA) was eliminated as a stand-alone agency within USDA in 2017.
The functions previously performed by GIPSA have been incorporated
into the Agricultural Marketing Service (AMS), and ECOA reporting
now comes from the Packers and Stockyards Division, Fair Trade
Practices Program, AMS.
\13\ 15 U.S.C. 1691c.
---------------------------------------------------------------------------
In 2017, the Bureau brought one public enforcement action for
violations of ECOA, and the other agencies reported that they brought
no public enforcement actions related to ECOA in 2017.
1.1.2 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--Regulation B Violations Cited by FFIEC Agencies: 2017
------------------------------------------------------------------------
Regulation B
FFIEC Agencies reporting violations: 2017
------------------------------------------------------------------------
The Bureau, FDIC, FRB, NCUA, OCC.................. 12 CFR 1002.4(a):
Discrimination on a
prohibited basis in
a credit
transaction.
12 CFR 1002.5(b):
Improperly
inquiring about the
race, color,
religion, national
origin, or sex of
an applicant or any
other person in
connection with a
credit transaction.
12 CFR 1002.7(d)(1),
(d)(6): Improperly
requiring the
signature of an
applicant's spouse
or other person if
the applicant
qualifies under the
creditor's
standards of
creditworthiness
for the amount and
terms of the credit
requested;
improperly imposing
requirements upon
an additional party
that the creditor
is prohibited from
imposing upon an
applicant.
12 CFR 1002.9(a)(1),
(a)(1)(i), (a)(2),
(b), (b)(2),
(c)(1)(i): 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
appropriate notice
to the applicant 30
days after taking
adverse action on
an incomplete
application;
failure to provide
sufficient
information in an
adverse action
notification,
including the
specific reasons
for the action
taken.
12 CFR
1002.12(b)(1):
Failure to preserve
records of actions
taken on an
application or of
incompleteness.
12 CFR
1002.13(a)(1)(i),
(b): Failure to
request information
on an application
regarding an
applicant's
ethnicity, race,
sex, marital
status, and age, or
note, to the extent
possible, the
ethnicity, race,
and sex of an
applicant on the
basis of visual
observation or
surname if not
provided by the
applicant.
12 CFR 1002.14(a),
(a)(2): 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
copy of an
appraisal report
upon an applicant's
written request.
------------------------------------------------------------------------
[[Page 2826]]
Table 2--Regulation B Violations Cited by Other ECOA Agencies: 2017
------------------------------------------------------------------------
Regulation B
Other ECOA agencies violations: 2017
------------------------------------------------------------------------
FCA............................................... 12 CFR
1002.9(a)(1)(i):
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.
12 CFR 1002.13:
Failure to request
and collect
information for
monitoring
purposes.
------------------------------------------------------------------------
The AMS, the SEC, and the SBA reported that they received no
complaints based on ECOA or Regulation B in 2017. In 2017, 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.
1.2 Referrals to the Department of Justice
In 2017, the FFIEC agencies including the Bureau, referred a total
of 11 ECOA matters involving discrimination in violation of ECOA to the
Department of Justice (DOJ or Justice Department). The FDIC referred
four matters to the DOJ involving discrimination in credit transactions
on the prohibited bases of age, marital status, sex, and national
origin. The FRB referred three matters to the DOJ involving
discrimination in credit transactions on the prohibited basis of
marital status. The NCUA referred two matters to the DOJ involving
discrimination in credit transactions on the prohibited bases of
marital status, receipt of public assistance income, and sex. The
Bureau referred two matters to the DOJ involving discrimination in
mortgage servicing on the prohibited basis of the receipt of public
assistance income, and discrimination in credit card account
management, installment lending, and mortgage servicing on the
prohibited bases of national origin and race.
1.3 Reporting on the Home Mortgage Disclosure Act
The Bureau's annual HMDA reporting requirement calls for the
Bureau, in consultation with 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.\14\ The
Bureau, in consultation with HUD, finds that itemization and tabulation
of these data further the purposes of HMDA. For more information on
HMDA and its implementing regulation, Regulation C with regard to
guidance and rulemaking, please see the Rulemaking section of this
report (Section 5).\15\
---------------------------------------------------------------------------
\14\ See 12 U.S.C. 2807.
\15\ For more information on recent developments in HMDA and
Regulation C, see: https://www.consumerfinance.gov/about-us/newsroom/bureau-consumer-financial-protection-issues-statement-implementation-economic-growth-regulatory-relief-and-consumer-protection-act-amendments-home-mortgage-disclosure-act/.
---------------------------------------------------------------------------
2. The Bureau's Fair Lending Prioritization
2.1 Risk-Based Prioritization
Because Congress charged the Bureau with responsibility for
overseeing many lenders and products, the Office uses a risk-based
approach to prioritize supervisory examinations and enforcement
activity, to help ensure focus on areas that present substantial risk
of credit discrimination for consumers.
As part of the prioritization process, the Bureau identifies
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, that information is
incorporated into the prioritization process to determine the type and
extent of attention required to address those risks. For instance, our
monitoring highlighted potential steering risks in student loan
servicing, which resulted in the prioritization of this market in our
supervisory work in 2017.
