Fair Lending Report of the Bureau of Consumer Financial Protection, June 2019, 32420-32429 [2019-14384]

Download as PDF 32420 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Notices Status: This meeting will be open to public participation. Individuals interested in attending should register at https://cpaess.ucar.edu/meetings/2019/ 2nd-national-drought-forum. Please refer to this web page for the most upto-date meeting times and agenda. Seating at the meeting will be available on a first-come, first-served basis. Special Accommodations: This meeting is accessible to people with disabilities. Requests for special accommodations may be directed no later than 5:00 p.m. on July 15, 2019, to Murielle Gamache-Morris, Secretariat for the National Drought Forum, David Skaggs Research Center, Room GD102, 325 Broadway, Boulder CO 80305; Email: murielle.gamache-morris@ noaa.gov. Matters To Be Considered: The meeting will include the following topics: (1) Lessons learned and progress towards U.S. drought readiness since the last Forum in 2012; (2) strengthening the state-federal relationship to realize greater collaboration and promote cooperative partnerships with U.S. businesses to address drought; (3) new information and opportunities for coordination that help move the Nation from a reactive to a proactive approach to drought risk management; and (4) action items that could improve U.S. drought resilience. Dated: June 19, 2019. David Holst, Chief Financial Officer/Administrative Officer, Office of Oceanic and Atmospheric Research, National Oceanic and Atmospheric Administration. [FR Doc. 2019–14459 Filed 7–5–19; 8:45 am] BILLING CODE 3510–KD–P COMMODITY FUTURES TRADING COMMISSION Sunshine Act Meetings 10 a.m., Thursday, July 11, 2019. PLACE: CFTC Headquarters, LobbyLevel Hearing Room, Three Lafayette Centre, 1155 21st Street NW, Washington, DC. STATUS: Open. MATTERS TO BE CONSIDERED: The Commodity Futures Trading Commission (‘‘Commission’’ or ‘‘CFTC’’) will hold this meeting to consider the following matters: • Supplemental Proposal on Exemption from Derivatives Clearing Organization Registration; • Proposed Rule on Registration with Alternative Compliance for Non-U.S. Derivatives Clearing Organizations; and jbell on DSK3GLQ082PROD with NOTICES TIME AND DATE: VerDate Sep<11>2014 19:44 Jul 05, 2019 Jkt 247001 • Proposed Rule on Customer Margin Rules relating to Security Futures. The agenda for this meeting will be available to the public and posted on the Commission’s website at https:// www.cftc.gov. In the event that the time, date, or place of this meeting changes, an announcement of the change, along with the new time, date, or place of the meeting, will be posted on the Commission’s website. CONTACT PERSON FOR MORE INFORMATION: Christopher Kirkpatrick, Secretary of the Commission, 202–418–5964. Dated: July 2, 2019. Christopher Kirkpatrick, Secretary of the Commission. [FR Doc. 2019–14500 Filed 7–3–19; 11:15 am] BILLING CODE 6351–01–P BUREAU OF CONSUMER FINANCIAL PROTECTION Fair Lending Report of the Bureau of Consumer Financial Protection, June 2019 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 seventh 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 2018. DATES: The Bureau released the June 2019 Fair Lending Report on its website on June 28, 2019. FOR FURTHER INFORMATION CONTACT: Bobby Conner, Senior Policy Counsel, Fair Lending, 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, June 2019 Message From Kathleen L. Kraninger, Director This Fair Lending Report describes the Consumer Financial Protection Bureau’s 2018 activities to expand fair, equitable, and nondiscriminatory access PO 00000 Frm 00020 Fmt 4703 Sfmt 4703 to credit and to ensure that consumers are protected from discrimination.1 Earlier this spring I outlined my priorities for how the Bureau will use its tools to carry out our mission. I shared how Congress granted to the Director the tools of education, regulation, supervision, and enforcement, each of which serves an important component in the Bureau’s execution of its mission. I believe that the best application of these tools is to focus on prevention of harm to consumers and that includes protecting consumers from unfair, deceptive and abusive acts or practices as well as from discrimination. The Bureau’s very purpose is to ensure that all consumers have access to consumer financial products and services which is based on having fair, transparent, and competitive markets. Protecting consumers from discrimination is one of the primary objectives laid out in the Dodd-Frank Act—an objective that the Bureau takes very seriously. Under my leadership, the Bureau will continue to vigorously enforce fair lending laws in our jurisdiction, and will stand on guard against unlawful discrimination in credit. In addition to that core work, the Bureau will continue to explore cuttingedge fair lending issues including how consumer-friendly innovation can increase access to credit to all consumers—and especially unbanked and underbanked consumers and their communities. I am truly excited to take the Bureau’s work in fair lending to a new level, and I look forward to working with all stakeholders on these important matters. Sincerely, Kathleen L. Kraninger. Message from Patrice Alexander Ficklin, Director, Fair Lending. 2018 marked the Office of Fair Lending and Equal Opportunity’s seventh full year of spearheading the Bureau’s efforts to fulfill its fair lending mandate. It was also a year of transition for the Office as it prepared to move to the Director’s office as part of the Office of Equal Opportunity and Fairness. Throughout the transition, the Office has continued to focus on promoting fair, equitable, and nondiscriminatory access to credit and has embarked on new efforts to coordinate the Bureau’s fair lending work both internally, and with other governmental agencies, industry, and stakeholders to encourage innovation in expanding responsible credit access. The Bureau’s supervisory and enforcement activity in 2018 focused on 1 (12 E:\FR\FM\08JYN1.SGM U.S.C. 5511(b)(2). 08JYN1 jbell on DSK3GLQ082PROD with NOTICES Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Notices mortgage lending, small business lending, and student loan servicing. Our mortgage lending activity focused on redlining, underwriting, pricing, steering, servicing, and Home Mortgage Disclosure Act data integrity. Redlining continues to be a priority for the Bureau in both mortgage lending and small business lending. The Bureau continues to facilitate implementation of the 2010 Dodd Frank Act amendments to HMDA and the subsequent changes under the Economic Growth, Regulatory Relief, and Consumer Protection Act.2 On July 18, 2018, the Bureau announced the creation of its Office of Innovation and transitioned the work of Project Catalyst to this new office. The Bureau encourages responsible innovations that could be implemented in a consumer-friendly way to help serve populations currently underserved by the mainstream credit system. The Office worked closely with Project Catalyst since its inception to increase consumer access to credit. The Fair Lending office looks forward to the continued close working relationship with the Office of Innovation. In September 2018, the Office held a symposium, Building a Bridge to Credit Visibility, the first in a series of planned convenings aimed at expanding access to credit for consumers who face barriers to accessing credit. The Bureau estimates that 45 million Americans are credit invisible or lack sufficient credit history which in turn causes those consumers to face barriers to accessing credit, or pay more for credit. The Symposium was attended, both inperson and via web-based livestream video, by hundreds of stakeholders from industry, government, think tanks, academia, and consumer advocacy and civil rights organizations, representing a diverse range of experiences and perspectives. Along with the rest of the Bureau, the Office welcomed our new Director, Kathy Kraninger, in early December 2018 and began work to implement her commitment to enforce the fair lending laws under the Bureau’s jurisdiction using the tools of education, rulemaking and guidance, supervision and enforcement. Since its inception, the Office has done tremendous work in fulfilling its Dodd-Frank mandate to protect America’s consumers from lending discrimination and promote credit access.3 Sincerely, Patrice Alexander Ficklin. 2 Public Law 115–174, 132 Stat. 1296 (2018). 3 See Dodd-Frank Act section 1013(c)(2)(D) (codified at 12 U.S.C. 5493(c)(2)(D)). VerDate Sep<11>2014 19:44 Jul 05, 2019 Jkt 247001 1. Access to Credit The Bureau is responsible for providing oversight and enforcement of Federal laws intended to ensure ‘‘fair, equitable, and nondiscriminatory access to credit for both individuals and communities.’’ 4 To achieve the mission, the Bureau focuses both on preventing discrimination and addressing it when it happens. The Bureau has available a number of prevention tools: Outreach and education, and the issuance of guidance, promulgation of regulations, and supervision and enforcement. In 2018, Fair Lending used a number of these tools and increased its focus on ensuring fair, equitable, and nondiscriminatory access to credit through: (1) Hosting a symposium on credit invisibility; (2) establishing collaboration with the new Office of Innovation; (3) monitoring a No-Action Letter; and (4) prioritizing supervisory reviews of third-party credit scoring models to further the Bureau’s interest in identifying potential benefits and risks associated with the use of alternative data and modeling techniques. 1.1 Symposium and Report on Credit Visibility The CFPB has reported in recent years, in a series of publications,5 that roughly 20 percent of the adult population have no credit records or very limited credit records with the three Nationwide Credit Reporting Agencies (NCRAs). As a result, these ‘‘credit invisible’’ and ‘‘unscorable’’ consumers are unable to fully participate in the credit marketplace. This can limit their ability to withstand financial shocks and achieve financial stability. In September 2018, the Bureau convened its first fair lending Symposium to address the issue of access to credit, entitled Building a Bridge to Credit Visibility. The Symposium was attended, both inperson and via web-based livestream video, by hundreds of stakeholders from industry, government, think tanks, academia, and consumer advocacy and civil rights organizations, representing a diverse range of experiences and perspectives. Panelists discussed U.S.C. 5493(c)(2)(A). CFPB Data Point: Becoming Credit Visible (June 2017), s3.amazonaws.com/ files.consumerfinance.gov/f/documents/ BecomingCreditVisible_Data_Point_Final.pdf; CFPB, Who Are the Credit Invisibles? How to Help People with Limited Credit Histories (Dec. 2016), s3.amazonaws.com/files.consumerfinance.gov/f/ documents/201612_cfpb_credit_invisible_policy_ report.pdf; CFPB, Data Point: Credit Invisibles (May 2015), files.consumerfinance.gov/f/201505_cfpb_ data-point-credit-invisibles.pdf. PO 00000 4 12 5 See Frm 00021 Fmt 4703 Sfmt 4703 32421 strategies and innovations for overcoming barriers faced by credit invisible consumers and unscorable consumers and expanding credit access. The Symposium was held at CFPB Headquarters in Washington, DC. The Bureau’s Building a Bridge to Credit Visibility Symposium added to the growing body of knowledge on the credit invisible population, sometimes referred to as unbanked and underbanked. The Symposium, and the Geography of Credit Invisibility data point 6 released in conjunction with the Symposium, provided a platform where industry, consumer and civil rights advocates, regulators, researchers, and other stakeholders could raise awareness of the issues that credit invisible and unscorable consumers face, learn more about financial innovation that is happening, and shape plans for how to continue to increase future access to credit going forward. At the Symposium, a number of stakeholders took part in substantive panel discussions. During the first panel, each speaker delivered a short talk on credit, exploring issues such as credit invisibility, lending deserts, and innovation to expand access to credit. During the second panel, panelists explored questions related to entry products that bridge consumers to credit visibility while also preparing them for financial success. During the third panel, panelists focused on identifying barriers and solutions to accessing credit in the small business lending space, and discussed the roles played by different stakeholders in this space. And finally, during the last panel, participants discussed the role alternative data and modeling techniques can play in expanding access to traditional credit. A few key themes were evident across panel discussions at the Symposium. These themes can inform action planning for private and public sector stakeholders from industry, consumer and civil rights advocacy organizations, academia, and government. Some of these key themes were: • Strengthen the business case for expanding access to credit. • Explore innovation that expands credit access without sacrificing consumer protections. • Understand the experience of the credit invisible population. • Recognize that ‘‘high-touch’’ relationships are important. • Conduct more research and data analysis. 6 See CFPB, Data Point: The Geography of Credit Invisibility (Sept. 2018), s3.amazonaws.com/ files.consumerfinance.gov/f/documents/bcfp_datapoint_the-geography-of-credit-invisibility.pdf. E:\FR\FM\08JYN1.SGM 08JYN1 32422 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Notices • Be mindful that not all credit is equal. At the Symposium, Jacqueline Reses from Square, Inc. and Square Capital (‘‘Square’’) gave the keynote address. Later in the day, Paul Watkins, Assistant Director of the Bureau’s Office of Innovation, shared his vision for the new office. Finally, Bureau leaders ended the Symposium with a ‘‘fireside chat,’’ highlighting key themes from the day and exploring the ways the CFPB’s mission provides the Bureau with tools to engage on these issues. Additional information including the symposium agenda, a video of the symposium (with closed-captioning), and an informational blog post can be found on the Bureau’s website.7 jbell on DSK3GLQ082PROD with NOTICES 1.2 Collaboration With Office of Innovation In 2018, the Bureau prioritized innovation in part to help expand fair, equitable and nondiscriminatory access to credit to underserved populations.8 To lead this effort, on July 18, 2018, the Bureau created the Office of Innovation and transitioned the work that was being done under Project Catalyst to this new office. The Office of Innovation helps the Bureau fulfill its statutory mandate to promote competition, innovation, and consumer access within financial services. To achieve this goal, the new office focuses on creating policies to facilitate innovation, engaging with entrepreneurs and regulators, and facilitating identification of outdated and unnecessary regulations.9 Fair Lending’s focus on fair, equitable, and nondiscriminatory access to credit for individuals and communities provides for synergy with the work of the Office of Innovation. The Office of Innovation is in the process of revising the Bureau’s No Action Letter (NAL) and trial disclosure policies, and establishing a Product Sandbox, in order to increase 7 https://www.consumerfinance.gov/about-us/ events/archive-past-events/building-bridge-creditvisibility/. 