Fair Lending Report of the Bureau of Consumer Financial Protection, April 2021, 22177-22192 [2021-08716]

Download as PDF Federal Register / Vol. 86, No. 79 / Tuesday, April 27, 2021 / Notices NMFS proposes to authorize incidental take of 16 marine mammal species (with 17 managed stocks). The total amount of takes proposed for authorization relative to the best available population abundance is less than 8 percent for one stock (bottlenose dolphin northern coastal migratory stock) and less than 4 percent of all other species and stocks, which NMFS preliminarily finds are small numbers of marine mammals relative to the estimated overall population abundances for those stocks (please see Table 4). Based on the analysis contained herein of the proposed activity (including the proposed mitigation and monitoring measures) and the anticipated take of marine mammals, NMFS preliminarily finds that small numbers of marine mammals will be taken relative to the population size of the affected species or stocks. Unmitigable Adverse Impact Analysis and Determination There are no relevant subsistence uses of the affected marine mammal stocks or species implicated by this action. Therefore, NMFS has determined that the total taking of affected species or stocks would not have an unmitigable adverse impact on the availability of such species or stocks for taking for subsistence purposes. jbell on DSKJLSW7X2PROD with NOTICES Endangered Species Act Section 7(a)(2) of the Endangered Species Act of 1973 (16 U.S.C. 1531 et seq.) requires that each Federal agency insure that any action it authorizes, funds, or carries out is not likely to jeopardize the continued existence of any endangered or threatened species or result in the destruction or adverse modification of designated critical habitat. To ensure ESA compliance for the issuance of IHAs, NMFS consults internally whenever NMFS proposes to authorize take for endangered or threatened species, in this case with NMFS Greater Atlantic Regional Fisheries Office (GARFO). The NMFS OPR is proposing to authorize the incidental take of four species of marine mammals which are listed under the ESA: The North Atlantic right, fin, sei, and sperm whales. The OPR has requested initiation of Section 7 consultation with NMFS GARFO for the issuance of this IHA. NMFS will conclude the ESA section 7 consultation prior to reaching a determination regarding the proposed issuance of the authorization. VerDate Sep<11>2014 18:52 Apr 26, 2021 Jkt 253001 Proposed Authorization As a result of these preliminary determinations, NMFS proposes to issue an IHA to Garden State for conducting marine site characterization surveys off the coasts of Delaware and New Jersey for one year from the date of issuance, provided the previously mentioned mitigation, monitoring, and reporting requirements are incorporated. A draft of the proposed IHA can be found at https://www.fisheries.noaa.gov/permit/ incidental-take-authorizations-undermarine-mammal-protection-act. Request for Public Comments We request comment on our analyses, the proposed authorization, and any other aspect of this notice of proposed IHA for the proposed marine site characterization surveys. We also request at this time comment on the potential renewal of this proposed IHA as described in the paragraph below. Please include with your comments any supporting data or literature citations to help inform decisions on the request for this IHA or a subsequent renewal IHA. On a case-by-case basis, NMFS may issue a one-time, 1-year renewal IHA following notice to the public providing an additional 15 days for public comments when (1) up to another year of identical or nearly identical, or nearly identical, activities as described in the Description of Proposed Activity section of this notice is planned or (2) the activities as described in the Description of Proposed Activity section of this notice would not be completed by the time the IHA expires and a renewal would allow for completion of the activities beyond that described in the Dates and Duration section of this notice, provided all of the following conditions are met: • A request for renewal is received no later than 60 days prior to the needed renewal IHA effective date (recognizing that the renewal IHA expiration date cannot extend beyond one year from expiration of the initial IHA). • The request for renewal must include the following: (1) An explanation that the activities to be conducted under the requested renewal IHA are identical to the activities analyzed under the initial IHA, are a subset of the activities, or include changes so minor (e.g., reduction in pile size) that the changes do not affect the previous analyses, mitigation and monitoring requirements, or take estimates (with the exception of reducing the type or amount of take). (2) A preliminary monitoring report showing the results of the required PO 00000 Frm 00048 Fmt 4703 Sfmt 4703 22177 monitoring to date and an explanation showing that the monitoring results do not indicate impacts of a scale or nature not previously analyzed or authorized. Upon review of the request for renewal, the status of the affected species or stocks, and any other pertinent information, NMFS determines that there are no more than minor changes in the activities, the mitigation and monitoring measures will remain the same and appropriate, and the findings in the initial IHA remain valid. Dated: April 21, 2021. Catherine Marzin, Acting Director, Office of Protected Resources, National Marine Fisheries Service. [FR Doc. 2021–08681 Filed 4–26–21; 8:45 am] BILLING CODE 3510–22–P BUREAU OF CONSUMER FINANCIAL PROTECTION Fair Lending Report of the Bureau of Consumer Financial Protection, April 2021 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 ninth Fair Lending Report of the Bureau of Consumer Financial Protection (Fair Lending Report) to Congress. The Bureau is committed to ensuring fair, equitable, and nondiscriminatory access to credit for both individuals and communities. This report describes our fair lending activities in supervision and enforcement; guidance and rulemaking; interagency coordination; and outreach and education for calendar year 2020. DATES: The Bureau released the 2020 Fair Lending Report on its website on April 14, 2021. 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, April 2021 Message From the Acting Director The Bureau recognizes April as fair lending and fair housing month—a time to specifically highlight the importance of equity in our financial markets. As E:\FR\FM\27APN1.SGM 27APN1 jbell on DSKJLSW7X2PROD with NOTICES 22178 Federal Register / Vol. 86, No. 79 / Tuesday, April 27, 2021 / Notices such, I am pleased to present the Fair Lending Annual Report to Congress, describing the Consumer Financial Protection Bureau’s fair lending work in 2020. I want to express how incredibly proud I am of the Bureau, the Office of Fair Lending and Equal Opportunity (Office of Fair Lending) and the work they have been able to accomplish in the past year—a challenging year for all of us on so many different levels. As I have made clear before, as Acting Director, my top priorities for this agency are to take bold and swift action to address issues of pervasive racial injustice and the long-term economic impacts of the COVID–19 pandemic on consumers. Although the true severity of the economic impacts of COVID–19 are just starting to be understood, it is clear that the pandemic is exacerbating racial inequality in all markets, including rising housing insecurity among the most vulnerable consumers. This, combined with the lingering impacts of over 400 years of chattel slavery and Jim Crow laws that sought to limit racial equality through institutionalized discrimination, deepens our nation’s longstanding racial inequities. To fully understand and address these issues, it is crucial that the Bureau apply a racial equity lens and to find practical ways to make freedom from racial prejudice and pursuit of racial equity a priority in the full breadth of the Bureau’s work. The Office of Fair Lending will play an integral part in achieving this mission. The Dodd-Frank Wall Street Reform and Consumer Protection Act (DoddFrank Act) established the Bureau’s Office of Fair Lending to provide ‘‘oversight and enforcement of Federal laws intended to ensure the fair, equitable, and nondiscriminatory access to credit for both individuals and communities.’’ During my tenure, the Bureau will continue to use all the tools Congress gave it, including enforcement, supervision, rulemaking, guidance, research, and education to ensure fair, equitable and nondiscriminatory access to credit. The Bureau will identify and act on opportunities to focus on consumers in underserved communities, while vigorously pursuing racial and economic justice. This includes, but is in no way limited to, robust enforcement of fair lending laws under the Bureau’s jurisdiction. As we are in the midst of a national emergency the likes of which have not been seen in a lifetime, the time for bold action is now. The hard work has already begun. I am eager for all that the Bureau, and the Office of Fair Lending, VerDate Sep<11>2014 18:52 Apr 26, 2021 Jkt 253001 will accomplish on behalf of all consumers. Sincerely, David K. Uejio. Message From the Fair Lending Director The events of 2020 challenged our nation in many ways. The COVID–19 pandemic has caused great physical, emotional, and economic suffering. Millions of Americans face economic uncertainty and financial insecurity, are underemployed or unemployed, are at the brink of eviction or foreclosure, and are desperate for help. Of those struggling, people and communities of color have been disproportionately affected. Womenand minority-owned small businesses are more likely to face more severe economic consequences than their white counterparts. Black and Hispanic homeowners are also less likely to access mortgage relief and forbearance, a troubling trend that the Bureau will continue to address. Further, I would be remiss to not say the names of Black men, women, and children like George Floyd, Breonna Taylor, Tamir Rice and Ahmaud Arbury, sadly among the many who were assaulted and murdered last year. These incidents highlight racial and economic inequities and their impacts on the country. As such, the Bureau’s fair lending work is more important now than perhaps ever. I am proud of what we have been able to accomplish in the past year. After hearing questions from financial institutions and consumer and civil rights groups about ways to support financial inclusion, the Bureau issued guidance on special purpose credit programs, which are innovative ways to expand access to credit to traditionally underserved communities, including minority and other underserved consumers. The Bureau also continued to examine and investigate institutions for compliance with the Home Mortgage Disclosure (HMDA) and Equal Credit Opportunity (ECOA) Acts. Last year, the Bureau filed a lawsuit against Townstone Financial, Inc., a nonbank retail-mortgage creditor that alleged, among other things, that Townstone illegally discouraged prospective African-American applicants and prospective applicants living in AfricanAmerican neighborhoods in the Chicago MSA from applying to Townstone for mortgage loans. We also embraced responsible innovation, hosting our first ever Tech Sprint, where participants creatively leveraged technology to develop innovative proposals on ways that lenders could better educate consumers by providing more useful PO 00000 Frm 00049 Fmt 4703 Sfmt 4703 explanations of adverse actions on their credit applications, and what those consumers can do to strengthen their next application for credit. Additionally, in 2020, Bureau staff participated in more than 90 outreach events with our external stakeholders, allowing the Bureau to hear perspectives on emerging issues and topics to better inform policy decisions. Last year (2020) tested us, but 2021 will prove to be consequential for consumers as the Bureau vigorously works to ensure an equitable recovery from the economic fallout of the COVID–19 pandemic. As the Bureau enters its tenth year of existence in 2021, I am reminded of the crisis in which this agency was conceived, the Great Recession. I am also reminded of the difference the Bureau has made in the lives of consumers over that decade. Most of all, the Bureau is still here, and much work remains to be done. Looking toward the future of the Bureau, and the Office of Fair Lending, we remain committed to fulfilling our statutory mandate to ensure fair, equitable, and nondiscriminatory access to credit for all consumers. Sincerely, Patrice Alexander Ficklin. 