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 Fair Lending has evaluated these inputs to prioritize
institutions, products, and markets based on an assessment of fair
lending risk posed to consumers, it considers how best to address those
risks as part of its annual strategic planning process. Potential
actions include scheduling an institution for a supervisory review,
opening an enforcement investigation where appropriate, conducting
further research, policy development, or outreach. 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 where appropriate, and reduce burden on subject institutions.
Risk-based prioritization is an ongoing process, and the Bureau
continues to receive and evaluate relevant information even after
priorities are identified. Such information may include new tips and
leads about specific institutions, consumer complaints, additional
risks identified in current supervisory and enforcement activities, and
compliance issues self-identified by institutions. In determining how
best to address this additional information, 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. It also takes
account of well-developed fair lending compliance management systems
\16\ and other responsible conduct as set forth in CFPB Bulletin 2013-
06, Responsible Business Conduct: Self-Policing, Self-Reporting,
Remediation, and Cooperation.\17\
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\16\ The Bureau previously has identified common features of a
well-developed fair lending compliance management system: 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.
\17\ 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.
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2.2 Fair Lending Priorities
As a result of its annual risk-based prioritization analyses, in
2017 the Bureau focused on: \18\
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\18\ 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/.
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Redlining: Whether lenders intentionally discouraged
prospective applicants in minority neighborhoods from applying for
credit.
Mortgage and Student Loan Servicing: Whether some
borrowers who were behind on their mortgage or student loan payments
may have been negatively impacted in their ability to
[[Page 2827]]
work out a new solution with the servicer because of their race,
ethnicity, sex, or age.
Small Business Lending: Whether institutions are complying
with the Congressional mandate to not discriminate on a prohibited
basis in small business lending. Focus in this area includes improving
Bureau understanding of: Small business lending credit processes;
existing data collection processes; and the nature, extent, and
management of fair lending risk in small business lending. Congress
required the Bureau to promulgate a regulation governing small business
loan data collection in order to ``facilitate enforcement of fair
lending laws and enable communities, governmental entities, and
creditors to identify business and community development needs and
opportunities of women-owned, minority-owned, and small businesses.''
\19\ Small business lending supervisory activity has helped 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.
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\19\ See Dodd-Frank Act, Public Law 111-203, sec. 1071, 704B(a).
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The Bureau remains committed to ensuring that consumers
are protected from discrimination in all credit markets under its legal
authority.
3. Fair Lending Supervision
The Bureau's Fair Lending Supervision program assesses compliance
with ECOA and HMDA at banks and nonbanks over which the Bureau has
supervisory authority. Supervision activities in 2017 ranged 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 conducted three types of fair lending
reviews: ECOA baseline reviews, ECOA targeted reviews, and HMDA data
integrity reviews.
As a general matter, if such a review finds that an institution's
fair lending compliance is inadequate, the Bureau communicates its
supervisory expectations to the institution to help the institution
establish fair lending compliance programs commensurate with the size
and complexity of the institution and its lines of business.\20\
Institutions may provide remediation and restitution to consumers in
response to violations of fair lending laws identified in the review,
and the Bureau may pursue other appropriate relief. The Bureau also
refers matters 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.\21\ The Bureau also may refer
other potential ECOA violations to the Justice Department.\22\
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\20\ For recent updates to the types of supervisory
communications, see https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/bcfp_bulletin-2018-01_changes-to-supervisory-communications.pdf.
\21\ 15 U.S.C. 1691e(g).
\22\ Id.
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3.1 Fair Lending Supervisory Observations
The Bureau published results of certain 2017 supervisory exams in
Supervisory Highlights. Those findings are also summarized below.
3.1.1 Update to Proxy Methodology
The Spring 2017 edition of Supervisory Highlights,\23\ published in
April 2017, discussed updates to the Bayesian Improved Surname
Geocoding (BISG) proxy methodology for race and ethnicity,\24\ which
relies in part on publically available information from the Census. In
December 2016, the U.S. Census Bureau released a list of the most
frequently-occurring surnames based on the most recent census, which
includes values for total counts and race and ethnicity shares
associated with each surname. In total, the list provides information
on the 162,253 surnames that appear at least 100 times in the most
recent census, covering approximately 90% of the population.\25\ In
April 2017, examination teams began relying on an updated proxy
methodology that reflected the newly available surname data from the
Census Bureau.\26\
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\23\ Consumer Financial Protection Bureau, Supervisory
Highlights Spring 2017 at 14-15 (April 26, 2017), https://www.consumerfinance.gov/documents/4608/201704_cfpb_Supervisory-Highlights_Issue-15.pdf.
\24\ For more information on the Bureau's use of BISG in 2017
and previously, see Consumer Financial Protection Bureau,
Supervisory Highlights Summer 2014 at 10-13 (September 17, 2014),
https://files.consumerfinance.gov/f/201409_cfpb_supervisory-highlights_auto-lending_summer-2014.pdf.