8 Historically, the Office of Fair Lending has worked closely with the Bureau’s Project Catalyst, which was established to encourage consumerfriendly innovation and entrepreneurship in markets for consumer financial products and services. Through Project Catalyst, the Bureau sought to advance consumer-friendly innovation by way of outreach to innovators, discussion of Special Purpose Credit Programs, and the No-Action Letter program. By staffing Project Catalyst Office Hours and engaging in discussions with No-Action Letter candidates, Fair Lending has worked to advance innovation. 9 Consumer Financial Protection Bureau, Bureau of Consumer Financial Protection Announces Director for the Office of Innovation, https:// www.consumerfinance.gov/about-us/newsroom/ bureau-consumer-financial-protection-announcesdirector-office-innovation/. VerDate Sep<11>2014 19:44 Jul 05, 2019 Jkt 247001 participation by organizations seeking to advance new products and services. The Bureau encourages innovative products and services that benefit consumers, including those that promote fair, equitable, and nondiscriminatory access to credit. As part of its coordination function, the Office of Fair Lending engages with potential entrants into the Bureau’s Innovation programs, including those interested in special purpose credit programs 10 to help promote credit access for underserved borrowers. 1.3 Upstart No-Action Letter In February 2016, the Bureau issued its initial No Action Letter (NAL) policy, which provides Bureau staff the ability to evaluate an applicant’s consumer financial product or service and signify that Bureau staff has no present intent to recommend initiation of supervisory or enforcement action against the entity in respect to the product or service.11 In 2018 Fair Lending continued to monitor Upstart Network, Inc. (Upstart) under the terms of the no-action letter it received from Bureau staff on September 14, 2017. By way of background, Upstart is a company that uses machine learning in making credit and pricing decisions. Based in San Carlos, Calif., Upstart 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 information such as education and employment history. The no-action letter issued to Upstart signified that Bureau staff has no present intent to recommend initiation of supervisory or enforcement action against Upstart with respect to the Equal Credit Opportunity Act. The letter applies to Upstart’s model for underwriting and pricing applicants as described in the company’s application materials. The no-action letter is specific to the facts and circumstances of the particular company and does not serve as an endorsement of the use of any particular variables or modeling techniques. In 2018 Fair Lending monitored Upstart under the terms of 10 Consumer Financial Protection Bureau, Supervisory Highlights Summer 2016 at 16–18 (June 2016), https://files.consumerfinance.gov/f/ documents/Supervisory_Highlights_Issue_12.pdf. 11 The 2016 policy as submitted to the Federal Register is available at https:// files.consumerfinance.gov/f/201602_cfpb_noaction-letter-policy.pdf. As of the issuance of this report, a revised NAL policy is under consideration. See Section 1.4 for more information. PO 00000 Frm 00022 Fmt 4703 Sfmt 4703 the 2017 NAL. Under the terms of the no-action letter issued by Bureau staff, Upstart agreed to share certain information with the CFPB 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. In addition, Upstart agreed as part of its request for a NAL to employ other consumer safeguards. These safeguards, which are described in the application materials posted on the Bureau’s website, include ensuring compliance with adverse action notice requirements, and ensuring that all of its consumer-facing communications are timely, transparent, and clear, and use plain language to convey to consumers the type of information that will be used in underwriting. The CFPB expects that this information will further its understanding of how the types of practices employed by Upstart impact access to credit generally and for traditionally underserved populations, as well as the application of compliance management systems for these emerging practices. 1.4 Models When making credit decisions, lenders often rely on proprietary or third-party credit scoring models. In recent years, new third-party credit scoring models have been developed for lenders based on information beyond the contents of a consumer’s core credit file. The use of alternative data and modeling techniques may expand access to credit or lower credit cost and, at the same time, present fair lending risks. In 2018, Fair Lending recommended supervisory reviews of third-party credit scoring models so that the Bureau ‘‘keep[s] pace with the evolution of technology in consumer financial products and services in order to accomplish its strategic goals and objectives.’’ 12 These recommended reviews would focus on obtaining information and learning about the models and compliance systems of third-party credit scoring companies for the purpose of assessing fair lending risks to consumers and whether the models are likely to increase access to credit. Observations from these reviews are expected to further the Bureau’s interest in identifying potential benefits and risks associated with the use of 12 CFPB Strategic Plan for FY 2018–2022, https:// files.consumerfinance.gov/f/documents/cfpb_ strategic-plan_fy2018-fy2022.pdf. E:\FR\FM\08JYN1.SGM 08JYN1 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Notices alternative data and modeling techniques. A significant focus of the Bureau’s interest in models is ways that alternative data and modeling may expand access to credit for consumers who are credit invisible or who lack enough credit history to obtain a credit score. The Bureau is also interested in other potential benefits associated with the use of alternative data and modeling techniques that may directly or indirectly benefit consumers, including enhanced creditworthiness predictions, more timely information about a consumer, lower costs, and operational improvements. 2. Outreach: Promoting Fair Lending Compliance and Education A key tool that the Bureau uses to help prevent lending discrimination is outreach and education. Pursuant to Dodd-Frank,13 the Office of Fair Lending regularly engages in outreach with Bureau stakeholders, including consumer advocates, civil rights organizations, industry, academia, and other government agencies, to: (1) Educate them about fair lending compliance and access to credit issues and (2) hear their views on the Bureau’s work to inform the Bureau’s policy decisions. The Bureau is committed to communicating directly with all stakeholders on its policies, compliance expectations, and fair lending priorities, and to receiving valuable input about fair lending issues and how innovation can promote fair, equitable, and nondiscriminatory access to credit. 2.1 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 2018 the Bureau published four blog posts related to fair lending topics including: Providing consumers updated information about a fair lending enforcement action,14 announcing the Bureau’s day -long Symposium, Building a Bridge to Credit Visibility,15 announcing the release of a jbell on DSK3GLQ082PROD with NOTICES 13 Dodd-Frank Act section 1013(c)(2)(C) (codified at 12 U.S.C. 5493(c)(2)(C)). 14 Patrice Alexander Ficklin, What you need to know to get money from the settlement with Bancorp South Bank for alleged discrimination, Consumer Financial Protection Bureau (June 5, 2018), https://www.consumerfinance.gov/about-us/ blog/what-you-need-know-get-money-settlementbancorpsouth-bank-alleged-discrimination/. 15 Patrice Alexander Ficklin, Save the date for the ‘Building a Bridge to Credit Visibility’ symposium, Consumer Financial Protection Bureau (Aug. 02, 2018), https://www.consumerfinance.gov/about-us/ VerDate Sep<11>2014 19:44 Jul 05, 2019 Jkt 247001 new research report on the geographic patterns of credit invisibility,16 and noting the release of the fair lending annual report on 2017 activities.17 The Bureau’s blog posts, including those related to fair lending, may be accessed at www.consumerfinance.gov/ blog. 2.2 Supervisory Highlights Supervisory Highlights has long been a report that anchors the Bureau’s efforts to communicate about the Bureau’s supervisory activity. More information about the fair lending topics discussed this year in Supervisory Highlights can be found in Section 5.1.1 of this Report. As with all Bureau resources, all editions of Supervisory Highlights are available on www.consumerfinance.gov/ reports. 2.3 Speaking Engagements and Roundtables Staff from the Bureau’s Office of Fair Lending and Equal Opportunity participated in a number of outreach speaking events and roundtables throughout 2018 to: (1) Educate them about fair lending compliance and access to credit issues and (2) hear their views on the Bureau’s work to inform the bureau’s policy decisions. In these events, staff shared information on fair lending priorities, emerging issues, and heard feedback from stakeholders on fair lending issues and how innovation can promote fair, equitable, and nondiscriminatory access to credit. Some examples of the topics covered include fair lending priorities, fair lending model governance, innovations in lending, redlining, HMDA, small business lending, alternative data, and installment lending contracts. In addition to these outreach events, the 2018 Symposium, discussed in Section 1.1 of this Report, served as a principal vehicle to exchange information related to access to credit to inform the Bureau’s policy making activity. blog/save-date-building-bridge-credit-visibilitysymposium/. 16 Ken Brevoort & Patrice Ficklin, New research report on the geography of credit invisibility, Consumer Financial Protection Bureau (Sept. 19, 2018), https://www.consumerfinance.gov/about-us/ blog/new-research-report-geography-creditinvisibility/. 17 Patrice Alexander Ficklin, Promoting fair, equitable, and nondiscriminatory access to credit: 2017 Fair Lending Report (Dec. 4, 2018), https:// www.consumerfinance.gov/about-us/blog/ promoting-fair-equitable-and-nondiscriminatoryaccess-credit-2017-fair-lending-report/. PO 00000 Frm 00023 Fmt 4703 Sfmt 4703 3.0 32423 Guidance and Rulemaking 3.1 HMDA Exemptions Under EGRRCPA As part of the Bureau’s efforts to enforce Home Mortgage Disclosure Act (HMDA) and its implementing regulation, Regulation C, on August 31, 2018, the Bureau issued an interpretive and procedural rule to implement and clarify the requirements of section 104(a) of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA), which earlier in 2018 amended certain provisions of HMDA.18 The rule clarifies that insured depository institutions and insured credit unions covered by a partial exemption have the option of reporting exempt data fields as long as they report all data fields within any exempt data point for which they report data; clarifies that only loans and lines of credit that are otherwise HMDA reportable count toward the thresholds for the partial exemptions; clarifies which of the data points in Regulation C are covered by the partial exemptions; designates a non-universal loan identifier for partially exempt transactions for institutions that choose not to report a universal loan identifier; and clarifies the exception to the partial exemptions for negative Community Reinvestment Act examination history. The rule also provided that at a later date, the Bureau would initiate a noticeand-comment rulemaking to incorporate these interpretations and procedures into Regulation C and further implement the Act.19 The Bureau also engaged in a number of non-rulemaking activities to facilitate the EGRRCPA implementation. The Bureau reviewed its compliance guides and examination manuals to make appropriate updates, as well as engaged with stakeholders regarding the issuance of guidance to meet the statutory requirements and facilitate compliance.20 3.2 HMDA Data Disclosure On December 21, 2018, the Bureau issued final policy guidance describing 18 Public Law 115–174, 132 Stat. 1296 (2018). Financial Protection Bureau, Partial Exemptions from the Requirements of the Home Mortgage Disclosure Act Under the Economic Growth, Regulatory Relief, and Consumer Protection Act (Regulation C) (September 7, 2018), 45325–45333, 83 FR 45325, https:// www.federalregister.gov/documents/2018/09/07/ 2018–19244/partial-exemptions-from-therequirements-of-the-home-mortgage-disclosure-actunder-the-economic. 20 Kelly Cochran, Fall 2018 rulemaking agenda (October 17, 2018), https:// www.consumerfinance.gov/about-us/blog/fall-2018rulemaking-agenda/. 19 Consumer E:\FR\FM\08JYN1.SGM 08JYN1 32424 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Notices modifications that it intends to apply to the HMDA data reported by financial institutions before the data are made public on the loan level. In issuing the guidance, the Bureau considered how appropriately to protect applicant and borrower privacy while also fulfilling HMDA’s public disclosure purposes. The policy guidance applies to data compiled by financial institutions in 2018 that will be made available to the public beginning in 2019. In addition, after consideration of stakeholder comments urging that determinations concerning the disclosure of loan-level HMDA data be effectuated through more formal processes, the Bureau also has decided to add a new notice-andcomment rulemaking to govern the disclosure of HMDA data in future years, which was included in the Bureau’s Fall 2018 rulemaking agenda. 