1. From the Great Recession to a National Emergency: Marking the 10th Year of the Consumer Financial Protection Act During a Pandemic The year 2020 marked the 10th anniversary of the passage of the DoddFrank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), from which the Consumer Financial Protection Bureau (CFPB or Bureau) was born. At that time, the nation found itself at a crossroads, reeling from the Great Recession—what was thought to have been a ‘‘once in a lifetime’’ economic crisis that devastated communities and families across the country. At its inception, the Bureau’s statutory lodestar was to make consumer financial markets work better for consumers, families, small businesses, and communities, for responsible lenders and financial institutions, and for the American economy as a whole. The agency was built on the understanding that when the rules are fair and are applied as such, we have a chance to build stronger families and a stronger nation. A key component to this has been the Bureau’s fair lending work to ensure the fair, equitable, and nondiscriminatory access to credit for both individuals and their communities. This year, the nation once again finds itself at a crossroads, facing the fallout of the devastating COVID–19 pandemic E:\FR\FM\27APN1.SGM 27APN1 jbell on DSKJLSW7X2PROD with NOTICES Federal Register / Vol. 86, No. 79 / Tuesday, April 27, 2021 / Notices which, at the time of this publication, has resulted in the deaths of more than 550,000 of American lives, as well as the destruction of millions of livelihoods. The events of 2020 caused the Bureau to quickly pivot from planned activities to respond to the consumer protection issues of the day. Enactment of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and the creation of the Small Business Administration’s (SBA) Paycheck Protection Program (PPP) required new guidance and interpretation, detailed in section 4.2.3 of this report. Additionally, in 2020, prioritized supervisory assessments were executed to identify risks to consumers, further explained in section 2 of this report. The Bureau also launched a hub of web-based COVID–19 content for consumers and other stakeholders, with resources available in multiple languages.1 In the midst of the COVID–19 pandemic, racial injustice issues also came to the forefront of America’s public dialogue. These issues were exposed by the inequitable burden communities and people of color bore from higher infection and mortality rates and greater resulting economic impacts, as well as high-profile deaths of Black and Brown Americans at the hands of law enforcement. Confronting the devastating impacts of the COVID– 19 pandemic and resulting economic crisis, the Bureau’s fair lending work necessarily carried on. The Bureau solicited feedback from the public in a Request for Information (RFI) about how to enhance compliance with the Equal Credit Opportunity Act (ECOA), a key civil rights law, and received over 140 comments, further described in section 6.2.2 of this report. The Bureau also filed an enforcement action against an institution accused of redlining and another for violating the Home Mortgage Disclosure Act (HMDA) (see section 2.3.1 of this report) and provided guidance on special purpose credit programs to enable creditors to expand credit to traditionally underserved consumers and communities (see section 4.2.1 of this report). The Bureau recognizes that the economic fallout from the pandemic is only beginning, and the pandemic’s effects and impacts are not yet fully known. What is certain, though, is that the Bureau’s fair lending work is and will continue to be a critical component of the Bureau and the Federal government’s response to the pandemic and the elimination of racial injustice. 1 https://www.consumerfinance.gov/coronavirus/. VerDate Sep<11>2014 18:52 Apr 26, 2021 Jkt 253001 In 2021, the Bureau’s Fair Lending Office will be front and center in the agency’s efforts to advance racial and economic equity. 2. Fair Lending Supervision and Enforcement 2.1 Risk-Based Prioritization Because Congress charged the Bureau with the responsibility of overseeing many lenders and products, the Bureau has long-used a risk-based approach to prioritizing supervisory examinations and enforcement activity. This approach helps ensure that the Bureau focuses on areas that present substantial risk of credit discrimination for consumers.2 As part of the prioritization process, the Bureau identifies emerging developments and trends by monitoring key consumer financial markets. If this field and market intelligence identifies fair lending risks in a particular market, that information is used to determine the type and extent of attention required to address those risks. The prioritization process incorporates a number of additional factors, 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 data. As a result of its annual risk-based prioritization process for 2020, the Bureau focused its fair lending supervision efforts on mortgage origination, small business lending, and student loan origination. As in previous years, the Bureau’s 2020 mortgage origination work continued to focus on redlining (and whether lenders intentionally discouraged prospective applicants living or seeking credit in minority neighborhoods from applying for credit); assessing whether there is discrimination in underwriting and pricing processes such as steering; and HMDA data integrity and validation reviews (both as standalone exams and in preparation for ECOA exams that will follow). The Bureau’s small business lending work focused on assessing whether (1) there is discrimination in the application, underwriting, and pricing processes, (2) creditors are redlining, and (3) there are weaknesses in fair lending related compliance management systems (CMS). 2 For additional information regarding the Bureau’s risk-based approach in prioritizing supervisory examinations, see section 2.2.3, RiskBased Approach to Examinations, Supervisory Highlights Summer 2013, available at https:// files.consumerfinance.gov/f/201308_cfpb_ supervisory-highlights_august.pdf. PO 00000 Frm 00050 Fmt 4703 Sfmt 4703 22179 The Bureau’s student loan origination work focused on whether there is discrimination in policies and practices governing underwriting and pricing. In May 2020, in response to the COVID–19 pandemic, the Bureau rescheduled about half of its planned examination work and instead conducted Prioritized Assessments. Prioritized Assessments were designed to cover a greater number of institutions than the typical examination schedule allows, gain a greater understanding of industry responses to pandemic-related challenges, and help ensure that entities were attentive to practices that may result in consumer harm. The Bureau’s Supervision program evaluated fair lending risks through Prioritized Assessments in the small business lending and mortgage servicing, automobile loan servicing, and credit card markets. 2.2 Fair Lending Supervision The Bureau’s Fair Lending Supervision program assesses compliance with Federal fair lending consumer financial laws and regulations at banks and nonbanks over which the Bureau has supervisory authority. As a result of the Bureau’s efforts to fulfill its fair lending mission during 2020, the Bureau initiated 13 fair lending examinations/targeted reviews. The Bureau also initiated a significant number of Prioritized Assessments that included important fair lending components. In 2020, the Bureau issued several fair lending-related Matters Requiring Attention, directing entities to take corrective actions that will be monitored by the Bureau through follow-up supervisory events. The Bureau also issued Supervisory Recommendations in 2020 relating to weak or nonexistent fair lending policies and procedures, risk assessments, and fair lending training.3 2.3 Fair lending enforcement The Bureau has the statutory authority to bring actions to enforce the requirements of ECOA and HMDA. The 3 Consumer Fin. Prot. Bureau, BCFP Bulletin 2018–01: Changes to types of supervisory communications (Sept. 25, 2018), https:// files.consumerfinance.gov/f/documents/bcfp_ bulletin-2018-01_changes-to-supervisorycommunications.pdf. Additional activity has occurred with this matter since the end of this reporting period. On March 31, 2021, the Bureau issued CFPB Bulletin 2021–01: Changes to Types of Supervisory Communications, which announces changes to how examiners articulate supervisory expectations to supervised entities in connection with supervisory events, https:// files.consumerfinance.gov/f/documents/cfpb_ bulletin_2021-01_changes-to-types-of-supervisorycommunications_2021-03.pdf (Mar. 31, 2021). E:\FR\FM\27APN1.SGM 27APN1 22180 Federal Register / Vol. 86, No. 79 / Tuesday, April 27, 2021 / Notices Bureau has the authority to engage in research, conduct investigations, file administrative complaints, hold hearings, and adjudicate claims through the Bureau’s administrative enforcement process regarding ECOA and HMDA. The Bureau also has independent litigation authority and can file cases in federal court alleging violations of fair lending laws under the Bureau’s jurisdiction. Like other Federal regulators, the Bureau is required to refer matters to the Department of Justice (DOJ) when it has reason to believe that a creditor has engaged in a pattern or practice of lending discrimination.4 2.3.1 Public Enforcement Actions In 2020, the Bureau announced two public fair lending enforcement actions: Townstone Financial Inc., and Washington Federal Bank, N.A. jbell on DSKJLSW7X2PROD with NOTICES Townstone Financial Inc. On July 15, 2020, the Bureau filed a lawsuit in federal district court in the Northern District of Illinois against Townstone Financial, Inc. (Townstone), a nonbank retail-mortgage creditor based in Chicago. On November 25, 2020, the Bureau amended the complaint.5 The Bureau alleges that Townstone violated ECOA and Regulation B. As alleged in the complaint, from 2014 through 2017, Townstone drew almost no applications for mortgages on properties in African American neighborhoods located in the Chicago-Naperville-Elgin Metropolitan Statistical Area (Chicago MSA) and few applications from African Americans throughout the Chicago MSA. The Bureau alleges that Townstone engaged in acts or practices, including making statements during its weekly radio shows and podcasts through which it marketed its services, that illegally discouraged African American prospective applicants from applying for mortgage loans and engaged in illegal redlining by engaging in acts or practices that discouraged prospective applicants living or seeking credit in African American neighborhoods in the Chicago MSA from applying for mortgage loans. The Bureau’s complaint seeks an injunction against Townstone, as well as damages, redress to consumers, and the imposition of a civil money penalty. Litigation is ongoing. 4 See 15 U.S.C. 1691e(h). Fin. Prot. Bureau, Townstone Financial, Inc. (July 15, 2020), https:// www.consumerfinance.gov/enforcement/actions/ townstone-financial-inc-and-barry-sturner/. 5 Consumer VerDate Sep<11>2014 18:52 Apr 26, 2021 Jkt 253001 Washington Federal Bank, N.A. On October 27, 2020, the Bureau settled with Washington Federal Bank, N.A. (Washington Federal), a federallyinsured national bank, to address the Bureau’s finding that it reported inaccurate HMDA data about its mortgage transactions for 2016 and 2017.6 Inaccurate HMDA data can make it difficult for the public and regulators to discover and stop discrimination in home mortgage lending or for public officials and lenders to tell whether a community’s credit needs are being met. The settlement requires Washington Federal to pay a $200,000 civil money penalty and develop and implement an effective compliance-management system to prevent future violations. Washington Federal reported HMDA data for over 7,000 mortgage applications in both 2016 and 2017. The Bureau found that these data included significant errors, with some samples having error rates as high as 40%. The Bureau found that the errors in Washington Federal’s 2016 HMDA data were caused by a lack of appropriate staffing, insufficient staff training, and ineffective quality control. The errors in its 2017 HMDA data were directly related to weaknesses in Washington Federal’s compliance-management system. The Bureau found weaknesses in the areas of board and management oversight, monitoring, and policies and procedures. The significant errors in reported mortgage-application data violated HMDA and Regulation C. These violations also constituted violations of the Consumer Financial Protection Act. 2.3.3 Implementing Enforcement Orders When an enforcement action is resolved through a public enforcement order, the Bureau (together with DOJ, when relevant) takes steps to ensure that the respondent or defendant complies with the requirements of the order. Depending on 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. In January 2020, DOJ and the Bureau, together with BancorpSouth Bank (BancorpSouth), submitted a joint motion for early termination of the Consent Order in the BancorpSouth case, which was granted by the court.9 More information about our enforcement activity, past and present, is available at www.consumerfinance.gov/ enforcement/actions/. 2.3.4 Pending Fair Lending Investigations In 2020, the Bureau had a number of ongoing and newly opened fair lending investigations of institutions. The Bureau investigated potential discrimination in several markets, including student lending, payday lending, credit cards, and mortgage lending, including the unlawful practice of redlining. These matters are ongoing. The Bureau must refer to DOJ a matter when it has reason to believe that a creditor has engaged in a pattern or practice of lending discrimination in violation of ECOA.7 The Bureau may refer other potential ECOA violations to DOJ.8 In 2020, the Bureau referred four matters to DOJ about discrimination pursuant to section 706(g) of ECOA. Two referrals involved redlining in mortgage origination based on race and national origin. One referral involved discrimination based on receipt of public assistance income in mortgage origination and one referral involved pricing discrimination in mortgage origination based on race and sex. 3. Interagency Reporting on ECOA and HMDA The Bureau is statutorily required 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.10 In addition, the Bureau’s annual HMDA reporting requirement calls for the Bureau, in consultation with the Department of Housing and Urban Development (HUD), to report annually on the utility of HMDA’s requirement that covered lenders itemize certain mortgage loan data.11 6 Consent Order, In re Washington Federal Bank, N.A., CFPB No. 2020–BCFP–0019 (Oct. 24, 2020), https://files.consumerfinance.gov/f/documents/ cfpb_washington-federal-na_consent-order_202010.pdf. 7 15 U.S.C. 1691e(g). 