\25\ The surname data are available on the Census Bureau's
website, see Frequently Occurring Surnames from the 2010 Census
(last revised December 27, 2016), https://www.census.gov/topics/population/genealogy/data/2010_surnames.html.
\26\ The new surname list; statistical software code, written in
Stata; and other publicly available data used to build the BISG
proxy are available at: https://github.com/cfpb/proxy-methodology.
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3.1.2 Mortgage Servicing
The Summer 2017 edition of Supervisory Highlights \27\ reported on
the Bureau's fair lending work in mortgage servicing. As part of its
fair lending work, the Bureau seeks to ensure that creditors do not
discriminate on any prohibited bases. Mortgage servicing, and
specifically default servicing, may introduce fair lending risks
because of the complexity of certain processes, the range of default
servicing options, and the discretion that can sometimes exist in
evaluating and selecting among available default servicing options.
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\27\ Consumer Financial Protection Bureau, Supervisory
Highlights Summer 2017 at 32-33 (September 12, 2017), https://www.consumerfinance.gov/documents/5386/201709_cfpb_Supervisory-Highlights_Issue-16.pdf.
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In mortgage servicing, the Bureau's supervisory work has included
use of the Mortgage Servicing Exam Procedures and the ECOA Baseline
Modules, both of which are part of the Bureau's publically-available
Supervision and Examination Manual. Bureau examination teams use these
procedures to conduct ECOA Baseline Reviews, which evaluate
institutions' compliance management systems (CMS), or ECOA Targeted
Reviews, which are more in-depth reviews of activities that may pose
heightened fair lending risks to consumers. These exam procedures
contain questions about, among other things, the fair lending training
of servicing staff, fair lending monitoring of servicing, and servicing
of consumers with limited English proficiency.
In one or more ECOA targeted reviews of mortgage servicers, Bureau
examiners found weaknesses in fair lending CMS. In general, examiners
found deficiencies in oversight by board and senior management,
monitoring and corrective action processes, compliance audits, and
oversight of third-party service providers.
In one or more examinations, data quality issues, which were
related to a lack of complete and accurate loan servicing records, made
certain fair lending analyses difficult or impossible to perform.
Examiners attributed these data quality issues to significant
weaknesses in CMS-related policies, procedures, and service provider
oversight.
Separately, fair lending analysis at one or more mortgage servicers
was affected by a lack of readily-accessible information concerning a
borrower's ethnicity, race, and sex information that had been collected
pursuant to Regulation C and transferred to the
[[Page 2828]]
servicer. One or more mortgage servicers acknowledged the importance of
retaining in readily-accessible format--for the express purpose of
performing future fair lending analyses--ethnicity, race, and sex data
that it had received in the borrower's origination file.
4. 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.\28\
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.
---------------------------------------------------------------------------
\28\ 15 U.S.C. 1691e(g).
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4.1 Fair Lending Public Enforcement Actions
4.1.1 Mortgage
Nationstar Mortgage LLC
On March 15, 2017, the Bureau resolved an enforcement action
against Nationstar Mortgage LLC (Nationstar) for violating HMDA by
submitting mortgage loan data for 2012 through 2014 containing
substantial errors. HMDA requires many mortgage lenders to collect and
report data about their mortgage lending to appropriate Federal
agencies and make it available to the public. The consent order
requires Nationstar to pay a $1.75 million penalty to the Bureau's
Civil Penalty Fund. The Nationstar action is the largest HMDA civil
penalty imposed to date by the Bureau, which stems from Nationstar's
market size, the substantial magnitude of its errors, and its history
of previous violations.
In addition to paying the civil penalty, Nationstar must take the
necessary steps to improve its compliance management and prevent future
violations.\29\ Nationstar also must review, correct, and make
available its corrected HMDA data from 2012-14. Since the Bureau's
examination, Nationstar has been taking steps to improve its HMDA
compliance management system and increase the accuracy of its HMDA
reporting.
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\29\ Consent Order, In the Matter of Nationstar Mortgage LLC,
File No. 2017-CFPB-0011 (Mar. 15, 2017), https://files.consumerfinance.gov/f/documents/201703_cfpb_Nationstar-Mortgage-consent-order.pdf.
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Nationstar, a nationwide nonbank mortgage lender headquartered in
Coppell, Texas (now doing business as Mr. Cooper), is a wholly-owned
subsidiary of Nationstar Mortgage Holdings Inc. With nearly 3 million
customers, Nationstar Mortgage Holdings is a major participant in the
mortgage servicing and origination markets. According to 2014 data,
Nationstar was the ninth-largest HMDA reporter by total mortgage
originations, the sixth largest by applications received, and the
thirteenth largest by money lent. From 2010 to 2014, Nationstar's
number of HMDA mortgage loans increased by nearly 900 percent.