3.3 ECOA and Regulation B On May 21, 2018, in response to the enactment of a Congressional resolution disapproving the Bureau’s indirect auto lending guidance, the Bureau’s former Acting Director issued a statement indicating the Bureau’s intent to reexamine requirements of the ECOA regarding the disparate impact doctrine in light of recent Supreme Court case law addressing the availability of disparate impact legal theory under the Fair Housing Act.21 On April 19, 2019, the Bureau announced that it would be conducting a symposia series exploring consumer protections in the financial services marketplace. One topic of the symposia series is disparate impact and the Equal Credit Opportunity Act.22 Details regarding the symposium will be announced on the Bureau’s website at a later time. 3.4 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, jbell on DSK3GLQ082PROD with NOTICES 21 Statement of the Bureau of Consumer Financial Protection on enactment of S.J. Res. 57 (May 21, 2018), https://www.consumerfinance.gov/about-us/ newsroom/statement-bureau-consumer-financialprotection-enactment-sj-res-57/; see also Fall 2018 Regulatory Agenda Preamble (Aug. 30, 2018), available at https://www.reginfo.gov/public/jsp/ eAgenda/StaticContent/201810/Preamble_ 3170.html. 22 Consumer Financial Protection Bureau Announces Symposia Series (April 8, 2019), https:// www.consumerfinance.gov/about-us/newsroom/ bureau-announces-symposia-series/. VerDate Sep<11>2014 19:44 Jul 05, 2019 Jkt 247001 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. In connection with its Fall 2018 Rulemaking Agenda,23 the Bureau announced that in light of the need to focus additional resources on various HMDA initiatives, the Bureau had adjusted its timeline for implementing the statutory directive contained in section 1071 from pre-rule status to longer-term action status. More recently, in connection with its Spring 2019 Rulemaking Agenda,24 the Bureau announced it intends to recommence work later this year to develop rules to implement section 1071 of the DoddFrank Act. The Bureau will recommence its work on section 1071 with a symposium on small business loan data collection.25 Details regarding the symposium will be announced on the Bureau’s website at a later time. 3.5 Amicus Program The Bureau files amicus, or friend-ofthe-court, briefs in significant court cases concerning the federal consumer financial protection laws, including ECOA. These amicus briefs provide the courts with Bureau views on significant consumer financial protection issues. Information regarding the Bureau’s amicus program, including a description of the amicus briefs it has filed, is available on the Bureau’s website.26 4. Supervision and Enforcement Prioritization 4.1 Risk-Based Prioritization Because Congress charged the Bureau with responsibility for overseeing many lenders and products, SEFL, including the Office of Fair Lending, have longused a risk-based approach to prioritize supervisory examinations and 23 Kelly Cochran, Fall 2018 rulemaking agenda (October 17, 2018), https:// www.consumerfinance.gov/about-us/blog/fall-2018rulemaking-agenda/. 24 Diane Thompson, Spring 2019 rulemaking agenda (May 22, 2019), https:// www.consumerfinance.gov/about-us/blog/spring2019-rulemaking-agenda/. 25 Consumer Financial Protection Bureau Announces Symposia Series (April 8, 2019), https:// www.consumerfinance.gov/about-us/newsroom/ bureau-announces-symposia-series/. 26 https://www.consumerfinance.gov/policycompliance/amicus/. PO 00000 Frm 00024 Fmt 4703 Sfmt 4703 enforcement activity, to help ensure focus on areas that present substantial risk of credit discrimination for consumers.27 This same approach continued in 2018. 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. The fair lending prioritization process incorporates a number of additional factors as well, including: Tips and leads from industry whistleblowers, advocacy groups, and government agencies; supervisory and enforcement history; consumer complaints; and results from analysis of HMDA and other publicly available data. 4.2 Fair Lending Supervisory and Enforcement Priorities While the Bureau remains committed to ensuring that consumers are protected from discrimination in all credit markets under its legal authority, as a result of its annual risk-based prioritization process in 2018, the Bureau identified the following new focus areas for fair lending examinations or investigations: • Student Loan Origination: Whether there is discrimination in policies and practices governing underwriting and pricing. • Debt Collection and Model Use: Whether there is discrimination in policies and practices governing auto servicing and credit card collections, including the use of models that predict recovery outcomes. The Bureau’s fair lending supervision work also continued to focus on mortgage origination, mortgage servicing, and small business lending, as in previous years. The Bureau’s mortgage origination work continued to focus on: (a) Redlining and whether lenders intentionally discouraged prospective applicants living in or seeking credit in minority neighborhoods from applying for credit; (b) assessing whether there is discrimination in underwriting and pricing processes as well as steering; and (c) HMDA data integrity and 27 For additional information regarding the Bureau’s risk-based approach in prioritizing supervisory examinations, see Section 3.2.3, RiskBased Approach to Examinations, Supervisory Highlights Summer 2013, available at http:// files.consumerfinance.gov/f/201308_cfpb_ supervisory-highlights_august.pdf. E:\FR\FM\08JYN1.SGM 08JYN1 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Notices jbell on DSK3GLQ082PROD with NOTICES validation (supporting ECOA exams) as well as HMDA diagnostic work (monitoring and assessing new rule compliance). The Bureau’s mortgage servicing fair lending supervision work explored whether there is discrimination in the default servicing processes at particular institutions, and focused on whether there are weaknesses in fair lendingrelated compliance management systems. The Bureau’s small business lending supervision work focused on assessing whether (1) there is discrimination in application, underwriting, and pricing processes, (2) creditors are redlining, and (3) there are weaknesses in fair lending related compliance management systems. The Bureau also continued to vigorously enforce Federal fair lending laws, including ECOA and HMDA. 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. 5. Fair Lending Supervision One of the Bureau’s consumer protection tools is its supervisory examinations. 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 2018 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 or creates fair lending risk, the Bureau communicates its supervisory recommendations to the institution to help the institution consider fair lending compliance programs commensurate with the size and complexity of the institution and its lines of business.28 In circumstances where examinations identify violations of fair lending laws, institutions may be required to provide remediation and restitution to consumers, along with other appropriate relief. In accordance with law, the Bureau is mandated to 28 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. VerDate Sep<11>2014 19:44 Jul 05, 2019 Jkt 247001 refer 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.29 The Bureau also may refer other potential ECOA violations to the Justice Department, at its discretion.30 5.1.1 Fair Lending Supervisory Developments The Bureau published various supervision program developments related to fair lending in the Summer 2018 edition of Supervisory Highlights. Those developments are also summarized below.31 5.1.2 HMDA Implementation and New Data Submission Platform The Summer 2018 edition of Supervisory Highlights 32 noted its prior statement regarding HMDA implementation and discussed updates to HMDA related to the enactment of the EGRRCPA. On December 21, 2017, the Bureau issued a public statement regarding HMDA implementation.33 The statement indicated that, ‘‘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.’’ The Bureau further indicated that examinations of 2018 HMDA data would be diagnostic in nature, serving to help institutions identify compliance weakness and crediting good faith efforts.34 The statement also noted 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.’’ 35 In January 2018, the Bureau launched a new HMDA Platform to collect and publish HMDA data. The HMDA Platform is operated by the Bureau on behalf of the members of the Federal 29 15 U.S.C. 1691e(g). 30 Id. 31 Consumer Financial Protection Bureau, Supervisory Highlights Summer 2018 at 18–20 (September 2018), https:// www.consumerfinance.gov/documents/6817/bcfp_ supervisory-highlights_issue-17_2018-09.pdf. 32 Id. 33 CFPB Issues Public Statement on Home Mortgage Disclosure Act Compliance (December 21, 2017), available at https:// www.consumerfinance.gov/about-us/newsroom/ cfpb-issues-public-statement-home-mortgagedisclosure-act-compliance/. 34 Id. 35 Id. PO 00000 Frm 00025 Fmt 4703 Sfmt 4703 32425 Financial Institutions Examination Council (FFIEC) and the Department of Housing and Urban Development. The new platform modernizes the HMDA collection process, and aims to reduce the time to deliver HMDA data to the public. New capabilities will continue to be added to this platform, including a forthcoming publication query tool and Application Programming Interface (API) that will replace the previous API. The previous Bureau HMDA Explorer and API that are scheduled to be retired had been designed to support a previous generation of HMDA data and were not able to accommodate the expanded data points in the 2018 collection that were added pursuant to the 2015 HMDA Rule. The tool had not had any major updates since its release in 2013. In order to prepare for the retirement of the old site, the Bureau conducted a number of interviews with community groups and HMDA stakeholders over last summer to develop a new set of requirements based on the needs of data users. The new query tool, HMDA Data Browser, will be released late Summer 2019 on the new HMDA Platform. The Summer 2018 Supervisory Highlights also discussed the Bureau’s July 5, 2018 public statement regarding recent HMDA amendments under the EGRRCPA. The EGRRCPA provided partial exemptions for some insured depository institutions and insured credit unions from certain HMDA requirements. The Bureau indicated that the EGRRCPA would not affect the format of the HMDA Loan Application Registry (LAR).36 Institutions that were no longer required to report certain data fields under the EGRRCPA would instead enter an exemption code in the field. On August 31, 2018, the Bureau published an updated Filing Instructions Guide which added exemption codes to the requisite data fields under the EGRRCPA.37 More information about the HMDArelated topics discussed this year in Supervisory Highlights can be found in Section 3 of this Report. 5.1.3 Small Business Lending Review Procedures The Summer 2018 edition of Supervisory Highlights 38 reported on the Bureau’s fair lending work in small 36 Consumer Financial Protection Bureau, Supervisory Highlights Summer 2018 at 19 (September 2018), https:// www.consumerfinance.gov/documents/6817/bcfp_ supervisory-highlights_issue-17_2018-09.pdf. 37 Filing Instructions Guide for HMDA Data Collected in 2018 (August 2018), https:// s3.amazonaws.com/cfpb-hmda-public/prod/help/ 2018-hmda-fig-2018-hmda-rule.pdf. 38 Id. at 20–21. E:\FR\FM\08JYN1.SGM 08JYN1 32426 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Notices jbell on DSK3GLQ082PROD with NOTICES business lending where the Bureau seeks to ensure that creditors do not discriminate on any prohibited bases. The Supervisory Highlights discussed the procedures and methodologies used as part of the Bureau’s small business examination process. Each ECOA small business lending review includes a fair lending assessment of the institution’s Compliance Management System (CMS) related to small business lending. To conduct this portion of the review, examinations use Module II of the ECOA Baseline Review Modules.39 CMS reviews include assessments of the institution’s board and management oversight, compliance program (policies and procedures, training, monitoring and/or audit, and complaint response), and service provider oversight. Examinations also use the Interagency Fair Lending Examination Procedures, which have been adopted in the Bureau’s Supervision and Examination Manual. In some ECOA small business lending reviews, examination teams may evaluate an institution’s fair lending risks and controls related to origination or pricing of small business lending products. Some reviews may include a geographic distribution analysis of small business loan applications, originations, loan officers, or marketing and outreach, in order to assess potential redlining risk. As with other in-depth ECOA reviews, ECOA small business lending reviews may include statistical analysis of lending data in order to identify fair lending risks and appropriate areas of focus during the examination. Notably, statistical analysis is only one factor taken into account by examination teams that review small business lending for ECOA compliance. Reviews typically include other methodologies to assess compliance, including policy and procedure reviews, interviews with management and staff, and reviews of individual loan files. 6.0 Fair Lending Enforcement In addition to supervision, the Bureau’s enforcement function is another tool to protect consumers. 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. In 2018, the Bureau opened and continued a number of fair-lending-related investigations, however, it did not bring fair lendingrelated enforcement actions. The Bureau refers matters with ECOA violations to the DOJ when it has reason to believe that a creditor has engaged in a pattern or practice of lending discrimination.40 A referral does not prevent the Bureau from taking its own independent action to address a violation. 6.1 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 2018, 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. 