8 Id. 9 Order, United States v. BancorpSouth Bank, No. 1:16–cv–00118–MPM–DAS (N.D. Miss. Jan. 27, 2020), ECF No. 8, https:// files.consumerfinance.gov/f/documents/cfpb_ bancorpsouth_order-terminating-consent-order.pdf. 10 15 U.S.C. 1691f. 11 12 U.S.C. 2807. 2.3.2 ECOA Referrals to the Department of Justice PO 00000 Frm 00051 Fmt 4703 Sfmt 4703 E:\FR\FM\27APN1.SGM 27APN1 22181 Federal Register / Vol. 86, No. 79 / Tuesday, April 27, 2021 / Notices 3.1 Reporting on ECOA Enforcement The enforcement efforts and compliance assessments made by the eleven agencies assigned enforcement authority under section 704 of ECOA are discussed in this section. Each of the agencies reported information describing their efforts to achieve general compliance. BILLING CODE 4810–AM–P TABLE 1: FFIEC AGENCIES WITH ADMINISTRATIVE ENFORCEMENT OF ECOA 12 ~ ~-4 '----19_3_~- Bureau of Consumer Financial Protection (CFPB) Federal Deposit Insurance Corporation (FDIC) Federal Reserve Board (FRB) National Credit Union Administrati on (NCUA) -~~~.,..P;,' Office of the Comptroller ofthe Currency (OCC) Agricultural Marketing Service (AMS) of the U.S. Department of Agriculture (USDA) 13 Department of Transportation (DOT) Farm Credit Administration (FCA) Federal Trade Commission (FTC) Securities and Exchange Commission (SEC) Small Business Administration (SBA) 14 12 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 (Bureau) comprise the Federal Financial Institutions VerDate Sep<11>2014 18:52 Apr 26, 2021 Jkt 253001 Examination Council (FFIEC). The State Liaison Committee was added to FFIEC in 2006 as a voting member. Federal Financial Institutions Examination Council, http://www.ffiec.gov (last visited Mar. 30, 2021). 13 The Grain Inspection, Packers and Stockyards Administration (GIPSA) was eliminated as a stand- PO 00000 Frm 00052 Fmt 4703 Sfmt 4703 alone agency within USDA in 2017. The functions previously performed by GIPSA have been incorporated into the Agricultural Marketing Service (AMS), and ECOA reporting comes from the Packers and Stockyards Division, Fair Trade Practices Program, AMS. 14 15 U.S.C. 1691c. E:\FR\FM\27APN1.SGM 27APN1 EN27AP21.000</GPH> jbell on DSKJLSW7X2PROD with NOTICES TABLE'\ 2: NON-FFIEC AGENCIES WITH ADMINISTRATIVE ENFORCEMENT OF ECOA 22182 Federal Register / Vol. 86, No. 79 / Tuesday, April 27, 2021 / Notices BILLING CODE 4810–AM–C 3.1.1 Public Enforcement Actions In 2020, two of the eleven Federal agencies with ECOA enforcement authority brought public enforcement actions for violations of ECOA. The FTC brought an enforcement action in federal court against New York City car dealer Bronx Honda and its general manager, Carlo Fittanto, alleging that defendants violated ECOA and Regulation B by discriminating against African American and Hispanic consumers who financed vehicle purchases. According to the FTC’s complaint, among other things, defendants charged African American and Hispanic customers higher markups and fees for financing than similarly situated non-Hispanic white consumers. In May 2020, the defendants agreed to pay $1.5 million to settle the charges. In addition, along with relief for other illegal practices alleged by the complaint, defendants are also required to establish a fair lending program that will, among other requirements, cap the amount of any additional interest markup they charge consumers. The FTC issued refunds totaling nearly $1.5 million to individuals affected by the allegedly unlawful financing and sales practices of defendants, with refunds averaging about $371 each to 3,977 victims of Bronx Honda’s practices. As described in section 2.3, in July 2020, the Bureau brought a public enforcement action in federal district court in the Northern District of Illinois against Townstone Financial, Inc., a nonbank retail-mortgage creditor based in Chicago, alleging discouragement of prospective applicants, redlining, and other violations of ECOA and Regulation B. Below is an overview of the number of ECOA enforcement actions by all Federal agencies since 2012: TABLE 3: NUMBER OF ECOA ENFORCEMENT ACTIONS (2012-2020) 15 17 fl) C .2 u -i (0 E CD 9 ~ .eC CD <( 5 0 w 2012 2013 3.1.2 Number of Institutions Cited for ECOA/Reg B Violations jbell on DSKJLSW7X2PROD with NOTICES In 2020, the Federal Banking Agencies and the CFPB reported citing 81 15 Table 3 identifies public enforcement actions by the year they were initiated (when filed and announced publicly). VerDate Sep<11>2014 18:52 Apr 26, 2021 Jkt 253001 ■ 2014 II 3 2 1 2015 2016 2017 2 0 2018 0 2019 ■ 2020 institutions with violations of ECOA and/or Regulation B.16 Below is an overview of the number of institutions cited with ECOA and Regulation B violations by the Federal Banking Agencies and the CFPB since 2014: 16 For these purposes, the Federal Banking Agencies refer to the FDIC, FRB, and OCC. In addition to the number of institutions cited by the Federal Banking Agencies and the CFPB, the NCUA reported citing 116 credit unions for ECOA and/or Regulation B violations in 2020. PO 00000 Frm 00053 Fmt 4703 Sfmt 4703 E:\FR\FM\27APN1.SGM 27APN1 EN27AP21.001</GPH> 0 Federal Register / Vol. 86, No. 79 / Tuesday, April 27, 2021 / Notices 22183 TABLE 4: NUMBER OF INSTITUTIONS CITED FORECOA VIOLATIONS (2014-2020) 17 fl) 271 C ~ m 250 i 210 8.... 162 UJ a 159 132 i '1 81 fl) C .$2 i fl) C 2014 2015 2016 3.1.3 Violations Cited During ECOA Examinations Among institutions examined for compliance with ECOA and Regulation 2017 2018 2019 I 2020 B, the FFIEC agencies reported that the most frequently cited violations were as follows: TABLE 5—REGULATION B VIOLATIONS CITED BY FFIEC AGENCIES, 2020 Regulation B violations: 2020 FFIEC agencies reporting 12 CFR 1002.4(a), 1002.4(b), 1002.7(d)(1): Discrimination: Discrimination on a prohibited basis in a credit transaction; discouragement of prospective applicants on a prohibited basis; a creditor shall not inquire about the race, color, religion, national origin, or sex of an applicant or any other person in connection with a credit transaction; improperly considering receipt of public assistance in a system of evaluating applicant creditworthiness; improperly requiring the signature of the applicant’s spouse or other person. 12 CFR 1002.9(a)(1), (a)(1)(i)–(ii), (a)(2), (b)(2): Adverse Action: Failure to provide notice to the applicant 30 days after receiving a completed application concerning the creditor’s approval of, counteroffer or adverse action on the application; failure to provide appropriate notice to the applicant 30 days after taking adverse action on an incomplete application; failure to provide sufficient information in an adverse action notification, including the specific reasons for the action taken. 12 CFR 1002.12(b)(1): Record Retention: Failure to preserve application records ........................................... 12 CFR 1002.14 (a)(1), (a)(2), (a)(3), (a)(4): Appraisals and Valuations: Failure to provide appraisals and other valuations. NCUA,18 OCC,19 FRB,20 CFPB.21 17 Table 4 reflects data provided only by the Federal Banking Agencies and the CFPB. NCUA data is not included in the table because the relevant data are unavailable for years 2014–2019. The NCUA reported citing 116 credit unions for ECOA and/or Regulation B violations in 2020. 18 12 CFR 1002.4(a). VerDate Sep<11>2014 18:52 Apr 26, 2021 Jkt 253001 CFPB. OCC,27 FDIC.28 the most frequently cited violations were as follows: 19 12 CFR 1002.7(d)(1). CFR 1002.7(d)(1). 21 12 CFR 1002.4(a) and 1002.4(b). 22 12 CFR 1002.9(a)(2), 1002.9(b)(2). 23 12 CFR 1002.9(a)(1), 1002.9(a)(2), 1002.9(b)(2). 24 12 CFR 1002.9(a)(1)(i), 1002.9(a)(1)(ii), 1002.9(a)(2). 20 12 PO 00000 Frm 00054 Fmt 4703 Sfmt 4703 25 12 CFR 1002.9 (a)(2), 1002.9(b)(2). CFR 1002.9(a)(1); 1002.9(a)(2); 1002.9(b)(2). 2712 CFR 1002.14(a)(1), 1002.14(a)(2). 2812 CFR 1002.14(a)(1), 1002.14(a)(2), ID02.14(a)(3), 1002.14(a)(4). 26 12 E:\FR\FM\27APN1.SGM 27APN1 EN27AP21.002</GPH> jbell on DSKJLSW7X2PROD with NOTICES Among institutions examined for compliance with ECOA and Regulation B, the Non-FFIEC agencies reported that FDIC,22 NCUA,23 OCC,24 FRB,25 CFPB.26 22184 Federal Register / Vol. 86, No. 79 / Tuesday, April 27, 2021 / Notices TABLE 6—REGULATION B VIOLATIONS CITED BY NON-FFIEC AGENCIES ENFORCING ECOA, 2020 Regulation B violations: 2020 Non-FFIEC agencies reporting 12 CFR 1002.9(a)(1)(i): Adverse Action: 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. The AMS, SEC, and the SBA reported that they received no complaints based on ECOA or Regulation B in 2020. In 2020, the DOT Office of Aviation Enforcement and Proceedings reported that it ‘‘may have received a relatively small number of consumer inquiries or complaints concerning credit matters possibly covered by ECOA,’’ which it ‘‘processed informally.’’ 3.1.4 Additional Efforts To Ensure Compliance With ECOA and Regulation B jbell on DSKJLSW7X2PROD with NOTICES The agencies with administrative enforcement responsibilities under ECOA engage in other activities to ensure compliance with ECOA and Regulation B. Below is a sample of activities that agencies reported for 2020: • Hosting or participating in meetings, conferences, and trainings with consumer advocates, industry representatives, and interagency groups on fair lending and consumer protection issues. • Releasing publications focused on consumer compliance. • Hosting or participating in interagency webinars on fair lending supervision. • Providing technical assistance and outreach to educate community banks 29 15 U.S.C. 1691e(g). VerDate Sep<11>2014 18:52 Apr 26, 2021 regarding the requirements of the regulation. • Providing comments in response to the Bureau’s Request for Information on ECOA and Regulation B. • Providing training and workshops for military consumers on protections provided by ECOA and Regulation B. • Issuing blog posts for consumers and businesses regarding ECOA and Regulation B on important topics, such as artificial intelligence. 3.1.5 Referrals to the Department of Justice The agencies assigned enforcement authority under section 704 of ECOA must refer a matter to DOJ when there is reason to believe that a creditor has engaged in a pattern or practice of lending discrimination in violation of ECOA.29 They also may refer other potential ECOA violations to DOJ.30 In 2020, four agencies (CFPB, FDIC, FRB, and NCUA) made twelve such referrals to DOJ involving discrimination in violation of ECOA. A brief description of those matters follows. As reported in section 2.3.2, in 2020, the Bureau referred four matters to DOJ. Two referrals involved redlining in mortgage origination based on race and national origin. One referral involved discrimination based on receipt of public assistance income in the FCA. mortgage servicing context and one referral involved pricing discrimination in mortgage origination based on race and sex. In 2020, FDIC referred three matters to DOJ. The first referral involved discrimination in the underwriting of unsecured consumer loans on the basis of age and receipt of public assistance income. The second referral involved discrimination in the pricing of unsecured consumer loans on the basis of marital status. The third referral involved discrimination in underwriting and the pricing of unsecured consumer loans on the bases of age, sex, and receipt of public assistance income. The NCUA referred three matters to DOJ in 2020. One referral was for discrimination on the prohibited basis of age and two referrals were for discrimination on the basis of marital status. In 2020, FRB referred two matters to DOJ. One matter involved discrimination based on marital status in requiring spousal guarantees on loans. The second matter involved a pattern or practice of redlining in mortgage lending based on race or national origin. Below is an overview of the number of ECOA referrals to DOJ by all Federal agencies since 2012: 30 Id. Jkt 253001 PO 00000 Frm 00055 Fmt 4703 Sfmt 4703 E:\FR\FM\27APN1.SGM 27APN1 22185 Federal Register / Vol. 86, No. 79 / Tuesday, April 27, 2021 / Notices TABLE 7: NUMBER OF ECOA REFERRALS TO DOJ (2012-2020) 24 20 -, 0 18 0 16 s fl} ... f? J! S? 12 12 11 <( 8 UJ 7 2 3.2 2013 Reporting on HMDA 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.31 The Bureau, in consultation with HUD, finds that itemization and tabulation of these data furthers the purposes of HMDA. 4. Guidance and Rulemaking 4.1 ECOA and Regulation B Rulemaking jbell on DSKJLSW7X2PROD with NOTICES 4.1.1 Small Business Lending and Data Collection In the Dodd-Frank Act, Congress directed the Bureau to adopt regulations governing the collection of small business lending data. Section 1071 of the Dodd-Frank Act (section 1071) amended ECOA to require financial institutions to compile, maintain, and submit to the Bureau certain data on applications for credit for womenowned, minority-owned, and small businesses. Congress enacted section 1071 for the purpose of facilitating enforcement of fair lending laws and enabling communities, governmental entities, and creditors to identify business and community development needs and 31 12 U.S.C. 2807. VerDate Sep<11>2014 18:52 Apr 26, 2021 Jkt 253001 2014 2015 2016 2017 opportunities for women-owned, minority-owned, and small businesses. Under the process established by Congress in the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), the Bureau is required to consult with representatives of small entities likely to be directly affected by the regulations