In its supervision process, the Bureau found that Nationstar's HMDA
compliance systems were deficient, and not reasonably adapted to avoid
the identified errors. Specifically, Nationstar failed to maintain
detailed HMDA data collection and validation procedures, and failed to
implement adequate compliance procedures, even after it knew was
required to improve its HMDA compliance. It also produced HMDA data
discrepancies by failing to consistently define data among its various
lines of business. Nationstar has a history of HMDA non-compliance. In
2011, the Commonwealth of Massachusetts Division of Banks reached a
settlement with Nationstar to address HMDA compliance deficiencies. The
samples reviewed by the Bureau showed substantial error rates in three
consecutive reporting years, even after the Massachusetts settlement
was reached. In the samples reviewed, the Bureau found error rates of
13 percent in 2012, 33 percent in 2013, and 21 percent in 2014.
4.1.2 Credit Cards
American Express Centurion Bank and American Express Bank, FSB
On August 23, 2017, the Bureau took action against American Express
Centurion Bank and American Express Bank, FSB (collectively referred to
as American Express), for violating ECOA by discriminating against
consumers in Puerto Rico, the U.S. Virgin Islands, and other U.S.
territories by providing them with credit and charge card terms that
were inferior in many respects to those available in the 50 U.S.
states. American Express also discriminated against certain consumers
with Spanish-language preferences by not providing them certain charge
card collection offers that were provided to similarly-situated
consumers without Spanish-language preferences. Over the course of at
least ten years, more than 200,000 of these consumers were harmed by
American Express's discriminatory practices. American Express has paid
approximately $95 million in consumer redress during the course of the
Bureau's review and American Express's review, and the Bureau Order
requires it to pay at least another $1 million to fully compensate
harmed consumers.\30\
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\30\ Consent Order, In the Matter of American Express Centurion
Bank and American Express Bank, FSB, File No. 2017-CFPB-0016 (Aug.
23, 2017), https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/201708_cfpb_american-express_content-order.pdf.
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Beginning in 2013, American Express self-reported to the Bureau
differences between terms associated with its Puerto Rico and U.S.
Virgin Islands cards (collectively, Puerto Rico cards) and its cards
offered in the 50 U.S. states (U.S. cards), as well as differences with
respect to certain consumers with a Spanish-language preference.
Through the course of a supervisory review, the Bureau concluded that,
from at least 2005 to 2015, American Express's Puerto Rico cards had
different, and often worse, pricing, rebates, promotional offers,
underwriting, customer and account management services, and collections
practices than its U.S. cards. These differences spanned the product
lifecycle and included: Charging higher fees and interest rates and
offering less advantageous pricing on promotional offers; imposing more
stringent credit score cutoffs and lower credit limits; applying
certain inferior servicing policies; and requiring more money to settle
debt. The Bureau's review found that these differences constituted
discrimination on the prohibited bases of race and national origin in
violation of ECOA.
Under the terms of the Bureau Order, American Express must develop
and implement a comprehensive compliance plan to ensure that it
provides credit and charge cards in a non-discriminatory manner to
consumers in Puerto Rico, the U.S. territories, and customers in
collection who prefer Spanish-language communications. The compliance
plan must include any
[[Page 2829]]
necessary additional improvements to its compliance management system;
compliance audit program; credit and charge card business structure,
policies, and procedures; employee training procedures; and complaints
procedures.
During the Bureau's review, American Express provided monetary and
non-monetary relief to harmed consumers, resulting in approximately $95
million of remediation. The Bureau did not assess penalties based on a
number of factors, including that American Express self-reported the
violations to the Bureau, self-initiated remediation for the harm done
to affected consumers, and fully cooperated with the Bureau's review
and investigation.
4.2 Implementing Enforcement Orders
When an enforcement action is resolved through a public enforcement
order, the Bureau (together with the Justice Department, 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 complied with the
injunctive provisions of the order, including implementing a
comprehensive fair lending compliance management system. Throughout
2017, the Bureau worked to implement and oversee compliance with the
pending public enforcement orders that were entered by Federal courts
or issued by the Bureau's Director in prior years.
4.2.1 Settlement Administration
Settlement Administration
Toyota Motor Credit Corporation
On December 29, 2017, participation materials were mailed to
potentially eligible African-American and Asian and Pacific Islander
borrowers whom Toyota Motor Credit overcharged for their auto loans
notifying them how to participate in the settlement, resulting from a
2016 enforcement action brought by the Bureau and Justice Department
against Toyota for alleged discrimination in auto lending.\31\
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\31\ 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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Provident Funding Associates
On November 2, 2017, the Bureau announced the mailing of
remuneration checks to consumers, totaling $9 million, plus accrued
interest, to eligible borrowers resulting from a 2015 enforcement
action brought by the Bureau and Justice Department against Provident
for alleged discrimination in mortgage lending.\32\
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\32\ Patrice Alexander Ficklin, African-American and Hispanic
borrowers harmed by Provident will receive $9 million in
compensation, Consumer Financial Protection Bureau (Nov. 2, 2017),
https://www.consumerfinance.gov/about-us/blog/african-american-and-hispanic-borrowers-harmed-provident-will-receive-9-million-compensation/.