6.1.1 Settlement Administration Bancorp South Bank On June 25, 2018 participation materials were mailed to potentially eligible African-American borrowers identified as harmed by Bancorp South’s alleged redlining discrimination in mortgage lending between 2011 and 2015 notifying them how to participate in the settlement, resulting from a 2016 enforcement action brought by the Bureau and Justice Department against Bancorp South for alleged redlining and pricing discrimination in mortgage lending.41 Fifth Third Bank On December 17, 2018, participating African-American and Hispanic borrowers, whom Fifth Third overcharged for their auto loans, were mailed checks totaling $12 million, plus accrued interest, resulting from a 2015 enforcement action brought by the Bureau and the Justice Department 40 15 39 Equal Credit Opportunity Act (ECOA) Baseline Review Procedures (April 2019), https:// www.consumerfinance.gov/policy-compliance/ guidance/supervision-examinations/equal-creditopportunity-act-ecoa-baseline-review-procedures/. VerDate Sep<11>2014 19:44 Jul 05, 2019 Jkt 247001 U.S.C. 1691e(g). Order, United States of America and Consumer Financial Protection Bureau v. Bancorp South Bank, CFPB No. 1:16cv118 (July 25, 2016) https://www.consumerfinance.gov/documents/519/ 201606_cfpb_bancorpSouth-consent-order.pdf. PO 00000 41 Consent Frm 00026 Fmt 4703 Sfmt 4703 against Fifth Third for alleged discrimination in auto lending.42 Honda Finance In 2018 the Bureau conducted activity following the 2015 enforcement action against Honda Finance. By way of background, on July 14, 2015, working in close coordination with the DOJ, the Bureau ordered American Honda Finance Corporation (Honda Finance) to pay $24 million in damages to harmed African-American, Hispanic, and Asian or Pacific Islander borrowers. On October 2, 2017, participating AfricanAmerican, Hispanic, and Asian and/or Pacific Islander borrowers, whom Honda Finance overcharged for their auto loans were mailed checks compensating them for their harm. During 2018, the administration of the settlement consisted largely of monitoring consumer responses, check cashing rates and following up with respect to uncashed checks to determine better ways to contact eligible consumers and encourage check cashing. Provident Funding Associates In 2018 the Bureau completed its work implementing the consumer redress provisions of the consent order in the Provident Funding Associates (Provident) matter. Working jointly with DOJ, the agencies filed a complaint on May 28, 2015 alleging that Provident unlawfully discriminated against African-American and Hispanic borrowers by overcharging them on their mortgage loans. The consent order required that Provident pay $9 million in restitution. On November 2, 2017, participating African-American and Hispanic borrowers who were unlawfully overcharged on their mortgage loans were mailed checks. On November 6, 2018, the Bureau completed the process for the mailing of remuneration checks, totaling $9 million, plus accrued interest, to eligible borrowers.43 6.1.2 ECOA Referrals to the Department of Justice The Bureau must refer to the Justice Department (DOJ) a matter when it has 42 Consent Order, In re Fifth Third Bank, CFPB No. 2015–CFPB–0024 (Sept. 28, 2015), https:// www.consumerfinance.gov/about-us/newsroom/ cfpb-takes-action-against-fifth-third-bank-for-autolending-discrimination-and-illegal-credit-cardpractices/. 43 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/. E:\FR\FM\08JYN1.SGM 08JYN1 32427 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Notices reason to believe that a creditor has engaged in a pattern or practice of lending discrimination in violation of ECOA.44 The Bureau also may refer other potential ECOA violations to the DOJ.45 In 2018, the Bureau did not refer any ECOA violations to the Justice Department. 6.1.3 Pending Fair Lending Investigations In 2018, the Bureau had a number of ongoing fair lending investigations of institutions involving a variety of consumer financial products. 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. At the end of 2018, the Bureau had a number of pending investigations in this and other areas. 7.0 Interagency Coordination 7.1 Interagency Coordination and Engagement In 2018, the Office of Fair Lending coordinated 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.46 This interagency engagement seeks to address current and emerging fair lending risks. The Bureau, along with the Federal Trade Commission (FTC), Department of Housing and Urban Development (HUD), Federal Deposit Insurance Corporation (FDIC), Federal Reserve Board (FRB), National Credit Union Administration (NCUA), Office of the Comptroller of the Currency (OCC), Department of Justice (DOJ), and the Federal Housing Finance Agency (FHFA), comprise the Interagency Task Force on Fair Lending.47 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. 44 15 U.S.C. 1691e(g). jbell on DSK3GLQ082PROD with NOTICES 45 Id. 46 Dodd-Frank Act section 1013(c)(2)(B) (codified at 12 U.S.C. 5493(c)(2)(B)). 47 In early 2019, the Bureau assumed the role of chairing the Task Force. 48 15 U.S.C. 1691f. 49 12 U.S.C. 2807. 50 Collectively, the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the National Credit VerDate Sep<11>2014 19:44 Jul 05, 2019 Jkt 247001 The Bureau also 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 the Bureau’s fair lending work. In 2018, 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. 8. 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.48 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.49 under Section 704 of ECOA are discussed in this section. 8.2 Public Enforcement Actions The agencies charged with administrative enforcement of ECOA under Section 704 are as follows: 1. CFPB; 2. Federal Deposit Insurance Corporation (FDIC); 3. Federal Reserve Board (FRB); 4. National Credit Union Administration (NCUA); 5. Office of the Comptroller of the Currency (OCC); 50 6. Agricultural Marketing Service (AMS) of the U.S. Department of Agriculture (USDA),51 7. Department of Transportation (DOT); 8. Farm Credit Administration (FCA); 9. Federal Trade Commission (FTC); 10. Securities and Exchange Commission (SEC); and 11. Small Business Administration (SBA).52 In 2018, none of the eleven ECOA enforcement agencies brought public enforcement actions for violations of ECOA. Below is an overview of the year-toyear ECOA enforcement actions since 2012: Reporting year 2012 2013 2014 2015 2016 2017 2018 Total enforcement matters ...................................... ...................................... ...................................... ...................................... ...................................... ...................................... ...................................... 1 26 2 5 3 1 0 8.1.2 Violations Cited During ECOA Examinations 8.1 Reporting on ECOA Enforcement The enforcement efforts and compliance assessments made by all the agencies assigned enforcement authority Among institutions examined for compliance with ECOA and Regulation B, the FFIEC agencies reported that the most frequently-cited violations were as follows: Union Administration (NCUA), the Office of the Comptroller of the Currency (OCC), and the Bureau of Consumer Financial Protection (the Bureau) comprise the FFIEC. 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, http://www.ffiec.gov (last visited April 5, 2018). The State Liaison Committee was added to FFIEC in 2006 as a voting member. 51 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. 52 15 U.S.C. 1691c. PO 00000 Frm 00027 Fmt 4703 Sfmt 4703 E:\FR\FM\08JYN1.SGM 08JYN1 32428 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Notices TABLE 1—REGULATION B VIOLATIONS CITED BY FFIEC AGENCIES: 2018 FFIEC agencies reporting Regulation B violations: 2018 The Bureau, FDIC, FRB, NCUA, OCC ..... 12 CFR 1002.4(a): Discrimination on a prohibited basis in a credit transaction. 12 CFR 1002.9(a)(1), (a)(2), (b)(2), (c): 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 1002.14(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. TABLE 2—REGULATION B VIOLATIONS CITED BY OTHER ECOA AGENCIES: 2017 Other ECOA agencies Regulation B violations: 2018 FCA ........................................................... 12 CFR 1002.9(a)(1)(i), (a)(2)(i), (b)(1): Failure to provide notice to the applicant 30 days after receiving a completed application concerning the creditor’s approval of, counteroffer or adverse action on the application; failure to provide sufficient information in an adverse action notification, including the specific reasons for the action taken; failure to provide ECOA notice. 12 CFR 1002.13: Failure to request and collect information for monitoring purposes. The AMS, SEC and the SBA reported that they received no complaints based on ECOA or Regulation B in 2018. In 2018, 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. 8.2 Referrals to the Department of Justice In 2018, one FFIEC agency, the NCUA, made a referral to the DOJ involving discrimination in violation of ECOA. The NCUA made its referral on the basis of marital status discrimination. Below is a year-to-year overview of ECOA referrals to DOJ: Number of referrals Year 2012 2013 2014 2015 2016 2017 2018 8.3 Reporting on the Home Mortgage Disclosure Act ...................................... ...................................... ...................................... ...................................... ...................................... ...................................... ...................................... 12 24 18 16 20 11 1 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.53 The Bureau, in consultation with HUD, finds that itemization and tabulation of these data furthers the purposes of HMDA. APPENDIX A: DEFINED TERMS Term Definition AMS .......................................................... Bureau ....................................................... CMS .......................................................... Dodd-Frank Act ......................................... DOJ ........................................................... DOT ........................................................... ECOA ........................................................ EGRRCPA ................................................ FCA ........................................................... FDIC .......................................................... Federal Reserve Board or FRB ................ jbell on DSK3GLQ082PROD with NOTICES 53 See Agricultural Marketing Service of the U.S. Department of Agriculture. The Bureau of Consumer Financial Protection. Compliance Management System. 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. Economic Growth, Regulatory Relief, and Consumer Protection Act. Farm Credit Administration. Federal Deposit Insurance Corporation. Board of Governors of the Federal Reserve System. 12 U.S.C. 2807. VerDate Sep<11>2014 19:44 Jul 05, 2019 Jkt 247001 PO 00000 Frm 00028 Fmt 4703 Sfmt 4703 E:\FR\FM\08JYN1.SGM 08JYN1 Federal Register / Vol. 84, No. 130 / Monday, July 8, 2019 / Notices 32429 APPENDIX A: DEFINED TERMS—Continued Term Definition FFIEC ........................................................ 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 (The Bureau). The State Liaison Committee was added to FFIEC in 2006 as a voting member. Federal Trade Commission. Grain Inspection, Packers and Stockyards Administration 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. Office of the Comptroller of the Currency. Small Business Administration. Securities and Exchange Commission. U.S. Department of Agriculture. FTC ........................................................... GIPSA ....................................................... HMDA ........................................................ HUD .......................................................... NCUA ........................................................ OCC .......................................................... SBA ........................................................... SEC ........................................................... USDA ........................................................ Kathleen L. Kraninger, Director, Bureau of Consumer Financial Protection. [FR Doc. 2019–14384 Filed 7–5–19; 8:45 am] BILLING CODE 4810–AM–P DEPARTMENT OF DEFENSE Office of the Secretary Department of Defense Military Family Readiness Council Member Solicitation Under Secretary of Defense for Personnel and Readiness, Department of Defense (DoD). ACTION: Notice of Federal Advisory Committee member solicitation. AGENCY: The DoD announces the following Federal Advisory Committee member solicitation for the Department of Defense Military Family Readiness Council (MFRC). FOR FURTHER INFORMATION CONTACT: William Story, (571) 372–5345 (Voice), (571) 372–0884 (Facsimile), OSD Pentagon OUSD P–R Mailbox Family Readiness Council, osd.pentagon.ousdp-r.mbx.family-readiness-council@ mail.mil (Email). Mailing address is: Office of the Deputy Assistant Secretary of Defense (Military Community & Family Policy), Office of Family Readiness Policy, 4800 Mark Center Drive, Alexandria, VA 22350–2300, Room 3G15. A copy of this solicitation notice will be posted on the MFRC website: https:// www.militaryonesource.mil/leadersservice-providers/military-familyreadiness-council. SUPPLEMENTARY INFORMATION: Consistent with the Federal Advisory Committee Act (FACA) (5 U.S.C., Appendix), the DoD announces the following Federal Advisory Committee member solicitation for the MFRC. The duties of jbell on DSK3GLQ082PROD with NOTICES SUMMARY: VerDate Sep<11>2014 19:44 Jul 05, 2019 Jkt 247001 the MFRC are specified in 10 U.S.C. 1781a(d). The MFRC consists of 18 members, and 3 members are appointed from among representatives of military family organizations, including military family organizations of families of members of the regular components, and of families of members of the reserve components. It is these three positions that the DoD is soliciting nominations. Forward Nominations for Membership: This notice is a solicitation to fill the three military family organization vacancies on the MFRC. To be considered for nomination, please forward a biography of the nominee describing the professional background and qualifications meeting the above stated criteria. Include a separate detailed description of the nominee’s military family organization, its purpose and goals, its programs and work concerning military families, membership size and makeup (officer, enlisted, reserve, guard, both), and recent initiatives. Submissions may be by email: osd.pentagon.ousd-p-r.mbx.familyreadiness-council@mail.mil or by FAX (571) 372–0884 to the MFRC’s Designated Federal Officer no later than 11:59 p.m. EST Friday, July 26, 2019. Note: Nominees must be U.S. citizens and cannot be registered federal lobbyists. Individuals appointed by the Secretary of Defense to serve on the MFRC will be appointed as experts and consultants under the authority of 5 U.S.C. 3109 to serve as special governmental employee members and will be required to comply with all DoD ethics requirements. Nominees must pass a security background check. In addition, those appointed will serve without compensation except for travel and per diem in conjunction with official MFRC business. PO 00000 Frm 00029 Fmt 4703 Sfmt 4703 Dated: July 2, 2019. Aaron T. Siegel, Alternate OSD Federal Register Liaison Officer, Department of Defense. [FR Doc. 2019–14430 Filed 7–5–19; 8:45 am] BILLING CODE 5001–06–P DEPARTMENT OF DEFENSE Office of the Secretary [Docket ID: DOD–2019–OS–0083] Proposed Collection; Comment Request Office of the DoD Chief Information Officer, DoD. ACTION: Information collection notice. AGENCY: In compliance with the Paperwork Reduction Act of 1995, the Office of the DoD Chief Information Officer 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 September 6, 2019. ADDRESSES: You may submit comments, identified by docket number and title, by any of the following methods: Federal eRulemaking Portal: http:// www.regulations.gov. Follow the instructions for submitting comments. SUMMARY: E:\FR\FM\08JYN1.SGM 08JYN1