the Bureau is considering proposing and to obtain feedback on the likely impacts the rules under consideration would have on small entities. In September 2020, the Bureau released its Outline of Proposals Under Consideration and Alternatives Considered for Section 1071 of the Dodd-Frank Act governing small business lending data collection and reporting, which described proposals under consideration to implement section 1071 along with the relevant law, the regulatory process, and an economic analysis of the potential impacts of the proposals on directly affected small entities.32 The Bureau also convened a Small Business Advocacy Review panel in October 2020. The panel was comprised of a representative from the Bureau, the Chief Counsel for Advocacy of the SBA, and a representative from the Office of Information and Regulatory Affairs in the Office of Management and Budget. The panel collected comments and 32 Consumer Fin. Prot. Bureau, Small Business Advisory Review Panel For Consumer Financial Protection Bureau Small Business Lending Data Collection Rulemaking (Sept. 15, 2020), https:// files.consumerfinance.gov/f/documents/cfpb_1071sbrefa_outline-of-proposals-under-consideration_ 2020-09.pdf. PO 00000 Frm 00056 Fmt 4703 Sfmt 4703 ■ 2018 I 2019 2020 recommendations from representatives of small entities that are likely to be subject to the regulation that the Bureau is considering proposing. In December 2020, the Bureau released the Final Report of the Small Business Review Panel on the CFPB’s Proposals Under Consideration for the Small Business Lending Data Collection Rulemaking.33 This report includes a summary of the feedback received from small entity representatives (SERs) during the panel process, and findings and recommendations made by the panel. In their feedback, SERs were generally supportive of the Bureau’s statutory mission to enact rules under section 1071 and several SERs stated that a 1071 rulemaking is necessary to better understand the small business lending market. Further, SERs requested, and the panel agreed that, among other things, the Bureau should issue implementation and guidance materials specifically to assist small financial institutions in complying with an eventual section 1071 rule, and to consider providing sample disclosure language. The feedback from small entity representatives and the panel’s findings and recommendations will be used by the Bureau as it prepares a notice of 33 Consumer Fin. Prot. Bureau, Final Report of the Small Business Review Panel on the CFPB’s Proposals Under Consideration for the Small Business Lending Data Collection Rulemaking (Dec. 14, 2020), https://files.consumerfinance.gov/f/ documents/cfpb_1071-sbrefa-report.pdf. E:\FR\FM\27APN1.SGM 27APN1 EN27AP21.003</GPH> 2012 22186 Federal Register / Vol. 86, No. 79 / Tuesday, April 27, 2021 / Notices proposed rulemaking to implement section 1071. 4.2 ECOA and Regulation B Guidance jbell on DSKJLSW7X2PROD with NOTICES 4.2.1 Special Purpose Credit Program Interpretive Rule In December 2020, the Bureau issued an interpretive rule, styled as an Advisory Opinion, related to special purpose credit programs, clarifying the regulations and promoting equitable access to credit for historically economically disadvantaged groups and communities.34 This interpretive rule followed the Bureau’s issuance of an RFI on ECOA and Regulation B (see section 6.2.2), where the Bureau sought public opinion on, among other things, special purpose credit programs. Through extensive stakeholder feedback and comments received in response to the RFI, the Bureau learned that stakeholders were interested in additional guidance to help them develop compliant special purpose credit programs. As detailed in the interpretive rule, ECOA and Regulation B prohibit discrimination on certain prohibited bases in any aspect of a credit transaction, but the statute and regulation clarify that it is not discrimination for for-profit organizations to provide special purpose credit programs designed to meet special social needs. The Bureau does not determine whether individual programs qualify for special purpose credit status. Instead, the creditor offering the special purpose credit program must determine the status of its program. Regulation B provides creditors with general guidance for developing special purpose credit programs that are compliant with ECOA. To guide this determination and to address regulatory uncertainty, the Bureau issued this interpretive rule with the hope that more creditors will offer special purpose credit programs and increase access to credit to underserved groups. Specifically, the Bureau clarified the content that a for-profit organization must include in a written plan that establishes and administers a special purpose credit program under Regulation B. The interpretive rule also clarified the type of research and data that may be appropriate to inform a forprofit organization’s determination that 34 Consumer Fin. Prot. Bureau, Consumer Financial Protection Bureau Issues Advisory Opinion to Help Expand Fair, Equitable, and Nondiscriminatory Access to Credit (Dec. 21, 2020), https://www.consumerfinance.gov/about-us/ newsroom/consumer-financial-protection-bureauissues-advisory-opinion-to-help-expand-fairequitable-and-nondiscriminatory-access-to-credit. VerDate Sep<11>2014 18:52 Apr 26, 2021 Jkt 253001 a special purpose credit program would benefit a certain class of people. This, and other interpretive rules issued by the Bureau, are available at www.consumerfinance.gov/compliance/ advisory-opinion-program/. 4.2.2 ECOA Valuations Rule Fact Sheets Regulation B requires creditors to provide applicants free copies of all appraisals and other written valuations developed in connection with an application for a loan to be secured by a first lien on a dwelling. Known as the ECOA Valuations Rule, the rule also requires creditors to notify applicants in writing that copies of appraisals will be provided to them promptly upon completion or no later than three business days before consummation or account opening, whichever is earlier. In April 2020, the Bureau released two factsheets on the ECOA Valuations Rule. The factsheets provide information on transaction coverage 35 under the Valuations Rule and delivery method and timing requirements for appraisals and other written valuations.36 The Bureau also published a frequently asked questions sheet (FAQ) related to the ECOA Valuations Rule in light of the COVID–19 pandemic.37 4.2.3 Paycheck Protection Program FAQs On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act),38 which included a temporary small business lending program known as the Paycheck Protection Program (PPP). Under this program, small businesses could receive loans from private lenders to cover eligible payroll, costs, business mortgage payments and interest, rent, and utilities for either an 8- or 24-week period after disbursement. Each loan is fully guaranteed by the SBA, which administers the PPP; small business borrowers do not have to make any payments during the first six months of the loan term and may receive a deferral up to one year; and 35 Consumer Fin. Prot. Bureau, Factsheet: Transaction coverage under the ECOA Valuations Rule (May 14, 2020), https:// www.consumerfinance.gov/documents/8736/cfpb_ ecoa-valuation_transaction-coverage-factsheet.pdf. 36 Consumer Fin. Prot. Bureau, Factsheet: Delivery of appraisals (June 5, 2020), https:// www.consumerfinance.gov/documents/8737/cfpb_ ecoa-valuation_delivery-of-appraisals-factsheet.pdf. 37 Consumer Fin. Prot. Bureau, The Bureau’s Mortgage Origination Rules FAQs related to the COVID–19 Emergency (Apr. 29, 2020), https:// files.consumerfinance.gov/f/documents/cfpb_ mortgage-origination-rules_faqs-covid-19.pdf. 38 Coronavirus Aid, Relief, and Economic Security Act, Public Law 116–136, 134 Stat. 281 (Mar. 27, 2020). PO 00000 Frm 00057 Fmt 4703 Sfmt 4703 small businesses may receive complete or partial forgiveness of their loans if they use their loans to cover certain expenses and meet other requirements. A wide range of financial institutions were eligible to participate as lenders in the PPP, including institutions that normally do not participate in the SBA’s 7(a) lending program.39 This includes federally insured depository institutions, credit unions, and nonbanks.40 In May 2020, the Bureau issued clarifying FAQs to support small businesses that applied for a loan under the PPP.41 Creditors are generally required under ECOA and Regulation B to notify applicants within 30 days of receiving a ‘‘completed application’’ of the creditor’s approval, counteroffer, denial or other adverse notice regarding the application. Regulation B notifications of action taken are designed to help consumers and businesses by providing transparency to the credit underwriting process in a timely manner. Information that is generally included in a complete application includes any approvals or reports by governmental agencies or others who can guarantee, insure, or provide security for the credit or collateral. In its FAQs, the Bureau clarified that a PPP application is only a ‘‘completed application’’ once the creditor has received a loan number from the SBA or a response about the availability of funds. This ensures that the time awaiting this information from the SBA does not count toward the 30day notice requirement, and that applications will therefore not ‘‘time out’’ during the process. The FAQs also made clear that if the creditor denies an application without ever sending the application to the SBA, the creditor must give notice of this adverse action within 30 days. The FAQs further clarified that a creditor cannot deny a loan application based on incompleteness, where an application is incomplete regarding matters the applicant cannot provide, such as a loan number or response about the availability of funds from the SBA. 39 The 7(a) loan program is the SBA’s primary program for providing financial assistance to small businesses. The program’s name comes from section 7(a) of the Small Business Act, 15 U.S.C. 636(a). The SBA offers several different types of loans through the program. 40 Institutions that were not SBA-certified did have to apply to the SBA and receive delegated authority to process PPP loan applications. 41 Consumer Fin. Prot. Bureau, Consumer Financial Protection Bureau Issues Clarifications to Support Small Business Applying for PPP Loans (May 6, 2020), https://www.consumerfinance.gov/ about-us/newsroom/cfpb-issues-clarificationssupport-small-business-applying-ppp-loans/. E:\FR\FM\27APN1.SGM 27APN1 Federal Register / Vol. 86, No. 79 / Tuesday, April 27, 2021 / Notices 4.2.4 Supervisory Highlights Issue 22, Summer 2020 4.3 HMDA and Regulation C Rulemaking The Bureau periodically publishes Supervisory Highlights to communicate about the Bureau’s supervisory activity and to share key examination findings. These reports also communicate operational changes to our supervision program and provide a convenient and easily accessible resource for information on our recent guidance documents. In September 2020, the Bureau published Issue 22 of Supervisory Highlights.42 In this edition, the Bureau noted that one or more lenders violated ECOA and Regulation B by intentionally redlining majority minority neighborhoods in two MSAs by engaging in acts or practices directed at prospective applicants that may have discouraged reasonable people from applying for credit. Additionally, Bureau examiners found that one or more lenders violated ECOA and Regulation B by maintaining a policy and practice that excluded certain forms of public assistance income, including unemployment compensation and Supplemental Nutrition Assistance Program (SNAP benefits)—commonly known as food stamps, from consideration in determining a borrower’s eligibility for mortgage modification programs. ECOA and Regulation B prohibit lenders from discriminating in any aspect of a credit transaction against an applicant ‘‘because all or part of the applicant’s income derives from any public assistance program.’’ 43 All editions of Supervisory Highlights are available at www.consumerfinance.gov/compliance/ supervisory-highlights/. 4.3.1 Final Rule Raising Reporting Thresholds Under HMDA In April 2020, the Bureau issued a final rule raising the loan-volume coverage thresholds for financial institutions reporting data under HMDA. The final rule, amending Regulation C, increased the permanent threshold for collecting, recording, and reporting data about closed-end mortgage loans from 25 to 100 loans, effective July 1, 2020. The final rule will also amend Regulation C to increase the permanent threshold for collecting, recording, and reporting data about open-end lines of credit from 100 to 200, effective January 1, 2022, when the current temporary threshold of 500 of open-end lines of credit expires. 4.2.5 Help Desk Program jbell on DSKJLSW7X2PROD with NOTICES To promote fair lending compliance, during 2020, the Bureau hosted ‘‘Fair Lending Help Desks.’’ The help desks, hosted at two external stakeholder conferences, allowed conference participants to engage with Bureau subject matter experts on regulatory compliance issues relating to ECOA and Regulation B, as well as HMDA and Regulation C. 42 Consumer Fin. Prot. Bureau, Supervisory Highlights, Summer 2020 (Sept. 2020), https:// files.consumerfinance.gov/f/documents/cfpb_ supervisory-highlights_issue-22_2020-09.pdf. 43 15 U.S.C. 1691(a)(2); 12 CFR 1002.2(z). VerDate Sep<11>2014 18:52 Apr 26, 2021 Jkt 253001 4.3.2 HMDA Notices of Proposed Rulemaking In the Fall 2020 Rulemaking Agenda, the Bureau announced that it anticipated publishing two Notices of Proposed Rulemaking (NPRMs) in early 2021 concerning possible revisions to the 2015 HMDA rule. One of these indicated that it followed an Advance Notice of Proposed Rulemaking in May 2019 concerning certain data points that are required to be reported under the HMDA rule and coverage of certain business or commercial purpose loans, addressing concerns about regulatory burden. The second indicated it would address the public disclosure of HMDA data in light of consumer privacy interests, so that stakeholders can concurrently consider and comment on the collection and reporting of data points and public disclosure of those data points. Concurrent with the publication of the Fall 2020 Unified Agenda, the Bureau’s Office of Regulations issued a blog post on the Bureau’s website stating that the data points and disclosure rules may not be released by the anticipated February target in the Unified Agenda. 4.4 HMDA and Regulation C Guidance 4.4.1 HMDA Data Point Articles With Observations of the 2019 HMDA Data In 2020, the Bureau released two HMDA data point articles presenting Bureau analysis of the 2019 HMDA data. The first was issued in June 2020, which describes mortgage market activity over time based on data reported under HMDA. It summarizes the historical data points in the 2019 HMDA data, as well as recent trends in mortgage and housing markets. The second article was released in August 2020. The focus of the article PO 00000 Frm 00058 Fmt 4703 Sfmt 4703 22187 was on the data points newly added or revised by the 2015 HMDA rule, specifically through cross-sectional analyses, i.e., using the data contained in one year’s loan application register (LAR) to explore various patterns and relationships between different data fields to provide some initial observations. To the extent some of those patterns or relationships might have changed significantly over the last year, the article highlighted such changes. Otherwise, the majority of the analyses were limited to the data collected in 2019 and reported in 2020. 4.4.2 HMDA Reporting Notification Program On occasion, the Bureau will send notification letters to advise recipients that the Bureau has information that appears to show that the recipients might be in violation of Federal consumer financial law. The letters are not accusations of wrongdoing. Instead, they are intended to help recipients review certain practices to ensure that they comply with Federal law. One such letter pertains to compliance with HMDA, through the Bureau’s HMDA Reporting Notification Program (HMDA RNP). As part of the HMDA RNP, in September 2020, the Bureau issued notification letters to 40 non-depository mortgage lenders regarding potential non-compliance with certain reporting requirements of HMDA and Regulation C. Specifically, the letters informed recipients that they may be required to collect, record, and report data about their mortgage-lending activity under HMDA and Regulation C, and that they may be in violation of those requirements. The letters also provided information about specific reporting requirements under HMDA and Regulation C and provided links to educational resources for HMDA reporters. The letters urged recipients to review their practices to ensure compliance with all relevant laws. The recipients were encouraged to respond to the Bureau to advise if they had taken, or would take, steps to ensure compliance with the law. Recipients were invited to tell the Bureau if they thought their activities did not meet HMDA reporting thresholds. The Bureau’s HMDA RNP sought to increase HMDA compliance through education and direct outreach to potential non-reporting mortgage lenders, and to improve HMDA data quality and completeness through accurate reporting. Since commencing the HMDA non-reporters project pilot in 2016, more than 224,000 previously E:\FR\FM\27APN1.SGM 27APN1 22188 Federal Register / Vol. 86, No. 79 / Tuesday, April 27, 2021 / Notices jbell on DSKJLSW7X2PROD with NOTICES unreported mortgage loan records have now been reported. 4.4.3 HMDA Data Browser Webinars HMDA data are the most comprehensive source of publicly available information on the U.S. mortgage market. Each year, thousands of financial institutions are required to maintain, report, and publicly disclose loan-level information about mortgages under HMDA. These data serve multiple purposes: Helping to show whether lenders are serving the housing needs of their communities, giving public officials information that helps them make decisions and policies, and shedding light on lending patterns that could be discriminatory. The public data are modified to protect applicant and borrower privacy. In 2019, the HMDA Data Browser was launched as a tool to access HMDA data collections for the years 2018 and onward. While a single year of HMDA data may contain tens of millions of records and require special software to analyze, the HMDA Data Browser allows users to filter and download more manageable and targeted HMDA datasets, including by geographic area. Upon selection, users can download a comma separated values (CSV) file, compatible with Excel, that includes this geographic data, along with all 99 public data fields. If a user would like to filter data further, they can select from up to two of 11 available variables. Users can then view an aggregated summary table of the data requested and download a CSV file of the filtered data. In 2020, the Bureau hosted five webinars on HMDA and the HMDA Data Browser, which were presented to educate civil rights groups, consumer advocates, industry, and other government agencies on the tool. These skill-building webinars provided background information on HMDA, including the types of mortgage transactions and the specific data points reported under the law and a step-bystep demonstration on how to use the HMDA Data Browser. A recorded version of the live HMDA Data Browser webinar is available at www.consumerfinance.gov/about-us/ events/archive-past-events/hmda-databrowser/. Access to the HMDA Data Browser is available at https://ffiec.cfpb.gov/databrowser/. For questions or suggestions about HMDA or the HMDA Data Browser, contact HMDAHelp@cfpb.gov. 4.4.4 Other HMDA Guidance and Resources The Bureau maintains a suite of resources on its public website to help VerDate Sep<11>2014 18:52 Apr 26, 2021 Jkt 253001 facilitate compliance with HMDA and Regulation C, including an Executive Summary of HMDA rule changes; Small Entity Compliance Guide; Key Dates Timeline; Institutional and Transactional Coverage Charts; Reportable HMDA Data Chart; sample data collection form; and FAQs, in addition to downloadable webinars, which provide an overview of the HMDA rule. The Bureau also provides on its website an Interactive Bureau Regulations version of Regulation C. The Bureau routinely updates its HMDA resources throughout the year to ensure HMDA reporters have the most up-to-date information. For example, in November 2020, the Bureau released the 2021 Filing Instructions Guide (FIG) and the Supplemental Guide for Quarterly Filers. Together with the FFIEC, in January 2020, the Bureau also published the 2020 edition of the HMDA Getting it Right Guide. The Bureau also works with the FFIEC to publish data submission resources for HMDA filers and vendors on its Resources for HMDA Filers website, https://ffiec.cfpb.gov. In addition, HMDA reporters can ask technical questions about HMDA and Regulation C, including how to submit HMDA data, by emailing the Bureau’s HMDA Help at HMDAHelp@cfpb.gov. The Bureau also offers financial institutions, service providers, and others, informal staff guidance on specific questions about the statutes and rules the Bureau implements, including ECOA and Regulation B and HMDA and Regulation C, through its Regulation Inquiries platform at www.reginquiries.consumerfinance.gov. Additionally, questions about HMDA may be asked at the Bureau’s Fair Lending Help Desks as referenced in section 4.2.5. 5. Tech Sprints: Using Innovative Technology To Address Fair Lending Compliance The Bureau’s Tech Sprint Program gathers regulators, technologists, academics, financial institutions, vendors, and subject matter experts from key stakeholders for several days to work together to develop innovative solutions to specific challenges at the intersection of emerging technology and Federal consumer protection laws. Inspired by a similar program successfully launched by the Financial Conduct Authority in the United Kingdom, the Tech Sprint program aims to (1) develop actionable technologyfocused solutions to a variety of regulatory and consumer protection challenges; (2) harness technology to reduce burden, improve results, and create greater efficiencies across PO 00000 Frm 00059 Fmt 4703 Sfmt 4703 financial markets; and (3) explore how technology can reshape compliance and speed effective interaction between regulators and financial institutions. During a Tech Sprint, participants work together in small teams. The teams include participants from both the regulator and a diversity of entities to ensure the inclusion of regulatory, consumer advocate, industry, academic, and technologist perspectives. The regulator assigns a specific regulatory compliance or market problem to each team and challenges the teams to solve or mitigate the problem using modern technologies and approaches. The teams then work for several days to produce actionable ideas, write computer code, and present their solutions. On the final day, each team presents their solutions to an independent panel of evaluators that selects the outstanding teams in several categories. The most promising ideas can then be further developed either in collaboration with the regulator or by external parties. In June 2020, the Bureau announced its first Tech Sprint which was held October 5–9, 2020, virtually, due to the pandemic. This Tech Sprint focused on electronically delivered adverse action notices that that serve statutory purposes under ECOA and the Fair Credit Reporting Act (FCRA).44 The event challenged participants to develop innovative approaches to electronicallydelivered ways to notify consumers of, and inform them about, adverse credit actions. Teams were asked to show how their solution could improve on current adverse action notices to better realize three core goals: • Accuracy—using accurate information to take adverse action; • Anti-discrimination—preventing illegal discrimination in credit decisions; and • Education—helping consumers fare better in future credit applications. Participants were informed that innovations could include any aspect, or potential aspect, of adverse action communication. The Tech Sprint attracted numerous expressions of interest, and more than 80 participants formed into 13 ‘‘sprint teams.’’ Participants represented a wide variety 44 Consumer Fin. Prot. Bureau, CFPB Announces Tech Sprints To Empower Consumers, Reduce Regulatory Burden (June 29, 2020), https:// www.consumerfinance.gov/about-us/newsroom/ tech-sprints. Additional activity has occurred with this matter since the end of the reporting period. The second Tech Sprint occurred from March 22– 26, 2021. During this week, 17 teams, with over 100 total members participated in the Tech Sprint. Teams presented their solutions to a panel of evaluators on the last day, which included many novel and innovative solutions to the problem statement. E:\FR\FM\27APN1.SGM 27APN1 Federal Register / Vol. 86, No. 79 / Tuesday, April 27, 2021 / Notices jbell on DSKJLSW7X2PROD with NOTICES of stakeholders including large financial institutions, community and consumer organizations, FinTechs, research organizations, and academia. On the final day of the Tech Sprint, the teams presented their solutions to a panel of evaluators. The solutions developed by the sprint teams were creative and varied. Some of the solutions included providing more detailed information on what role each denial reason played in the credit decision; identifying how the denied applicant might obtain a credit approval in the future by, for example, raising the credit score to a certain level, decreasing credit inquiries to a certain number, or requesting a different loan term or amount; delivering additional information or educational content with the electronic notice to the consumer to assist them in making more informed financial decisions; and proposing methodologies for identifying principal reasons for adverse action when algorithms—including, potentially, algorithms that make use of artificial intelligence—are used in the credit decision. Following the conclusion of the Tech Sprint, some of the participants informed the Bureau that they would work to incorporate their innovations into their delivery of adverse action notices or would consider working with the Bureau to further develop their ideas. The creative solutions presented will also help better inform the Bureau’s policy making. The Bureau also announced its second Tech Sprint, focused on improvements to submitting and publishing HMDA data, to be held between March 22–26, 2021.45 Participants in this Tech Sprint were invited to help create additional tools for users on the HMDA Platform and to develop and document HMDA Platform Applicant Programming Interfaces (APIs). Alternatively, participants may develop additional enhancements to HMDA data products and services, or new ways to interact with existing products, data analysis capabilities, or interfaces to other datasets. Details about the HMDA Tech Sprint will be published in the 2022 Annual Report. 