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American Honda Finance Corporation
On October 2, 2017, participating African-American, Hispanic, and
Asian and/or Pacific Islander borrowers, whom Honda Finance overcharged
for their auto loans, were mailed checks totaling $24 million, plus
accrued interest, resulting from a 2015 enforcement action brought by
the Bureau and Justice Department against Honda for alleged
discrimination in auto lending.\33\
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\33\ 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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Ally Financial Inc. and Ally Bank
In 2017, Ally Financial Inc. and Ally Bank completed their payments
totaling $48.8 million to consumers whom Ally determined were both
eligible and overcharged on auto loans booked during 2016 pursuant to
the December 2013 enforcement actions and consent orders with the
Justice Department and the Bureau.
4.3 ECOA Referrals to the Department of Justice
The Bureau must refer to the Justice Department 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.\34\ The Bureau
also may refer other potential ECOA violations to the DOJ.\35\ In 2017,
the Bureau referred two matters with ECOA violations to the Justice
Department. In both of the matters, the DOJ deferred to the Bureau's
handling of the matters and declined to open its own investigation. The
Bureau's referrals to the DOJ in 2017 involved discrimination in
mortgage servicing on the basis of the receipt of public assistance
income, and discrimination in credit card account management,
installment lending, and mortgage servicing on the bases of national
origin and race.
---------------------------------------------------------------------------
\34\ 15 U.S.C. 1691e(g).
\35\ Id.
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4.4 Pending Fair Lending Investigations
In 2017, the Bureau had a number of ongoing fair lending
investigations of a number of institutions involving a variety of
consumer financial products. Consistent with the Bureau's risk-based
priorities, 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 2017, the Bureau had a number of pending investigations
in this and other areas.
5. Guidance and Rulemaking
5.1 HMDA and Regulation C
Consistent with the Bureau's obligation to work with private
industry to ``promot[e] fair lending . . . compliance,'' in 2017 the
Bureau published several regulatory and guidance documents related to
HMDA and Regulation C, as reported below.\36\
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\36\ See Dodd-Frank Act section 1013(c)(2)(C), Public Law 111-
203, 124 Stat. 1376 (2010) (codified at 12 U.S.C. 5493(c)(2)(C)).
---------------------------------------------------------------------------
On August 22, 2017, the Bureau, together with the other member
agencies of the FFIEC, announced new FFIEC HMDA Examiner Transaction
Testing Guidelines (Guidelines) for all financial institutions that
report HMDA data.\37\ The Guidelines will apply to the examination of
HMDA data collected beginning in 2018, and reported beginning in 2019.
---------------------------------------------------------------------------
\37\ FFIEC HMDA Examiner Transaction Testing Guidelines, https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/201708_cfpb_ffiec-hmda-examiner-transaction-testing-guidelines.pdf.
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The Bureau issued a proposed rule in April 2017 \38\ seeking
comment on amendments to certain provisions of the 2015 HMDA Final Rule
to make technical corrections and to clarify certain requirements under
Regulation C, and issued a second proposal in July 2017 \39\ to
increase temporarily the institutional and transactional coverage
thresholds for open-end lines of credit. On August 24, 2017, after
reviewing the
[[Page 2830]]
comments received, the Bureau issued a final rule amending Regulation
C.\40\
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\38\ Technical Corrections and Clarifying Amendments to the Home
Mortgage Disclosure (Regulation C) October 2015 Final Rule, https://www.consumerfinance.gov/policy-compliance/rulemaking/rules-under-development/technical-corrections-and-clarifying-amendments-home-mortgage-disclosure-october-2015-final-rule/.
\39\ Home Mortgage Disclosure (Regulation C), Temporary Increase
in Institutional and Transactional Coverage Thresholds for Open-End
Lines of Credit, https://www.consumerfinance.gov/policy-compliance/rulemaking/rules-under-development/home-mortgage-disclosure-regulation-c-temporary-increase-institutional-and-transactional-coverage-thresholds-open-end-lines-credit/.
\40\ Consumer Financial Protection Bureau, Home Mortgage
Disclosure (Regulation C) Final Rule, https://www.consumerfinance.gov/policy-compliance/rulemaking/final-rules/regulation-c-home-mortgage-disclosure-act/.
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On September 20, 2017, the Bureau issued proposed policy guidance
regarding the data the Bureau may make available to the public
beginning in 2019 from the HMDA data collected by financial
institutions in or after 2018. The proposal described the modifications
that the Bureau intends to apply to the loan-level HMDA data to protect
applicant and borrower privacy, and it sought comment on those
proposals.\41\
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\41\ Disclosure of Loan-Level HMDA Data, https://files.consumerfinance.gov/f/documents/201709_cfpb_hmda-disclosure-policy-guidance.pdf.
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In December 2017, the FFIEC agencies issued public statements on
HMDA implementation announcing that the Bureau does not intend to
require data resubmission unless data errors are material or assess
penalties with respect to errors in data collected in 2018 and reported
in 2019 under HMDA. The Bureau's statement also announced that the
Bureau intends to engage in a rulemaking to reconsider various aspects
of the 2015 HMDA Rule such as the institutional and transactional
coverage tests and the rule's discretionary data points.\42\
---------------------------------------------------------------------------
\42\ Consumer Financial Protection Bureau, CFPB Issues Public
Statement On Home Mortgage Disclosure Act Compliance, (December 21,
2017), https://www.consumerfinance.gov/about-us/newsroom/cfpb-issues-public-statement-home-mortgage-disclosure-act-compliance/.