Agencies

[Federal Register Volume 84, Number 130 (Monday, July 8, 2019)]
[Notices]
[Pages 32420-32429]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-14384]


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BUREAU OF CONSUMER FINANCIAL PROTECTION


Fair Lending Report of the Bureau of Consumer Financial 
Protection, June 2019

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Fair Lending Report of the Bureau of Consumer Financial 
Protection.

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SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is 
issuing its seventh 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 
2018.

DATES: The Bureau released the June 2019 Fair Lending Report on its 
website on June 28, 2019.

FOR FURTHER INFORMATION CONTACT: Bobby Conner, Senior Policy Counsel, 
Fair Lending, at 1-855-411-2372. If you require this document in an 
alternative electronic format, please contact 
[email protected].

SUPPLEMENTARY INFORMATION:

1. Fair Lending Report of the Bureau of Consumer Financial Protection, 
June 2019

Message From Kathleen L. Kraninger, Director

    This Fair Lending Report describes the Consumer Financial 
Protection Bureau's 2018 activities to expand fair, equitable, and 
nondiscriminatory access to credit and to ensure that consumers are 
protected from discrimination.\1\
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    \1\ (12 U.S.C. 5511(b)(2).
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    Earlier this spring I outlined my priorities for how the Bureau 
will use its tools to carry out our mission. I shared how Congress 
granted to the Director the tools of education, regulation, 
supervision, and enforcement, each of which serves an important 
component in the Bureau's execution of its mission. I believe that the 
best application of these tools is to focus on prevention of harm to 
consumers and that includes protecting consumers from unfair, deceptive 
and abusive acts or practices as well as from discrimination. The 
Bureau's very purpose is to ensure that all consumers have access to 
consumer financial products and services which is based on having fair, 
transparent, and competitive markets.
    Protecting consumers from discrimination is one of the primary 
objectives laid out in the Dodd-Frank Act--an objective that the Bureau 
takes very seriously. Under my leadership, the Bureau will continue to 
vigorously enforce fair lending laws in our jurisdiction, and will 
stand on guard against unlawful discrimination in credit. In addition 
to that core work, the Bureau will continue to explore cutting-edge 
fair lending issues including how consumer-friendly innovation can 
increase access to credit to all consumers--and especially unbanked and 
underbanked consumers and their communities.
    I am truly excited to take the Bureau's work in fair lending to a 
new level, and I look forward to working with all stakeholders on these 
important matters.

    Sincerely,

Kathleen L. Kraninger.

Message from Patrice Alexander Ficklin,

Director, Fair Lending.

    2018 marked the Office of Fair Lending and Equal Opportunity's 
seventh full year of spearheading the Bureau's efforts to fulfill its 
fair lending mandate. It was also a year of transition for the Office 
as it prepared to move to the Director's office as part of the Office 
of Equal Opportunity and Fairness. Throughout the transition, the 
Office has continued to focus on promoting fair, equitable, and 
nondiscriminatory access to credit and has embarked on new efforts to 
coordinate the Bureau's fair lending work both internally, and with 
other governmental agencies, industry, and stakeholders to encourage 
innovation in expanding responsible credit access.
    The Bureau's supervisory and enforcement activity in 2018 focused 
on

[[Page 32421]]

mortgage lending, small business lending, and student loan servicing. 
Our mortgage lending activity focused on redlining, underwriting, 
pricing, steering, servicing, and Home Mortgage Disclosure Act data 
integrity. Redlining continues to be a priority for the Bureau in both 
mortgage lending and small business lending. The Bureau continues to 
facilitate implementation of the 2010 Dodd Frank Act amendments to HMDA 
and the subsequent changes under the Economic Growth, Regulatory 
Relief, and Consumer Protection Act.\2\
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    \2\ Public Law 115-174, 132 Stat. 1296 (2018).
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    On July 18, 2018, the Bureau announced the creation of its Office 
of Innovation and transitioned the work of Project Catalyst to this new 
office. The Bureau encourages responsible innovations that could be 
implemented in a consumer-friendly way to help serve populations 
currently underserved by the mainstream credit system. The Office 
worked closely with Project Catalyst since its inception to increase 
consumer access to credit. The Fair Lending office looks forward to the 
continued close working relationship with the Office of Innovation.
    In September 2018, the Office held a symposium, Building a Bridge 
to Credit Visibility, the first in a series of planned convenings aimed 
at expanding access to credit for consumers who face barriers to 
accessing credit. The Bureau estimates that 45 million Americans are 
credit invisible or lack sufficient credit history which in turn causes 
those consumers to face barriers to accessing credit, or pay more for 
credit. The Symposium was attended, both in-person and via web-based 
livestream video, by hundreds of stakeholders from industry, 
government, think tanks, academia, and consumer advocacy and civil 
rights organizations, representing a diverse range of experiences and 
perspectives.
    Along with the rest of the Bureau, the Office welcomed our new 
Director, Kathy Kraninger, in early December 2018 and began work to 
implement her commitment to enforce the fair lending laws under the 
Bureau's jurisdiction using the tools of education, rulemaking and 
guidance, supervision and enforcement.
    Since its inception, the Office has done tremendous work in 
fulfilling its Dodd-Frank mandate to protect America's consumers from 
lending discrimination and promote credit access.\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.

1. Access to Credit

    The Bureau is responsible for providing oversight and enforcement 
of Federal laws intended to ensure ``fair, equitable, and 
nondiscriminatory access to credit for both individuals and 
communities.'' \4\ To achieve the mission, the Bureau focuses both on 
preventing discrimination and addressing it when it happens. The Bureau 
has available a number of prevention tools: Outreach and education, and 
the issuance of guidance, promulgation of regulations, and supervision 
and enforcement.
---------------------------------------------------------------------------

    \4\ 12 U.S.C. 5493(c)(2)(A).
---------------------------------------------------------------------------

    In 2018, Fair Lending used a number of these tools and increased 
its focus on ensuring fair, equitable, and nondiscriminatory access to 
credit through: (1) Hosting a symposium on credit invisibility; (2) 
establishing collaboration with the new Office of Innovation; (3) 
monitoring a No-Action Letter; and (4) prioritizing supervisory reviews 
of third-party credit scoring models to further the Bureau's interest 
in identifying potential benefits and risks associated with the use of 
alternative data and modeling techniques.

1.1 Symposium and Report on Credit Visibility

    The CFPB has reported in recent years, in a series of 
publications,\5\ that roughly 20 percent of the adult population have 
no credit records or very limited credit records with the three 
Nationwide Credit Reporting Agencies (NCRAs). As a result, these 
``credit invisible'' and ``unscorable'' consumers are unable to fully 
participate in the credit marketplace. This can limit their ability to 
withstand financial shocks and achieve financial stability.
---------------------------------------------------------------------------

    \5\ See CFPB Data Point: Becoming Credit Visible (June 2017), 
s3.amazonaws.com/files.consumerfinance.gov/f/documents/BecomingCreditVisible_Data_Point_Final.pdf; CFPB, Who Are the Credit 
Invisibles? How to Help People with Limited Credit Histories (Dec. 
2016), s3.amazonaws.com/files.consumerfinance.gov/f/documents/201612_cfpb_credit_invisible_policy_report.pdf; CFPB, Data Point: 
Credit Invisibles (May 2015), files.consumerfinance.gov/f/201505_cfpb_data-point-credit-invisibles.pdf.
---------------------------------------------------------------------------

    In September 2018, the Bureau convened its first fair lending 
Symposium to address the issue of access to credit, entitled Building a 
Bridge to Credit Visibility. The Symposium was attended, both in-person 
and via web-based livestream video, by hundreds of stakeholders from 
industry, government, think tanks, academia, and consumer advocacy and 
civil rights organizations, representing a diverse range of experiences 
and perspectives. Panelists discussed strategies and innovations for 
overcoming barriers faced by credit invisible consumers and unscorable 
consumers and expanding credit access. The Symposium was held at CFPB 
Headquarters in Washington, DC.
    The Bureau's Building a Bridge to Credit Visibility Symposium added 
to the growing body of knowledge on the credit invisible population, 
sometimes referred to as unbanked and underbanked. The Symposium, and 
the Geography of Credit Invisibility data point \6\ released in 
conjunction with the Symposium, provided a platform where industry, 
consumer and civil rights advocates, regulators, researchers, and other 
stakeholders could raise awareness of the issues that credit invisible 
and unscorable consumers face, learn more about financial innovation 
that is happening, and shape plans for how to continue to increase 
future access to credit going forward.
---------------------------------------------------------------------------

    \6\ See CFPB, Data Point: The Geography of Credit Invisibility 
(Sept. 2018), s3.amazonaws.com/files.consumerfinance.gov/f/documents/bcfp_data-point_the-geography-of-credit-invisibility.pdf.
---------------------------------------------------------------------------

    At the Symposium, a number of stakeholders took part in substantive 
panel discussions. During the first panel, each speaker delivered a 
short talk on credit, exploring issues such as credit invisibility, 
lending deserts, and innovation to expand access to credit. During the 
second panel, panelists explored questions related to entry products 
that bridge consumers to credit visibility while also preparing them 
for financial success. During the third panel, panelists focused on 
identifying barriers and solutions to accessing credit in the small 
business lending space, and discussed the roles played by different 
stakeholders in this space. And finally, during the last panel, 
participants discussed the role alternative data and modeling 
techniques can play in expanding access to traditional credit.
    A few key themes were evident across panel discussions at the 
Symposium. These themes can inform action planning for private and 
public sector stakeholders from industry, consumer and civil rights 
advocacy organizations, academia, and government. Some of these key 
themes were:
     Strengthen the business case for expanding access to 
credit.
     Explore innovation that expands credit access without 
sacrificing consumer protections.
     Understand the experience of the credit invisible 
population.
     Recognize that ``high-touch'' relationships are important.
     Conduct more research and data analysis.