6. Outreach: Promoting Fair Lending Compliance and Education Pursuant to the Dodd-Frank Act, the Bureau regularly engages in outreach with stakeholders, including consumer advocates, civil rights organizations, industry, academia, and other government agencies, to (1) educate them about fair lending compliance and 45 Id. VerDate Sep<11>2014 18:52 Apr 26, 2021 Jkt 253001 access to credit issues and (2) hear their views on the Bureau’s work to inform its policy decisions.46 In coordinating fair lending efforts Bureau-wide, throughout 2020, the Office of Fair Lending worked closely with other Bureau offices to execute the Bureau’s fair lending outreach and education efforts. 6.1 Educating Stakeholders About Fair Lending Compliance and Access to Credit Issues 6.1.1 Bureau Blog Posts, Statements, Reports, and Press Releases The Bureau regularly uses blog posts, statements, reports, and press releases as tools to timely and effectively communicate with consumers, small business owners, financial institutions, and other stakeholders about fair lending issues, emerging areas of concern, Bureau initiatives, and more. In 2020, the Bureau published seven blog posts related to fair lending topics including the announcement of the 2019 Fair Lending Annual Report to Congress; 47 the importance of fair and equitable access to credit for minority and women-owned businesses, including businesses applying for PPP relief; 48 providing adverse action notices when using artificial intelligence and machine learning models; 49 announcing an RFI related to ECOA; 50 expanding access to credit to underserved communities through the special purpose credit programs provisions of ECOA and Regulation B; 51 46 Consumer Fin. Prot. Bureau, Fiscal Year 2020: Annual Performance Plan and Report, and Budget Overview, Performance goal 2.1.1, at 69 (Feb. 2021), https://files.consumerfinance.gov/f/documents/ cfpb_performance-plan-and-report_fy20.pdf. 47 Patrice Alexander Ficklin and J. Frank VespaPapaleo, Consumer Fin. Prot. Bureau, Protecting consumers and encouraging innovation: 2019 Fair Lending Report to Congress (Apr. 30, 2020), https:// www.consumerfinance.gov/about-us/blog/ protecting-consumers-and-encouraging-innovation2019-fair-lending-report-congress/. 48 Patrice Alexander Ficklin, Grady Hedgespeth, and Lora McCray, Consumer Fin. Prot. Bureau, The importance of fair and equitable access to credit for minority and women-owned businesses (Apr. 27, 2020), https://www.consumerfinance.gov/about-us/ blog/fair-equitable-access-credit-minority-womenowned-businesses/. 49 Patrice Alexander Ficklin, Tom Pahl, and Paul Watkins, Consumer Fin. Prot. Bureau, Innovation spotlight: Providing adverse action notices when using AI/ML models (July 7, 2020), https:// www.consumerfinance.gov/about-us/blog/ innovation-spotlight-providing-adverse-actionnotices-when-using-ai-ml-models/. 50 Kathleen L. Kraninger, Consumer Fin. Prot. Bureau, The Bureau is taking action to build a more inclusive financial system (July 28, 2020), https:// www.consumerfinance.gov/about-us/blog/bureautaking-action-build-more-inclusive-financialsystem/. 51 Susan M. Bernard and Patrice Alexander Ficklin, Consumer Fin. Prot. Bureau, Expanding access to credit to underserved communities (July PO 00000 Frm 00060 Fmt 4703 Sfmt 4703 22189 the availability of Bureau resources for consumers in multiple languages; 52 a request for public comments to inform Bureau guidance on serving LEP consumers; 53 54 and the Bureau’s first tech sprint on improving electronicallydelivered adverse action notices to consumers.55 The Bureau’s blog posts, including those related to fair lending, may be accessed at www.consumerfinance.gov/blog. In 2020, the Bureau also issued ten press releases related to fair lending topics including the flexibilities provided to financial institutions during the COVID–19 pandemic relating to certain HMDA reporting requirements; 56 the release of the Bureau’s Outline of Proposals Under Consideration and Alternatives Considered regarding section 1071 of the Dodd-Frank Act; 57 the release of 2019 HMDA data to the public; 58 the Bureau’s analysis of 2019 HMDA data 31, 2020), https://www.consumerfinance.gov/aboutus/blog/expanding-access-credit-underservedcommunities/. 52 Desmond Brown, Keo Chea, and Frank VespaPapaleo, Consumer Fin. Prot. Bureau, More CFPB resources available in multiple languages (Aug. 26, 2020), https://content.consumerfinance.gov/aboutus/blog/cfpb-multilingual-resources-webinar/. 53 Elena Babinecz and Frank Vespa-Papaleo, Consumer Fin. Prot. Bureau, Bureau seeks formal comments to inform forthcoming guidance on serving LEP consumers (Nov. 16, 2020), https:// www.consumerfinance.gov/about-us/blog/bureauseeks-formal-comments-to-inform-forthcomingguidance-serving-lep-consumers/. 54 Additional activity has occurred with this issue since the end of this reporting period. In January 2021, the Bureau issued a statement to encourage financial institutions to better serve consumers with limited English proficiency (LEP) and to provide principles and guidelines to assist financial institutions in complying with the Dodd-Frank Act, ECOA, and other applicable laws. More information can be found here: https:// www.consumerfinance.gov/rules-policy/noticeopportunities-comment/open-notices/statementregarding-the-provision-of-financial-products-andservices-to-consumers-with-limited-englishproficiency/. 55 Albert Chang, Tim Lambert, and Jennifer Lassiter, Consumer Fin. Prot. Bureau, CFPB’s first tech sprint on October 5–9, 2020: Help improve consumer adverse action notices (Sept. 1, 2020), https://www.consumerfinance.gov/about-us/blog/ cfpb-tech-sprint-october-2020-consumer-adverseaction-notices/. 56 Consumer Fin. Prot. Bureau, CFPB Provides Flexibility During COVID–19 Pandemic (March 26, 2020), https://www.consumerfinance.gov/about-us/ newsroom/cfpb-provides-flexibility-during-covid19-pandemic/. 57 Consumer Fin. Prot. Bureau, CFPB Releases Outline of Proposals Under Consideration to Implement Small Business Lending Data Collection Requirements (Sept. 15, 2020), https:// www.consumerfinance.gov/about-us/newsroom/ cfpb-releases-outline-proposals-implement-smallbusiness-lending-data-collection-requirements/. 58 Consumer Fin. Prot. Bureau, FFIEC Announces Availability of 2019 Data on Mortgage Lending (June 24, 2020), https://www.consumerfinance.gov/ about-us/newsroom/ffiec-announces-availability2019-data-mortgage-lending/. E:\FR\FM\27APN1.SGM 27APN1 22190 Federal Register / Vol. 86, No. 79 / Tuesday, April 27, 2021 / Notices points; 59 the issuance of a final HMDA rule raising data reporting thresholds; 60 the issuance of an RFI on ECOA 61 and an extension of its public comment period; 62 the Bureau’s announcements of public enforcement actions against Townstone Financial, Inc.63 and Washington Federal Bank 64; and the issuance of an interpretive rule pertaining to special purpose credit programs.65 The Bureau’s statements and press releases, including those related to fair lending, may be accessed at www.consumerfinance.gov/about-us/ newsroom. jbell on DSKJLSW7X2PROD with NOTICES 6.1.2 Bureau Outreach Engagements With Stakeholders Bureau staff participated in 93 outreach engagements throughout 2020 about fair lending compliance and access to credit issues. In many of those engagements, Bureau personnel also received information and feedback on the Bureau’s policy decisions. Specifically, in 2020, the Bureau communicated directly with stakeholders through speeches, presentations, webinars, and smaller 59 Consumer Fin. Prot. Bureau, CFPB Issues Analysis of HMDA Data Points (Aug. 27, 2020), https://www.consumerfinance.gov/about-us/ newsroom/cfpb-issues-analysis-hmda-data-points/. 60 Consumer Fin. Prot. Bureau, CFPB Issues Final Rule Raising Data Reporting Thresholds Under the Home Mortgage Disclosure Act (Apr. 16, 2020), https://www.consumerfinance.gov/about-us/ newsroom/cfpb-issues-final-rule-raising-datareporting-thresholds-under-hmda/. 61 Consumer Fin. Prot. Bureau, CFPB Requests Information on Ways to Prevent Credit Discrimination and Build a More Inclusive Financial System (July 28, 2020), https:// www.consumerfinance.gov/about-us/newsroom/ cfpb-rfi-prevent-credit-discrimination-build-moreinclusive-financial-system/. 62 Consumer Fin. Prot. Bureau, CFPB Extends Comment Period on Request for Information on Ways to Prevent Credit Discrimination and Build a More Inclusive Financial System (Aug. 19, 2020), https://www.consumerfinance.gov/about-us/ newsroom/cfpb-extends-rfi-comment-period-waysprevent-credit-discrimination-build-more-inclusivefinancial-system/. 63 Consumer Fin. Prot. Bureau, CFPB Files Suit Against Mortgage Creditor for Discriminatory Mortgage-Lending Practices (July 15, 2020), https:// www.consumerfinance.gov/about-us/newsroom/ cfpb-files-suit-against-mortgage-creditordiscriminatory-mortgage-lending-practices/. 64 Consumer Fin. Prot. Bureau, CFPB Announces Settlement With Washington Federal Bank, N.A. For Flawed Mortgage-Loan Data Reporting (Oct. 27, 2020), https://www.consumerfinance.gov/about-us/ newsroom/consumer-financial-protection-bureauannounces-settlement-washington-federal-bank-naflawed-mortgage-loan-data-reporting/. 65 Consumer Fin. Prot. Bureau, Consumer Financial Protection Bureau Issues Advisory Opinion to Help Expand Fair, Equitable, and Nondiscriminatory Access to Credit (Dec. 21, 2020), https://www.consumerfinance.gov/about-us/ newsroom/consumer-financial-protection-bureauissues-advisory-opinion-to-help-expand-fairequitable-and-nondiscriminatory-access-to-credit/. VerDate Sep<11>2014 18:52 Apr 26, 2021 Jkt 253001 discussions on issues pertaining to fair, equitable, and nondiscriminatory access to credit. Some examples of the topics covered in these engagements included the impacts of the COVID–19 pandemic on the economy, and racial and economic justice issues; fair lending supervision and enforcement priorities; innovations in lending; HMDA and Regulation C; ECOA and Regulation B; small business lending; access to credit for LEP consumers; providing adverse action notices when using machine learning models; and the use of alternative data in credit underwriting. 6.2 Listening to Stakeholders To Inform the Bureau’s Policy Decisions 6.2.1 Bureau Outreach Engagements With Stakeholders As described above in section 6.1, Bureau outreach engagements with stakeholders inform the Bureau’s policy decisions. In these events, Bureau staff received feedback from stakeholders on issues pertaining to fair, equitable, and nondiscriminatory access to credit. For example, in July 2020, the Bureau hosted a roundtable discussion on credit access issues faced by Limited English Proficient (LEP) consumers and the challenges financial institutions face when addressing language access needs. Throughout 2020, the Bureau engaged in eight additional meetings with stakeholders to inform Bureau guidance on serving LEP consumers.66 The Bureau also engaged with stakeholders throughout the year on a variety of other issues related to fair lending, including section 1071 governing small business lending data collection and reporting; HMDA; agricultural and rural lending; student lending; alternative data; artificial intelligence and machine learning methods; and credit reporting. 6.2.2 Request for Information: Building a More Inclusive Financial System On July 28, 2020, the Bureau issued an RFI on the following topics under ECOA and Regulation B: • Disparate impact. 66 Additional activity has occurred regarding this issue since the end of this reporting period. On January 13, 2021, in response to requests for additional guidance regarding providing products and services to LEP consumers, the Bureau issued a statement to encourage financial institutions to better serve consumers with limited English proficiency and to provide principles and guidelines to assist financial institutions in complying with the Dodd-Frank Act, ECOA, and other applicable laws. More information can be found here: https://www.consumerfinance.gov/ rules-policy/notice-opportunities-comment/opennotices/statement-regarding-the-provision-offinancial-products-and-services-to-consumers-withlimited-english-proficiency/. PO 00000 Frm 00061 Fmt 4703 Sfmt 4703 • Serving LEP consumers.67 • Special Purpose Credit Programs. • Affirmative advertising to disadvantaged groups. • Small business lending. • Sexual orientation and gender identity discrimination.68 • Scope of federal preemption of state law. • Public assistance income. • Artificial intelligence and machine learning. • Adverse action notices under ECOA. The Bureau received 144 comments from consumer and civil rights advocates, industry, academics and researchers, government agencies and entities, as well as individuals, attorneys, and law firms. The information provided will help the Bureau continue to explore ways to address regulatory compliance challenges while fulfilling the Bureau’s core mission to prevent unlawful discrimination. For example, in response to many commenters’ requests for additional guidance regarding the special purpose credit programs provisions of ECOA and Regulation B, in December 2020, the Bureau issued an interpretive rule styled as an Advisory Opinion to address regulatory uncertainty regarding Regulation B, as it applies to certain aspects of special purpose credit programs. Additional information regarding the interpretive rule on special purpose credit programs can be found in section 4.2.1 of this report. 