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5.1.1 HMDA Announcement
On December 21, 2017, the Bureau issued the following public
statement regarding HMDA implementation:
Recognizing the impending January 1, 2018 effective date of the
Bureau's amendments to Regulation C and the significant systems and
operational challenges needed to adjust to the revised regulation, for
HMDA data collected in 2018 and reported in 2019 the Bureau does not
intend to require data resubmission unless data errors are material.
Furthermore, the Bureau does not intend to assess penalties with
respect to errors in data collected in 2018 and reported in 2019.
Collection and submission of the 2018 HMDA data will provide financial
institutions an opportunity to identify any gaps in their
implementation of amended Regulation C and make improvements in their
HMDA compliance management systems for future years. Any examinations
of 2018 HMDA data will be diagnostic to help institutions identify
compliance weaknesses and will credit good faith compliance efforts.
The Bureau intends to engage in a rulemaking to reconsider various
aspects of the 2015 HMDA Rule such as the institutional and
transactional coverage tests and the rule's discretionary data points.
For data collected in 2017, financial institutions will submit
their reports in 2018 in accordance with the current Regulation C using
the Bureau's HMDA Platform.\43\
---------------------------------------------------------------------------
\43\ CFPB Issues Public Statement On Home Mortgage Disclosure
Act Compliance (December 21, 2017), https://www.consumerfinance.gov/about-us/newsroom/cfpb-issues-public-statement-home-mortgage-disclosure-act-compliance/.
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5.2 ECOA and Regulation B
On March 24, 2017, the Bureau issued a proposed rule seeking
comment on amendments to Regulation B providing creditors additional
flexibility in complying with Regulation B in order to facilitate
compliance with Regulation C, adding certain model forms and removing
others from Regulation B, and making 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.\44\ After considering the comments received, the
Bureau issued a final rule on September 20, 2017, amending Regulation
B.\45\
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\44\ Proposed Amendments to Equal Credit Opportunity Act
(Regulation B) Ethnicity and Race Information Collection, https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/201703_cfpb_NPRM-to-amend-Regulation-B.pdf.
\45\ Amendments to Equal Credit Opportunity Act (Regulation B)
Ethnicity and Race Information Collection, https://www.consumerfinance.gov/policy-compliance/rulemaking/final-rules/amendments-equal-credit-opportunity-act-regulation-b-ethnicity-and-race-information-collection/.
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On November 20, 2017, the Bureau issued an official approval
pursuant to section 706(e) of ECOA of the final redesigned Uniform
Residential Loan Application that included a question asking applicant
language preference.\46\ Bureau staff determined that the final
redesigned URLA is in compliance with Regulation B Sec. 1002.5(b)
through (d), which provide rules regarding requests for
information.\47\
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\46\ Consumer Financial Protection Bureau, Final Redesigned
Uniform Residential Loan Application Status under Regulation B,
(Nov. 20, 2017), https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/cfpb_urla-language-preference-question_bureau-official-approval_112017.pdf.
\47\ Regulation B Sec. 1002.5(b) provides rules concerning
requests for information about race, color, religion, national
origin, or sex. Section 1002.5(c) provides rules concerning requests
for information about a spouse or former spouse. Section 1002.5(d)
provides rules concerning requests for information regarding marital
status; income from alimony, child support, or separate maintenance;
and childbearing or childrearing.
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5.3 Small Business Data Collection
Section 1071 of the Dodd-Frank Act amends ECOA to require financial
institutions to collect, report, and make public certain information
concerning credit applications made by women-owned, minority-owned, and
small businesses. The amendments to ECOA made by the Dodd-Frank Act
require that specific data be collected, maintained, and reported,
including but not limited to the type of loan applied for, the amount
of credit applied for, the type of action taken with regard to each
application, the census tract of the principal place of business of the
loan applicant, and the race, sex, and ethnicity of the principal
owners of the business. The Dodd-Frank Act also provides authority for
the Bureau to require any additional data that the Bureau determines
would aid in fulfilling the purposes of section 1071. The Bureau issued
a Request for Information in 2017 seeking public comment on, among
other things, the types of credit products offered and the types of
data currently collected by small business lenders and the potential
complexity, cost of, and privacy issues related to, small business
lending data collection. The information received will help the Bureau
determine how to implement efficiently the Dodd-Frank Act's mandate
regarding small business lending data reporting, while minimizing
burdens on lenders.
5.4 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 Bureau 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.
On September 13, 2017, the Bureau filed an amicus brief in Regions
Bank v. Legal Outsource PA, in the United States Court of Appeals for
the Eleventh Circuit.\48\ This case involves claims under ECOA against
a bank that allegedly required a business owner's spouse to guarantee a
loan to the business because of the fact that the business owner was
married. The
[[Page 2831]]
Bureau filed an amicus brief arguing that the district court erred in
rejecting claims by the business and various guarantors of the loan.