[[Page 32422]]

     Be mindful that not all credit is equal.
    At the Symposium, Jacqueline Reses from Square, Inc. and Square 
Capital (``Square'') gave the keynote address. Later in the day, Paul 
Watkins, Assistant Director of the Bureau's Office of Innovation, 
shared his vision for the new office. Finally, Bureau leaders ended the 
Symposium with a ``fireside chat,'' highlighting key themes from the 
day and exploring the ways the CFPB's mission provides the Bureau with 
tools to engage on these issues.
    Additional information including the symposium agenda, a video of 
the symposium (with closed-captioning), and an informational blog post 
can be found on the Bureau's website.\7\
---------------------------------------------------------------------------

    \7\ https://www.consumerfinance.gov/about-us/events/archive-past-events/building-bridge-credit-visibility/.
---------------------------------------------------------------------------

1.2 Collaboration With Office of Innovation

    In 2018, the Bureau prioritized innovation in part to help expand 
fair, equitable and nondiscriminatory access to credit to underserved 
populations.\8\ To lead this effort, on July 18, 2018, the Bureau 
created the Office of Innovation and transitioned the work that was 
being done under Project Catalyst to this new office. The Office of 
Innovation helps the Bureau fulfill its statutory mandate to promote 
competition, innovation, and consumer access within financial services. 
To achieve this goal, the new office focuses on creating policies to 
facilitate innovation, engaging with entrepreneurs and regulators, and 
facilitating identification of outdated and unnecessary regulations.\9\ 
Fair Lending's focus on fair, equitable, and nondiscriminatory access 
to credit for individuals and communities provides for synergy with the 
work of the Office of Innovation.
---------------------------------------------------------------------------

    \8\ Historically, the Office of Fair Lending has worked closely 
with the Bureau's Project Catalyst, which was established to 
encourage consumer-friendly innovation and entrepreneurship in 
markets for consumer financial products and services. Through 
Project Catalyst, the Bureau sought to advance consumer-friendly 
innovation by way of outreach to innovators, discussion of Special 
Purpose Credit Programs, and the No-Action Letter program. By 
staffing Project Catalyst Office Hours and engaging in discussions 
with No-Action Letter candidates, Fair Lending has worked to advance 
innovation.
    \9\ Consumer Financial Protection Bureau, Bureau of Consumer 
Financial Protection Announces Director for the Office of 
Innovation, https://www.consumerfinance.gov/about-us/newsroom/bureau-consumer-financial-protection-announces-director-office-innovation/.
---------------------------------------------------------------------------

    The Office of Innovation is in the process of revising the Bureau's 
No Action Letter (NAL) and trial disclosure policies, and establishing 
a Product Sandbox, in order to increase participation by organizations 
seeking to advance new products and services. The Bureau encourages 
innovative products and services that benefit consumers, including 
those that promote fair, equitable, and nondiscriminatory access to 
credit. As part of its coordination function, the Office of Fair 
Lending engages with potential entrants into the Bureau's Innovation 
programs, including those interested in special purpose credit programs 
\10\ to help promote credit access for underserved borrowers.
---------------------------------------------------------------------------

    \10\ Consumer Financial Protection Bureau, Supervisory 
Highlights Summer 2016 at 16-18 (June 2016), https://files.consumerfinance.gov/f/documents/Supervisory_Highlights_Issue_12.pdf.
---------------------------------------------------------------------------

1.3 Upstart No-Action Letter

    In February 2016, the Bureau issued its initial No Action Letter 
(NAL) policy, which provides Bureau staff the ability to evaluate an 
applicant's consumer financial product or service and signify that 
Bureau staff has no present intent to recommend initiation of 
supervisory or enforcement action against the entity in respect to the 
product or service.\11\
---------------------------------------------------------------------------

    \11\ The 2016 policy as submitted to the Federal Register is 
available at https://files.consumerfinance.gov/f/201602_cfpb_no-action-letter-policy.pdf. As of the issuance of this report, a 
revised NAL policy is under consideration. See Section 1.4 for more 
information.
---------------------------------------------------------------------------

    In 2018 Fair Lending continued to monitor Upstart Network, Inc. 
(Upstart) under the terms of the no-action letter it received from 
Bureau staff on September 14, 2017.
    By way of background, Upstart is a company that uses machine 
learning in making credit and pricing decisions. Based in San Carlos, 
Calif., Upstart 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 information such as 
education and employment history.
    The no-action letter issued to Upstart signified that Bureau staff 
has no present intent to recommend initiation of supervisory or 
enforcement action against Upstart with respect to the Equal Credit 
Opportunity Act. The letter applies to Upstart's model for underwriting 
and pricing applicants as described in the company's application 
materials. The no-action letter is specific to the facts and 
circumstances of the particular company and does not serve as an 
endorsement of the use of any particular variables or modeling 
techniques. In 2018 Fair Lending monitored Upstart under the terms of 
the 2017 NAL. Under the terms of the no-action letter issued by Bureau 
staff, Upstart agreed to share certain information with the CFPB 
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. In addition, Upstart agreed as part of its 
request for a NAL to employ other consumer safeguards. These 
safeguards, which are described in the application materials posted on 
the Bureau's website, include ensuring compliance with adverse action 
notice requirements, and ensuring that all of its consumer-facing 
communications are timely, transparent, and clear, and use plain 
language to convey to consumers the type of information that will be 
used in underwriting.
    The CFPB expects that this information will further its 
understanding of how the types of practices employed by Upstart impact 
access to credit generally and for traditionally underserved 
populations, as well as the application of compliance management 
systems for these emerging practices.

1.4 Models

    When making credit decisions, lenders often rely on proprietary or 
third-party credit scoring models. In recent years, new third-party 
credit scoring models have been developed for lenders based on 
information beyond the contents of a consumer's core credit file. The 
use of alternative data and modeling techniques may expand access to 
credit or lower credit cost and, at the same time, present fair lending 
risks.
    In 2018, Fair Lending recommended supervisory reviews of third-
party credit scoring models so that the Bureau ``keep[s] pace with the 
evolution of technology in consumer financial products and services in 
order to accomplish its strategic goals and objectives.'' \12\ These 
recommended reviews would focus on obtaining information and learning 
about the models and compliance systems of third-party credit scoring 
companies for the purpose of assessing fair lending risks to consumers 
and whether the models are likely to increase access to credit. 
Observations from these reviews are expected to further the Bureau's 
interest in identifying potential benefits and risks associated with 
the use of

[[Page 32423]]

alternative data and modeling techniques.
---------------------------------------------------------------------------

    \12\ CFPB Strategic Plan for FY 2018-2022, https://files.consumerfinance.gov/f/documents/cfpb_strategic-plan_fy2018-fy2022.pdf.
---------------------------------------------------------------------------

    A significant focus of the Bureau's interest in models is ways that 
alternative data and modeling may expand access to credit for consumers 
who are credit invisible or who lack enough credit history to obtain a 
credit score. The Bureau is also interested in other potential benefits 
associated with the use of alternative data and modeling techniques 
that may directly or indirectly benefit consumers, including enhanced 
creditworthiness predictions, more timely information about a consumer, 
lower costs, and operational improvements.

2. Outreach: Promoting Fair Lending Compliance and Education

    A key tool that the Bureau uses to help prevent lending 
discrimination is outreach and education. Pursuant to Dodd-Frank,\13\ 
the Office of Fair Lending regularly engages in outreach with Bureau 
stakeholders, including consumer advocates, civil rights organizations, 
industry, academia, and other government agencies, to: (1) Educate them 
about fair lending compliance and access to credit issues and (2) hear 
their views on the Bureau's work to inform the Bureau's policy 
decisions.
---------------------------------------------------------------------------

    \13\ Dodd-Frank Act section 1013(c)(2)(C) (codified at 12 U.S.C. 
5493(c)(2)(C)).
---------------------------------------------------------------------------

    The Bureau is committed to communicating directly with all 
stakeholders on its policies, compliance expectations, and fair lending 
priorities, and to receiving valuable input about fair lending issues 
and how innovation can promote fair, equitable, and nondiscriminatory 
access to credit.

2.1 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 2018 the 
Bureau published four blog posts related to fair lending topics 
including: Providing consumers updated information about a fair lending 
enforcement action,\14\ announcing the Bureau's day -long Symposium, 
Building a Bridge to Credit Visibility,\15\ announcing the release of a 
new research report on the geographic patterns of credit 
invisibility,\16\ and noting the release of the fair lending annual 
report on 2017 activities.\17\
---------------------------------------------------------------------------

    \14\ Patrice Alexander Ficklin, What you need to know to get 
money from the settlement with Bancorp South Bank for alleged 
discrimination, Consumer Financial Protection Bureau (June 5, 2018), 
https://www.consumerfinance.gov/about-us/blog/what-you-need-know-get-money-settlement-bancorpsouth-bank-alleged-discrimination/.
    \15\ Patrice Alexander Ficklin, Save the date for the `Building 
a Bridge to Credit Visibility' symposium, Consumer Financial 
Protection Bureau (Aug. 02, 2018), https://www.consumerfinance.gov/about-us/blog/save-date-building-bridge-credit-visibility-symposium/.
    \16\ Ken Brevoort & Patrice Ficklin, New research report on the 
geography of credit invisibility, Consumer Financial Protection 
Bureau (Sept. 19, 2018), https://www.consumerfinance.gov/about-us/blog/new-research-report-geography-credit-invisibility/.
    \17\ Patrice Alexander Ficklin, Promoting fair, equitable, and 
nondiscriminatory access to credit: 2017 Fair Lending Report (Dec. 
4, 2018), https://www.consumerfinance.gov/about-us/blog/promoting-fair-equitable-and-nondiscriminatory-access-credit-2017-fair-lending-report/.
---------------------------------------------------------------------------

    The Bureau's blog posts, including those related to fair lending, 
may be accessed at www.consumerfinance.gov/blog.

2.2 Supervisory Highlights

    Supervisory Highlights has long been a report that anchors the 
Bureau's efforts to communicate about the Bureau's supervisory 
activity. More information about the fair lending topics discussed this 
year in Supervisory Highlights can be found in Section 5.1.1 of this 
Report. As with all Bureau resources, all editions of Supervisory 
Highlights are available on www.consumerfinance.gov/reports.

2.3 Speaking Engagements and Roundtables

    Staff from the Bureau's Office of Fair Lending and Equal 
Opportunity participated in a number of outreach speaking events and 
roundtables throughout 2018 to: (1) Educate them about fair lending 
compliance and access to credit issues and (2) hear their views on the 
Bureau's work to inform the bureau's policy decisions. In these events, 
staff shared information on fair lending priorities, emerging issues, 
and heard feedback from stakeholders on fair lending issues and how 
innovation can promote fair, equitable, and nondiscriminatory access to 
credit. Some examples of the topics covered include fair lending 
priorities, fair lending model governance, innovations in lending, 
redlining, HMDA, small business lending, alternative data, and 
installment lending contracts. In addition to these outreach events, 
the 2018 Symposium, discussed in Section 1.1 of this Report, served as 
a principal vehicle to exchange information related to access to credit 
to inform the Bureau's policy making activity.

3.0 Guidance and Rulemaking

3.1 HMDA Exemptions Under EGRRCPA

    As part of the Bureau's efforts to enforce Home Mortgage Disclosure 
Act (HMDA) and its implementing regulation, Regulation C, on August 31, 
2018, the Bureau issued an interpretive and procedural rule to 
implement and clarify the requirements of section 104(a) of the 
Economic Growth, Regulatory Relief, and Consumer Protection Act 
(EGRRCPA), which earlier in 2018 amended certain provisions of 
HMDA.\18\
---------------------------------------------------------------------------

    \18\ Public Law 115-174, 132 Stat. 1296 (2018).
---------------------------------------------------------------------------

    The rule clarifies that insured depository institutions and insured 
credit unions covered by a partial exemption have the option of 
reporting exempt data fields as long as they report all data fields 
within any exempt data point for which they report data; clarifies that 
only loans and lines of credit that are otherwise HMDA reportable count 
toward the thresholds for the partial exemptions; clarifies which of 
the data points in Regulation C are covered by the partial exemptions; 
designates a non-universal loan identifier for partially exempt 
transactions for institutions that choose not to report a universal 
loan identifier; and clarifies the exception to the partial exemptions 
for negative Community Reinvestment Act examination history. The rule 
also provided that at a later date, the Bureau would initiate a notice-
and-comment rulemaking to incorporate these interpretations and 
procedures into Regulation C and further implement the Act.\19\
---------------------------------------------------------------------------

    \19\ Consumer Financial Protection Bureau, Partial Exemptions 
from the Requirements of the Home Mortgage Disclosure Act Under the 
Economic Growth, Regulatory Relief, and Consumer Protection Act 
(Regulation C) (September 7, 2018), 45325-45333, 83 FR 45325, 
https://www.federalregister.gov/documents/2018/09/07/2018-19244/partial-exemptions-from-the-requirements-of-the-home-mortgage-disclosure-act-under-the-economic.
---------------------------------------------------------------------------

    The Bureau also engaged in a number of non-rulemaking activities to 
facilitate the EGRRCPA implementation. The Bureau reviewed its 
compliance guides and examination manuals to make appropriate updates, 
as well as engaged with stakeholders regarding the issuance of guidance 
to meet the statutory requirements and facilitate compliance.\20\
---------------------------------------------------------------------------

    \20\ Kelly Cochran, Fall 2018 rulemaking agenda (October 17, 
2018), https://www.consumerfinance.gov/about-us/blog/fall-2018-rulemaking-agenda/.
---------------------------------------------------------------------------

3.2 HMDA Data Disclosure

    On December 21, 2018, the Bureau issued final policy guidance 
describing

[[Page 32424]]

modifications that it intends to apply to the HMDA data reported by 
financial institutions before the data are made public on the loan 
level. In issuing the guidance, the Bureau considered how appropriately 
to protect applicant and borrower privacy while also fulfilling HMDA's 
public disclosure purposes. The policy guidance applies to data 
compiled by financial institutions in 2018 that will be made available 
to the public beginning in 2019. In addition, after consideration of 
stakeholder comments urging that determinations concerning the 
disclosure of loan-level HMDA data be effectuated through more formal 
processes, the Bureau also has decided to add a new notice-and-comment 
rulemaking to govern the disclosure of HMDA data in future years, which 
was included in the Bureau's Fall 2018 rulemaking agenda.