7. Amicus Program and Other Litigation The Bureau files amicus, or ‘‘friendof-the-court,’’ briefs in significant court cases concerning Federal consumer financial protection laws, including ECOA. In 2020, the Bureau and the FTC jointly filed an amicus brief in TeWinkle v. Capital One, N.A., explaining that the term ‘‘applicant’’ in ECOA and Regulation B includes both those who are currently seeking credit and those currently receiving credit. This interpretation is the best reading of the 67 Id. 68 Additional activity has occurred regarding this issue since the end of this reporting period. On March 9, 2021, the Bureau issued an interpretive rule clarifying that the prohibition against sex discrimination under ECOA and Regulation B includes sexual orientation discrimination and gender identity discrimination. This prohibition also covers discrimination based on actual or perceived nonconformity with traditional sex- or gender-based stereotypes, and discrimination based on an applicant’s social or other associations. More information can be found here: https:// www.consumerfinance.gov/about-us/newsroom/ cfpb-clarifies-discrimination-by-lenders-on-basis-ofsexual-orientation-and-gender-identity-is-illegal/. E:\FR\FM\27APN1.SGM 27APN1 Federal Register / Vol. 86, No. 79 / Tuesday, April 27, 2021 / Notices statute itself, and any doubt whether the term ‘‘applicant’’ includes current borrowers is put to rest by Regulation B, which for decades has expressly defined the term to include current borrowers. Information regarding the Bureau’s amicus program, including a description of previously filed amicus briefs, is available on the Bureau’s website, at www.consumerfinance.gov/policycompliance/amicus/. With regard to other litigation, in 2019, the Bureau was sued in the U.S. District Court for the Northern District of California by the California Reinvestment Coalition, et al., regarding the Bureau’s obligation to issue rules implementing section 1071. In February 2020, the court approved a stipulated settlement agreement. As part of the agreement, the Bureau agreed to a September 15, 2020, deadline for the release of an outline of proposals under consideration and alternatives considered, consistent with SBREFA. The settlement agreement also provided a process for setting appropriate deadlines for the issuance of a proposed and final rule implementing section 1071. The Bureau has made significant progress with this rulemaking. For a comprehensive update on 1071 activity, see section 4.1.1 of this report. In August 2020, the Bureau was sued in the U.S. District Court for the District of Columbia by the National Community Reinvestment Coalition, et al., over the Bureau’s final rule amending Regulation C to raise the loan-volume coverage thresholds for financial institutions reporting data under HMDA (the 2020 HMDA rule). The Plaintiffs argue that the 2020 HMDA rule violates the Administrative Procedure Act. The litigation is ongoing. 8. Interagency Coordination and Engagement jbell on DSKJLSW7X2PROD with NOTICES Throughout 2020, the Bureau coordinated 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. Interagency engagement occurs in numerous ways, including through several interagency organizations. In 2020, the FFIEC was chaired by the Bureau’s Director.69 Through the FFIEC, 69 Collectively, the FRB, FDIC, NCUA, OCC, and 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 VerDate Sep<11>2014 18:52 Apr 26, 2021 Jkt 253001 22191 fairness and equity, and prevent bias, in appraisals.71 Also, in October 2020, the Bureau signed a Memorandum of Understanding (MOU) with the FTC, HUD, FDIC, FRB, NCUA, OCC, DOJ, and FHFA—representing Federal agencies that, in addition to the Bureau, conduct fair lending analyses. The MOU allows economists from the agencies to voluntarily share confidential information with respect to analytical methodologies used to understand and assess compliance with fair lending laws.72 In addition to these established interagency organizations, Bureau personnel meet regularly with the DOJ, HUD, state Attorneys General, and the prudential regulators to coordinate the Bureau’s fair lending work. the Bureau has robust engagement with other partner agencies that focus on fair lending issues. For example, in 2020, the Bureau chaired the FFIEC HMDA/ Community Reinvestment Act (CRA) Data Collection Subcommittee of the FFIEC Task Force on Consumer Compliance. This subcommittee 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 FFIEC Task Force. Additionally, 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 Association (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. In 2020, the Bureau chaired the Interagency Task Force, which met regularly to discuss fair lending enforcement efforts, share current methods of conducting supervisory and enforcement fair lending activities, and coordinate fair lending policies.70 Further, the Bureau also participated in the Interagency Working Group on Fair Lending Enforcement, a standing working group of Federal agencies— DOJ, HUD, and FTC—that met regularly to discuss issues relating to fair lending enforcement. The agencies use these meetings to also discuss fair lending developments and trends, methods for evaluating fair lending risks The Bureau is also a member of the FFIEC’s Appraisal Subcommittee (ASC) that provides federal oversight of state appraiser and appraisal management company regulatory programs, and a monitoring framework for the Appraisal Foundation and the Federal Financial Institutions Regulatory Agencies in their roles to protect federal financial and public policy interests in real estate appraisals utilized in federally related transactions. The ASC is considering its authorities and ability to promote 9. Coordination With the Bureau’s Innovation Programs The Dodd-Frank Act established the Bureau’s mission to include both fair lending and innovation components. Specifically, the Bureau is authorized to exercise its authorities under Federal consumer financial law for the purposes of ensuring—with respect to consumer financial products and services—that consumers are protected from unfair, deceptive, or abusive acts and practices and from discrimination,73 and that markets for consumer financial products and services operate transparently and efficiently to facilitate access and innovation.74 As part of its coordination function, the Office of Fair Lending worked in 2020 with the Office of Innovation regarding applications to the Bureau’s innovation programs that involved fair lending and access to credit matters. Review of such applications included consideration of the potential fair lending risks associated with the proposed product or service, as well as its potential for expanding access to credit for underserved or underbanked populations. In addition, after an application related to fair lending or access to credit has been granted by the Bureau, the two offices continue to collaborate, for example by reviewing any data submitted by the recipient relating to fair lending and access issues during the monitoring period. Institutions Examination Council, http:// www.ffiec.gov (last visited Mar. 30, 2021). The State Liaison Committee was added to FFIEC in 2006 as a voting member. Additional activity has occurred on this issue since the end of this reporting period. In April 2021, the NCUA’s Chairman took over as chair of the FFIEC. 70 Additional activity has occurred since the end of this reporting period. In 2021, the FDIC took over as chair of the Interagency Task Force on Fair Lending. 71 The Appraisal Subcommittee includes the FFIEC agencies, HUD, and the FHFA. 72 For more information on the MOU, see Director Kraninger’s Remarks During ‘‘Current Priorities in Consumer Financial Protection Seminar’’ At Harvard Kennedy School (Oct. 29, 2020), https:// www.consumerfinance.gov/about-us/newsroom/ director-kraningers-remarks-current-prioritiesseminar-harvard-kennedy-school/. 73 Dodd-Frank Act sec. 1021(b)(2). 74 Dodd-Frank Act sec. 1021(b)(5). PO 00000 Frm 00062 Fmt 4703 Sfmt 4703 E:\FR\FM\27APN1.SGM 27APN1 22192 Federal Register / Vol. 86, No. 79 / Tuesday, April 27, 2021 / Notices In 2020, Upstart Network, Inc. (Upstart) was granted a No-Action Letter (NAL). 75 Upstart, a company that that uses alternative data and machine learning in making credit underwriting and pricing decisions, received a NAL pertaining to regulatory uncertainty under ECOA and Regulation B.76 APPENDIX A—DEFINED TERMS Term Definition AMS .................................................................... APA ..................................................................... API ...................................................................... ASC ..................................................................... Bureau ................................................................ CARES Act ......................................................... CMS .................................................................... COVID–19 ........................................................... Dodd-Frank Act ................................................... DOJ ..................................................................... DOT .................................................................... ECOA .................................................................. FCA ..................................................................... FCRA .................................................................. FDIC .................................................................... FHFA ................................................................... Federal Reserve Board or FRB .......................... FFIEC .................................................................. Agricultural Marketing Service of the U.S. Department of Agriculture. Administrative Procedure Act. Application Programming Interface. FFIEC’s Appraisal Subcommittee. Consumer Financial Protection Bureau/Bureau of Consumer Financial Protection. Coronavirus Aid, Relief, and Economic Security Act. Compliance Management System. Coronavirus Disease/Pandemic 2019. Dodd-Frank Wall Street Reform and Consumer Protection Act. U.S. Department of Justice. U.S. Department of Transportation. Equal Credit Opportunity Act. Farm Credit Administration. Fair Credit Reporting Act. Federal Deposit Insurance Corporation. Federal Housing Finance Agency. Board of Governors of the Federal Reserve System. 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. Home Mortgage Disclosure Act. U.S. Department of Housing and Urban Development. Loan Application Register (HMDA). Limited English Proficient. Metropolitan Statistical Area. Memorandum of Understanding. National Credit Union Administration. Notice of Proposed Rulemaking. Office of the Comptroller of the Currency. Paycheck Protection Program (CARES Act). Request for Information. Small Business Administration. Small Business Regulatory Enforcement Fairness Act of 1996. Securities and Exchange Commission. Small Entity Representatives. Supplemental Nutrition Assistance Program (‘‘Food Stamps’’). U.S. Department of Agriculture. FTC ..................................................................... GIPSA ................................................................. HMDA ................................................................. HUD .................................................................... LAR ..................................................................... LEP ..................................................................... MSA .................................................................... MOU .................................................................... NCUA .................................................................. NPRM ................................................................. OCC .................................................................... PPP ..................................................................... RFI ...................................................................... SBA ..................................................................... SBREFA .............................................................. SEC ..................................................................... SER ..................................................................... SNAP .................................................................. USDA .................................................................. Signing Authority The Acting Director of the Bureau, David Uejio, having reviewed and approved this document, is delegating the authority to electronically sign this document to Laura Galban, a Bureau Federal Register Liaison, for purposes of publication in the Federal Register. Dated: April 22, 2021. Laura Galban, Federal Register Liaison, Bureau of Consumer Financial Protection. [FR Doc. 2021–08716 Filed 4–26–21; 8:45 am] DEPARTMENT OF DEFENSE Office of the Secretary Revised Non-Foreign Overseas Per Diem Rates BILLING CODE 4810–AM–P Defense Human Resources Activity, Department of Defense (DoD). AGENCY: Notice of revised per diem rates in non-foreign areas outside the continental U.S. ACTION: Defense Human Resources Activity publishes this Civilian jbell on DSKJLSW7X2PROD with NOTICES SUMMARY: 75 Consumer Fin. Prot. Bureau, Upstart Network No-Action Letter (Nov. 30, 2020), https:// files.consumerfinance.gov/f/documents/cfpb_ upstart-network-inc_no-action-letter_2020-11.pdf. In addition to the Upstart NAL, in 2020, the Bureau granted a total of three Approvals under the VerDate Sep<11>2014 18:52 Apr 26, 2021 Jkt 253001 Compliance Assistance Sandbox policy and six NAL or NAL Templates. These applications, however, do not directly pertain to fair lending issues. All granted applications can be found on the Bureau’s website, at https:// PO 00000 Frm 00063 Fmt 4703 Sfmt 4703 www.consumerfinance.gov/rules-policy/innovation/ granted-applications. 76 On September 14, 2017, Upstart was granted a NAL for a term of three years. This NAL expired on December 1, 2020. E:\FR\FM\27APN1.SGM 27APN1