First, the brief argued that a business entity can state a claim for
ECOA discrimination based on its owner's marital status. Second, the
brief argued that regulations issued pursuant to ECOA reasonably
interpret the term ``applicant'' to encompass guarantors such that non-
borrowers who are required to guarantee their spouse's loans can state
claims for marital-status discrimination.
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\48\ A copy of the Bureau's amicus brief is available on its
amicus web page, https://www.consumerfinance.gov/policy-compliance/amicus/briefs/regions-bank-v-legal-outsource-pa/.
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5.5 No-Action Letter
In 2017, the Bureau maintained a ``No Action Letter'' policy \49\
that allowed companies to apply for a statement from Bureau staff
regarding an innovative product or service that offers the potential
for significant consumer benefit where there is substantial uncertainty
about whether or how specific provisions of law would be applied. A no-
action letter issued pursuant to that policy would advise a recipient
that staff has no present intention to recommend initiation of an
enforcement or supervisory action with respect to the specific matter.
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\49\ See proposed policy at: https://www.consumerfinance.gov/policy-compliance/notice-opportunities-comment/archive-closed/proposed-policy-on-no-action-letters/.
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On September 14, 2017, Bureau staff issued its first no-action
letter to Upstart Network, Inc., a company that uses alternative data
in making credit and pricing decisions.\50\ The Bureau's no-action
letter stated that Bureau staff had no present intention to recommend
initiation of an enforcement or supervisory action against Upstart with
regard to application of ECOA and Regulation B. The letter applies to
Upstart's automated model for underwriting applicants for unsecured
non-revolving credit, as that model is described in the company's
application materials. The letter is specific to the facts and
circumstances of Upstart and does not serve as an endorsement of the
use of any particular variables or modeling techniques in credit
underwriting.
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\50\ CFPB Announces First No-Action Letter to Upstart Network,
Consumer Financial Protection Bureau (Sept. 14, 2017), https://www.consumerfinance.gov/about-us/newsroom/cfpb-announces-first-no-action-letter-upstart-network/.
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Upstart Network, Inc. is based in San Carlos, California, and
provides an online lending platform for consumers to apply for personal
loans, including credit card refinancing, student loans, and debt
consolidation. Upstart evaluates consumer loan applications using
traditional factors such as credit score and income, as well as
incorporating non-traditional sources of data such as education and
employment history.
Under the terms of the no-action letter, Upstart will share certain
information with the Bureau regarding the loan applications it
receives, how it decides which loans to approve, and how it will
mitigate risk to consumers, as well as information on how its model
expands access to credit for traditionally-underserved populations. The
Bureau expects that this information will further its understanding of
the use of alternative data in credit decision-making.
The Upstart no-action letter was part of the Bureau's continued
exploration in 2017 of innovation through the use of alternative data
to help expand responsible and fair credit access for consumers who are
credit invisible or lack sufficient credit history to provide them
traditional access to credit markets.
6. Interagency Coordination
6.1 Interagency Coordination and Engagement
The Office of Fair Lending regularly coordinates the Bureau'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.\51\
Through our interagency engagement, we work to address current and
emerging fair lending risks.
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\51\ Dodd-Frank Act section 1013(c)(2)(B) (codified at 12 U.S.C.
5493(c)(2)(B)).
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On August 22, 2017, the FFIEC agencies announced new HMDA Examiner
Transaction Testing Guidelines (Guidelines).\52\ The new Guidelines
were accompanied by the release of a blog post by the Bureau.\53\ The
Guidelines represent a joint effort led by the Bureau, together with
the FDIC, the FRB, the NCUA, and the OCC to provide--for the first
time--uniform guidelines across all Federal HMDA supervisory agencies.
This collaboration began with the Bureau issuing a Request for
Information \54\ and holding outreach meetings in which the other
supervisory agencies participated. The agencies then worked together to
develop the Guidelines.
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\52\ FFIEC HMDA Examiner Transaction Testing Guidelines, https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/201708_cfpb_ffiec-hmda-examiner-transaction-testing-guidelines.pdf.
\53\ Tim Lambert & Eric Wang, Here's what you need to know about
the new FFIEC HMDA Examiner Transaction Testing Guidelines, Consumer
Financial Protection Bureau (Aug. 22, 2017), https://www.consumerfinance.gov/about-us/blog/heres-what-you-need-know-about-new-ffiec-hmda-examiner-transaction-testing-guidelines/.
\54\ Request for Info. Regarding Home Mortgage Disclosure Act
Resubmission Guidelines, 81 FR 1,405 (Jan. 12, 2016), https://www.gpo.gov/fdsys/pkg/FR-2016-01-12/pdf/2016-00442.pdf.
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The Bureau, 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 Bureau 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 constitute
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 Justice Department and prudential regulators to coordinate our
fair lending work.