3.3 ECOA and Regulation B

    On May 21, 2018, in response to the enactment of a Congressional 
resolution disapproving the Bureau's indirect auto lending guidance, 
the Bureau's former Acting Director issued a statement indicating the 
Bureau's intent to reexamine requirements of the ECOA regarding the 
disparate impact doctrine in light of recent Supreme Court case law 
addressing the availability of disparate impact legal theory under the 
Fair Housing Act.\21\
---------------------------------------------------------------------------

    \21\ Statement of the Bureau of Consumer Financial Protection on 
enactment of S.J. Res. 57 (May 21, 2018), https://www.consumerfinance.gov/about-us/newsroom/statement-bureau-consumer-financial-protection-enactment-sj-res-57/; see also Fall 2018 
Regulatory Agenda Preamble (Aug. 30, 2018), available at https://www.reginfo.gov/public/jsp/eAgenda/StaticContent/201810/Preamble_3170.html.
---------------------------------------------------------------------------

    On April 19, 2019, the Bureau announced that it would be conducting 
a symposia series exploring consumer protections in the financial 
services marketplace. One topic of the symposia series is disparate 
impact and the Equal Credit Opportunity Act.\22\ Details regarding the 
symposium will be announced on the Bureau's website at a later time.
---------------------------------------------------------------------------

    \22\ Consumer Financial Protection Bureau Announces Symposia 
Series (April 8, 2019), https://www.consumerfinance.gov/about-us/newsroom/bureau-announces-symposia-series/.
---------------------------------------------------------------------------

3.4 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.
    In connection with its Fall 2018 Rulemaking Agenda,\23\ the Bureau 
announced that in light of the need to focus additional resources on 
various HMDA initiatives, the Bureau had adjusted its timeline for 
implementing the statutory directive contained in section 1071 from 
pre-rule status to longer-term action status. More recently, in 
connection with its Spring 2019 Rulemaking Agenda,\24\ the Bureau 
announced it intends to recommence work later this year to develop 
rules to implement section 1071 of the Dodd-Frank Act. The Bureau will 
recommence its work on section 1071 with a symposium on small business 
loan data collection.\25\ Details regarding the symposium will be 
announced on the Bureau's website at a later time.
---------------------------------------------------------------------------

    \23\ Kelly Cochran, Fall 2018 rulemaking agenda (October 17, 
2018), https://www.consumerfinance.gov/about-us/blog/fall-2018-rulemaking-agenda/.
    \24\ Diane Thompson, Spring 2019 rulemaking agenda (May 22, 
2019), https://www.consumerfinance.gov/about-us/blog/spring-2019-rulemaking-agenda/.
    \25\ Consumer Financial Protection Bureau Announces Symposia 
Series (April 8, 2019), https://www.consumerfinance.gov/about-us/newsroom/bureau-announces-symposia-series/.
---------------------------------------------------------------------------

3.5 Amicus Program

    The Bureau files amicus, or friend-of-the-court, briefs in 
significant court cases concerning the federal consumer financial 
protection laws, including ECOA. These amicus briefs provide the courts 
with Bureau views on significant consumer financial protection issues. 
Information regarding the Bureau's amicus program, including a 
description of the amicus briefs it has filed, is available on the 
Bureau's website.\26\
---------------------------------------------------------------------------

    \26\ https://www.consumerfinance.gov/policy-compliance/amicus/.
---------------------------------------------------------------------------

4. Supervision and Enforcement Prioritization

4.1 Risk-Based Prioritization

    Because Congress charged the Bureau with responsibility for 
overseeing many lenders and products, SEFL, including the Office of 
Fair Lending, have long-used 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.\27\ This same approach continued in 2018.
---------------------------------------------------------------------------

    \27\ For additional information regarding the Bureau's risk-
based approach in prioritizing supervisory examinations, see Section 
3.2.3, Risk-Based Approach to Examinations, Supervisory Highlights 
Summer 2013, available at http://files.consumerfinance.gov/f/201308_cfpb_supervisory-highlights_august.pdf.
---------------------------------------------------------------------------

    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.
    The fair lending prioritization process incorporates a number of 
additional factors as well, including: Tips and leads from industry 
whistleblowers, advocacy groups, and government agencies; supervisory 
and enforcement history; consumer complaints; and results from analysis 
of HMDA and other publicly available data.

4.2 Fair Lending Supervisory and Enforcement Priorities

    While the Bureau remains committed to ensuring that consumers are 
protected from discrimination in all credit markets under its legal 
authority, as a result of its annual risk-based prioritization process 
in 2018, the Bureau identified the following new focus areas for fair 
lending examinations or investigations:
     Student Loan Origination: Whether there is discrimination 
in policies and practices governing underwriting and pricing.
     Debt Collection and Model Use: Whether there is 
discrimination in policies and practices governing auto servicing and 
credit card collections, including the use of models that predict 
recovery outcomes.
    The Bureau's fair lending supervision work also continued to focus 
on mortgage origination, mortgage servicing, and small business 
lending, as in previous years.
    The Bureau's mortgage origination work continued to focus on: (a) 
Redlining and whether lenders intentionally discouraged prospective 
applicants living in or seeking credit in minority neighborhoods from 
applying for credit; (b) assessing whether there is discrimination in 
underwriting and pricing processes as well as steering; and (c) HMDA 
data integrity and

[[Page 32425]]

validation (supporting ECOA exams) as well as HMDA diagnostic work 
(monitoring and assessing new rule compliance).
    The Bureau's mortgage servicing fair lending supervision work 
explored whether there is discrimination in the default servicing 
processes at particular institutions, and focused on whether there are 
weaknesses in fair lending-related compliance management systems.
    The Bureau's small business lending supervision work focused on 
assessing whether (1) there is discrimination in application, 
underwriting, and pricing processes, (2) creditors are redlining, and 
(3) there are weaknesses in fair lending related compliance management 
systems.
    The Bureau also continued to vigorously enforce Federal fair 
lending laws, including ECOA and HMDA. 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.

5. Fair Lending Supervision

    One of the Bureau's consumer protection tools is its supervisory 
examinations. 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 2018 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 or creates fair lending risk, the 
Bureau communicates its supervisory recommendations to the institution 
to help the institution consider fair lending compliance programs 
commensurate with the size and complexity of the institution and its 
lines of business.\28\ In circumstances where examinations identify 
violations of fair lending laws, institutions may be required to 
provide remediation and restitution to consumers, along with other 
appropriate relief. In accordance with law, the Bureau is mandated to 
refer 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.\29\ The Bureau also may refer 
other potential ECOA violations to the Justice Department, at its 
discretion.\30\
---------------------------------------------------------------------------

    \28\ 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.
    \29\ 15 U.S.C. 1691e(g).
    \30\ Id.
---------------------------------------------------------------------------

5.1.1 Fair Lending Supervisory Developments

    The Bureau published various supervision program developments 
related to fair lending in the Summer 2018 edition of Supervisory 
Highlights. Those developments are also summarized below.\31\
---------------------------------------------------------------------------

    \31\ Consumer Financial Protection Bureau, Supervisory 
Highlights Summer 2018 at 18-20 (September 2018), https://www.consumerfinance.gov/documents/6817/bcfp_supervisory-highlights_issue-17_2018-09.pdf.
---------------------------------------------------------------------------

5.1.2 HMDA Implementation and New Data Submission Platform

    The Summer 2018 edition of Supervisory Highlights \32\ noted its 
prior statement regarding HMDA implementation and discussed updates to 
HMDA related to the enactment of the EGRRCPA.
---------------------------------------------------------------------------

    \32\ Id.
---------------------------------------------------------------------------

    On December 21, 2017, the Bureau issued a public statement 
regarding HMDA implementation.\33\ The statement indicated that, ``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.'' The 
Bureau further indicated that examinations of 2018 HMDA data would be 
diagnostic in nature, serving to help institutions identify compliance 
weakness and crediting good faith efforts.\34\ The statement also noted 
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.'' \35\
---------------------------------------------------------------------------

    \33\ CFPB Issues Public Statement on Home Mortgage Disclosure 
Act Compliance (December 21, 2017), available at https://www.consumerfinance.gov/about-us/newsroom/cfpb-issues-public-statement-home-mortgage-disclosure-act-compliance/.
    \34\ Id.
    \35\ Id.
---------------------------------------------------------------------------

    In January 2018, the Bureau launched a new HMDA Platform to collect 
and publish HMDA data. The HMDA Platform is operated by the Bureau on 
behalf of the members of the Federal Financial Institutions Examination 
Council (FFIEC) and the Department of Housing and Urban Development. 
The new platform modernizes the HMDA collection process, and aims to 
reduce the time to deliver HMDA data to the public. New capabilities 
will continue to be added to this platform, including a forthcoming 
publication query tool and Application Programming Interface (API) that 
will replace the previous API.
    The previous Bureau HMDA Explorer and API that are scheduled to be 
retired had been designed to support a previous generation of HMDA data 
and were not able to accommodate the expanded data points in the 2018 
collection that were added pursuant to the 2015 HMDA Rule. The tool had 
not had any major updates since its release in 2013. In order to 
prepare for the retirement of the old site, the Bureau conducted a 
number of interviews with community groups and HMDA stakeholders over 
last summer to develop a new set of requirements based on the needs of 
data users. The new query tool, HMDA Data Browser, will be released 
late Summer 2019 on the new HMDA Platform.
    The Summer 2018 Supervisory Highlights also discussed the Bureau's 
July 5, 2018 public statement regarding recent HMDA amendments under 
the EGRRCPA. The EGRRCPA provided partial exemptions for some insured 
depository institutions and insured credit unions from certain HMDA 
requirements. The Bureau indicated that the EGRRCPA would not affect 
the format of the HMDA Loan Application Registry (LAR).\36\ 
Institutions that were no longer required to report certain data fields 
under the EGRRCPA would instead enter an exemption code in the field. 
On August 31, 2018, the Bureau published an updated Filing Instructions 
Guide which added exemption codes to the requisite data fields under 
the EGRRCPA.\37\
---------------------------------------------------------------------------

    \36\ Consumer Financial Protection Bureau, Supervisory 
Highlights Summer 2018 at 19 (September 2018), https://www.consumerfinance.gov/documents/6817/bcfp_supervisory-highlights_issue-17_2018-09.pdf.
    \37\ Filing Instructions Guide for HMDA Data Collected in 2018 
(August 2018), https://s3.amazonaws.com/cfpb-hmda-public/prod/help/2018-hmda-fig-2018-hmda-rule.pdf.
---------------------------------------------------------------------------

    More information about the HMDA-related topics discussed this year 
in Supervisory Highlights can be found in Section 3 of this Report.

5.1.3 Small Business Lending Review Procedures

    The Summer 2018 edition of Supervisory Highlights \38\ reported on 
the Bureau's fair lending work in small

[[Page 32426]]

business lending where the Bureau seeks to ensure that creditors do not 
discriminate on any prohibited bases. The Supervisory Highlights 
discussed the procedures and methodologies used as part of the Bureau's 
small business examination process.
---------------------------------------------------------------------------

    \38\ Id. at 20-21.
---------------------------------------------------------------------------

    Each ECOA small business lending review includes a fair lending 
assessment of the institution's Compliance Management System (CMS) 
related to small business lending. To conduct this portion of the 
review, examinations use Module II of the ECOA Baseline Review 
Modules.\39\ CMS reviews include assessments of the institution's board 
and management oversight, compliance program (policies and procedures, 
training, monitoring and/or audit, and complaint response), and service 
provider oversight.
---------------------------------------------------------------------------

    \39\ Equal Credit Opportunity Act (ECOA) Baseline Review 
Procedures (April 2019), https://www.consumerfinance.gov/policy-compliance/guidance/supervision-examinations/equal-credit-opportunity-act-ecoa-baseline-review-procedures/.
---------------------------------------------------------------------------

    Examinations also use the Interagency Fair Lending Examination 
Procedures, which have been adopted in the Bureau's Supervision and 
Examination Manual. In some ECOA small business lending reviews, 
examination teams may evaluate an institution's fair lending risks and 
controls related to origination or pricing of small business lending 
products. Some reviews may include a geographic distribution analysis 
of small business loan applications, originations, loan officers, or 
marketing and outreach, in order to assess potential redlining risk.
    As with other in-depth ECOA reviews, ECOA small business lending 
reviews may include statistical analysis of lending data in order to 
identify fair lending risks and appropriate areas of focus during the 
examination. Notably, statistical analysis is only one factor taken 
into account by examination teams that review small business lending 
for ECOA compliance. Reviews typically include other methodologies to 
assess compliance, including policy and procedure reviews, interviews 
with management and staff, and reviews of individual loan files.