In 2017, the Bureau chaired the FFIEC HMDA/Community Reinvestment
Act Data Collection Subcommittee, a subcommittee of the FFIEC Task
Force on Consumer Compliance (Task Force), that oversees FFIEC projects
and programs involving HMDA data collection and dissemination, the
preparation of the annual FFIEC budget for processing services, and the
development and implementation of other related HMDA processing
projects as directed by the Task Force.
7. Outreach: Promoting Fair Lending Compliance and Education
Pursuant to Dodd-Frank,\55\ the Office of Fair Lending regularly
engages in outreach with industry, bar associations, consumer
advocates, civil rights organizations, academia, and other government
agencies, to help educate and inform our stakeholders about fair
lending as well as learn about emerging trends or products that pose
fair lending risk. The Bureau is committed to communicating directly
with all stakeholders on its policies, compliance expectations, and
fair lending priorities, and to receiving valuable input on fair
[[Page 2832]]
lending issues. Outreach is accomplished through issuance of Reports to
Congress, Interagency 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.
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\55\ Dodd-Frank Act section 1013(c)(2)(C) (codified at 12 U.S.C.
5493(c)(2)(C)).
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7.1 Blog Posts
The Bureau regularly uses its blog as a tool to communicate
effectively to consumers and other stakeholders on timely issues,
emerging areas of concern, Bureau initiatives, and more. In 2017 we
published five blog posts related to fair lending topics including:
Providing consumers updated information about a fair lending
enforcement action,\56\ announcing the Bureau's first no-action
letter,\57\ announcing new guidelines on HMDA examiner transaction
testing,\58\ issuing an official approval of the final redesigned
Uniform Residential Loan Application,\59\ and noting the release of the
fair lending annual report on 2016 activities.\60\
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\56\ Patrice Alexander Ficklin, African-American and Hispanic
borrowers harmed by Provident will receive $9 million in
compensation, Consumer Financial Protection Bureau (Nov. 2, 2017),
https://www.consumerfinance.gov/about-us/blog/african-american-and-hispanic-borrowers-harmed-provident-will-receive-9-million-compensation/.
\57\ Patrice Alexander Ficklin and Dan Quan, Supporting
consumer-friendly innovation: Announcing our first no-action letter,
Consumer Financial Protection Bureau (Sept. 14, 2017), https://www.consumerfinance.gov/about-us/blog/supporting-consumer-friendly-innovation-announcing-our-first-no-action-letter/.
\58\ Tim Lambert & Eric Wang, Here's what you need to know about
the new FFIEC HMDA Examiner Transaction Testing Guidelines, Consumer
Financial Protection Bureau (Aug. 22, 2017), https://www.consumerfinance.gov/about-us/blog/heres-what-you-need-know-about-new-ffiec-hmda-examiner-transaction-testing-guidelines/.
\59\ J. Frank Vespa-Papaleo, Identification of language
preference on the Uniform Residential Loan Application, Consumer
Financial Protection Bureau (Nov. 20, 2017), https://www.consumerfinance.gov/about-us/blog/identification-language-preference-uniform-residential-loan-application/.
\60\ Patrice Alexander Ficklin, Safeguarding against credit
discrimination: 2016 Fair Lending Report (April 14, 2017), https://www.consumerfinance.gov/about-us/blog/safeguarding-against-credit-discrimination-2016-fair-lending-report/.
_____________________________________-
The blog posts may be accessed at www.consumerfinance.gov/blog.
7.2 Supervisory Highlights
Supervisory Highlights reports anchor the Bureau's efforts to
communicate about the Bureau's supervisory activity. More information
about the topics discussed this year in Supervisory Highlights can be
found in Section 3.1 of this Report. As with all Bureau resources, all
editions of Supervisory Highlights are available on
www.consumerfinance.gov/reports.
7.3 Speaking Engagements & Roundtables
Staff from the Bureau's Office of Fair Lending and Equal
Opportunity participated in a number of outreach speaking events and
roundtables throughout 2017 to further the Bureau's mission of
educating and informing stakeholders about fair lending and receiving
input from stakeholders. In these events, staff shared information on
fair lending priorities, emerging issues, and heard feedback from
stakeholders on Bureau fair-lending work. Some examples of the topics
covered include fair lending priorities, fair lending modeling and
governance, redlining, HMDA, small business lending, alternative data,
and installment lending contracts.
Appendix A: Defined Terms
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Term Definition
------------------------------------------------------------------------
AMS............................................... Agricultural
Marketing Service
of the U.S.
Department of
Agriculture.
Bureau............................................ The Bureau of
Consumer Financial
Protection.
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
Bureau of Consumer
Financial
Protection (BCFP).
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.
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.
USDA.............................................. U.S. Department of
Agriculture.
------------------------------------------------------------------------
[2]. Regulatory Requirements
This Fair Lending Report of the Bureau of Consumer Financial
Protection 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
[[Page 2833]]
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: February 1, 2019.
Kathleen L. Kraninger,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2019-01568 Filed 2-7-19; 8:45 am]
BILLING CODE 4810-AM-P