6.0 Fair Lending Enforcement

    In addition to supervision, the Bureau's enforcement function is 
another tool to protect consumers. 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. In 2018, the 
Bureau opened and continued a number of fair-lending-related 
investigations, however, it did not bring fair lending-related 
enforcement actions.
    The Bureau refers matters with ECOA violations to the DOJ when it 
has reason to believe that a creditor has engaged in a pattern or 
practice of lending discrimination.\40\ A referral does not prevent the 
Bureau from taking its own independent action to address a violation.
---------------------------------------------------------------------------

    \40\ 15 U.S.C. 1691e(g).
---------------------------------------------------------------------------

6.1 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 
2018, 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.

6.1.1 Settlement Administration

Bancorp South Bank
    On June 25, 2018 participation materials were mailed to potentially 
eligible African-American borrowers identified as harmed by Bancorp 
South's alleged redlining discrimination in mortgage lending between 
2011 and 2015 notifying them how to participate in the settlement, 
resulting from a 2016 enforcement action brought by the Bureau and 
Justice Department against Bancorp South for alleged redlining and 
pricing discrimination in mortgage lending.\41\
---------------------------------------------------------------------------

    \41\ Consent Order, United States of America and Consumer 
Financial Protection Bureau v. Bancorp South Bank, CFPB No. 
1:16cv118 (July 25, 2016) https://www.consumerfinance.gov/documents/519/201606_cfpb_bancorpSouth-consent-order.pdf.
---------------------------------------------------------------------------

Fifth Third Bank
    On December 17, 2018, participating African-American and Hispanic 
borrowers, whom Fifth Third overcharged for their auto loans, were 
mailed checks totaling $12 million, plus accrued interest, resulting 
from a 2015 enforcement action brought by the Bureau and the Justice 
Department against Fifth Third for alleged discrimination in auto 
lending.\42\
---------------------------------------------------------------------------

    \42\ Consent Order, In re Fifth Third Bank, CFPB No. 2015-CFPB-
0024 (Sept. 28, 2015), https://www.consumerfinance.gov/about-us/newsroom/cfpb-takes-action-against-fifth-third-bank-for-auto-lending-discrimination-and-illegal-credit-card-practices/.
---------------------------------------------------------------------------

Honda Finance
    In 2018 the Bureau conducted activity following the 2015 
enforcement action against Honda Finance. By way of background, on July 
14, 2015, working in close coordination with the DOJ, the Bureau 
ordered American Honda Finance Corporation (Honda Finance) to pay $24 
million in damages to harmed African-American, Hispanic, and Asian or 
Pacific Islander borrowers. 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 
compensating them for their harm. During 2018, the administration of 
the settlement consisted largely of monitoring consumer responses, 
check cashing rates and following up with respect to uncashed checks to 
determine better ways to contact eligible consumers and encourage check 
cashing.
Provident Funding Associates
    In 2018 the Bureau completed its work implementing the consumer 
redress provisions of the consent order in the Provident Funding 
Associates (Provident) matter. Working jointly with DOJ, the agencies 
filed a complaint on May 28, 2015 alleging that Provident unlawfully 
discriminated against African-American and Hispanic borrowers by 
overcharging them on their mortgage loans. The consent order required 
that Provident pay $9 million in restitution. On November 2, 2017, 
participating African-American and Hispanic borrowers who were 
unlawfully overcharged on their mortgage loans were mailed checks. On 
November 6, 2018, the Bureau completed the process for the mailing of 
remuneration checks, totaling $9 million, plus accrued interest, to 
eligible borrowers.\43\
---------------------------------------------------------------------------

    \43\ 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/.
---------------------------------------------------------------------------

6.1.2 ECOA Referrals to the Department of Justice

    The Bureau must refer to the Justice Department (DOJ) a matter when 
it has

[[Page 32427]]

reason to believe that a creditor has engaged in a pattern or practice 
of lending discrimination in violation of ECOA.\44\ The Bureau also may 
refer other potential ECOA violations to the DOJ.\45\ In 2018, the 
Bureau did not refer any ECOA violations to the Justice Department.
---------------------------------------------------------------------------

    \44\ 15 U.S.C. 1691e(g).
    \45\ Id.
---------------------------------------------------------------------------

6.1.3 Pending Fair Lending Investigations

    In 2018, the Bureau had a number of ongoing fair lending 
investigations of institutions involving a variety of consumer 
financial products. 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. At the 
end of 2018, the Bureau had a number of pending investigations in this 
and other areas.

7.0 Interagency Coordination

7.1 Interagency Coordination and Engagement

    In 2018, the Office of Fair Lending coordinated 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.\46\ 
This interagency engagement seeks to address current and emerging fair 
lending risks.
---------------------------------------------------------------------------

    \46\ Dodd-Frank Act section 1013(c)(2)(B) (codified at 12 U.S.C. 
5493(c)(2)(B)).
---------------------------------------------------------------------------

    The Bureau, along with the Federal Trade Commission (FTC), 
Department of Housing and Urban Development (HUD), Federal Deposit 
Insurance Corporation (FDIC), Federal Reserve Board (FRB), National 
Credit Union Administration (NCUA), Office of the Comptroller of the 
Currency (OCC), Department of Justice (DOJ), and the Federal Housing 
Finance Agency (FHFA), comprise the Interagency Task Force on Fair 
Lending.\47\ 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.
---------------------------------------------------------------------------

    \47\ In early 2019, the Bureau assumed the role of chairing the 
Task Force.
---------------------------------------------------------------------------

    The Bureau also 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 the 
Bureau's fair lending work.
    In 2018, 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.

8. 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.\48\ 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.\49\
---------------------------------------------------------------------------

    \48\ 15 U.S.C. 1691f.
    \49\ 12 U.S.C. 2807.
---------------------------------------------------------------------------

8.1 Reporting on 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.

8.2 Public Enforcement Actions

    The agencies charged with administrative enforcement of ECOA under 
Section 704 are as follows:
    1. CFPB;
    2. Federal Deposit Insurance Corporation (FDIC);
    3. Federal Reserve Board (FRB);
    4. National Credit Union Administration (NCUA);
    5. Office of the Comptroller of the Currency (OCC); \50\
---------------------------------------------------------------------------

    \50\ Collectively, 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 (the Bureau) comprise the FFIEC. 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, http://www.ffiec.gov 
(last visited April 5, 2018). The State Liaison Committee was added 
to FFIEC in 2006 as a voting member.
---------------------------------------------------------------------------

    6. Agricultural Marketing Service (AMS) of the U.S. Department of 
Agriculture (USDA),\51\
---------------------------------------------------------------------------

    \51\ 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.
---------------------------------------------------------------------------

    7. Department of Transportation (DOT);
    8. Farm Credit Administration (FCA);
    9. Federal Trade Commission (FTC);
    10. Securities and Exchange Commission (SEC); and
    11. Small Business Administration (SBA).\52\
---------------------------------------------------------------------------

    \52\ 15 U.S.C. 1691c.
---------------------------------------------------------------------------

    In 2018, none of the eleven ECOA enforcement agencies brought 
public enforcement actions for violations of ECOA.
    Below is an overview of the year-to-year ECOA enforcement actions 
since 2012:

------------------------------------------------------------------------
                                                               Total
                     Reporting year                         enforcement
                                                              matters
------------------------------------------------------------------------
2012....................................................               1
2013....................................................              26
2014....................................................               2
2015....................................................               5
2016....................................................               3
2017....................................................               1
2018....................................................               0
------------------------------------------------------------------------

8.1.2 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 as follows:

[[Page 32428]]



     Table 1--Regulation B Violations Cited by FFIEC Agencies: 2018
------------------------------------------------------------------------
                                                        Regulation B
             FFIEC agencies reporting                 violations: 2018
------------------------------------------------------------------------
The Bureau, FDIC, FRB, NCUA, OCC..................  12 CFR 1002.4(a):
                                                     Discrimination on a
                                                     prohibited basis in
                                                     a credit
                                                     transaction.
                                                    12 CFR 1002.9(a)(1),
                                                     (a)(2), (b)(2),
                                                     (c): 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
                                                     1002.14(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.
------------------------------------------------------------------------


   Table 2--Regulation B Violations Cited by Other ECOA Agencies: 2017
------------------------------------------------------------------------
                                                        Regulation B
                Other ECOA agencies                   violations: 2018
------------------------------------------------------------------------
FCA...............................................  12 CFR
                                                     1002.9(a)(1)(i),
                                                     (a)(2)(i), (b)(1):
                                                     Failure to provide
                                                     notice to the
                                                     applicant 30 days
                                                     after receiving a
                                                     completed
                                                     application
                                                     concerning the
                                                     creditor's approval
                                                     of, counteroffer or
                                                     adverse action on
                                                     the application;
                                                     failure to provide
                                                     sufficient
                                                     information in an
                                                     adverse action
                                                     notification,
                                                     including the
                                                     specific reasons
                                                     for the action
                                                     taken; failure to
                                                     provide ECOA
                                                     notice.
                                                    12 CFR 1002.13:
                                                     Failure to request
                                                     and collect
                                                     information for
                                                     monitoring
                                                     purposes.
------------------------------------------------------------------------

    The AMS, SEC and the SBA reported that they received no complaints 
based on ECOA or Regulation B in 2018. In 2018, 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.

8.2 Referrals to the Department of Justice

    In 2018, one FFIEC agency, the NCUA, made a referral to the DOJ 
involving discrimination in violation of ECOA. The NCUA made its 
referral on the basis of marital status discrimination.
    Below is a year-to-year overview of ECOA referrals to DOJ:

------------------------------------------------------------------------
                                                             Number of
                          Year                               referrals
------------------------------------------------------------------------
2012....................................................              12
2013....................................................              24
2014....................................................              18
2015....................................................              16
2016....................................................              20
2017....................................................              11
2018....................................................               1
------------------------------------------------------------------------

8.3 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.\53\ The 
Bureau, in consultation with HUD, finds that itemization and tabulation 
of these data furthers the purposes of HMDA.
---------------------------------------------------------------------------

    \53\ See 12 U.S.C. 2807.

                        Appendix A: Defined Terms
------------------------------------------------------------------------
                       Term                              Definition
------------------------------------------------------------------------
AMS...............................................  Agricultural
                                                     Marketing Service
                                                     of the U.S.
                                                     Department of
                                                     Agriculture.
Bureau............................................  The Bureau of
                                                     Consumer Financial
                                                     Protection.
CMS...............................................  Compliance
                                                     Management System.
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.
EGRRCPA...........................................  Economic Growth,
                                                     Regulatory Relief,
                                                     and Consumer
                                                     Protection Act.
FCA...............................................  Farm Credit
                                                     Administration.
FDIC..............................................  Federal Deposit
                                                     Insurance
                                                     Corporation.
Federal Reserve Board or FRB......................  Board of Governors
                                                     of the Federal
                                                     Reserve System.

[[Page 32429]]

 
FFIEC.............................................  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 (The
                                                     Bureau). The State
                                                     Liaison Committee
                                                     was added to FFIEC
                                                     in 2006 as a voting
                                                     member.
FTC...............................................  Federal Trade
                                                     Commission.
GIPSA.............................................  Grain Inspection,
                                                     Packers and
                                                     Stockyards
                                                     Administration 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...............................................  Office of the
                                                     Comptroller of the
                                                     Currency.
SBA...............................................  Small Business
                                                     Administration.
SEC...............................................  Securities and
                                                     Exchange
                                                     Commission.
USDA..............................................  U.S. Department of
                                                     Agriculture.
------------------------------------------------------------------------


Kathleen L. Kraninger,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2019-14384 Filed 7-5-19; 8:45 am]
 BILLING CODE 4810-AM-P