Agencies

[Federal Register Volume 86, Number 79 (Tuesday, April 27, 2021)]
[Notices]
[Pages 22177-22192]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-08716]


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BUREAU OF CONSUMER FINANCIAL PROTECTION


Fair Lending Report of the Bureau of Consumer Financial 
Protection, April 2021

AGENCY: Bureau of Consumer Financial Protection.

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

-----------------------------------------------------------------------

SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is 
issuing its ninth Fair Lending Report of the Bureau of Consumer 
Financial Protection (Fair Lending Report) to Congress. The Bureau is 
committed to ensuring fair, equitable, and nondiscriminatory access to 
credit for both individuals and communities. This report describes our 
fair lending activities in supervision and enforcement; guidance and 
rulemaking; interagency coordination; and outreach and education for 
calendar year 2020.

DATES: The Bureau released the 2020 Fair Lending Report on its website 
on April 14, 2021.

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, 
April 2021

Message From the Acting Director

    The Bureau recognizes April as fair lending and fair housing 
month--a time to specifically highlight the importance of equity in our 
financial markets. As

[[Page 22178]]

such, I am pleased to present the Fair Lending Annual Report to 
Congress, describing the Consumer Financial Protection Bureau's fair 
lending work in 2020.
    I want to express how incredibly proud I am of the Bureau, the 
Office of Fair Lending and Equal Opportunity (Office of Fair Lending) 
and the work they have been able to accomplish in the past year--a 
challenging year for all of us on so many different levels.
    As I have made clear before, as Acting Director, my top priorities 
for this agency are to take bold and swift action to address issues of 
pervasive racial injustice and the long-term economic impacts of the 
COVID-19 pandemic on consumers. Although the true severity of the 
economic impacts of COVID-19 are just starting to be understood, it is 
clear that the pandemic is exacerbating racial inequality in all 
markets, including rising housing insecurity among the most vulnerable 
consumers. This, combined with the lingering impacts of over 400 years 
of chattel slavery and Jim Crow laws that sought to limit racial 
equality through institutionalized discrimination, deepens our nation's 
longstanding racial inequities. To fully understand and address these 
issues, it is crucial that the Bureau apply a racial equity lens and to 
find practical ways to make freedom from racial prejudice and pursuit 
of racial equity a priority in the full breadth of the Bureau's work. 
The Office of Fair Lending will play an integral part in achieving this 
mission.
    The Dodd-Frank Wall Street Reform and Consumer Protection Act 
(Dodd-Frank Act) established the Bureau's Office of Fair Lending to 
provide ``oversight and enforcement of Federal laws intended to ensure 
the fair, equitable, and nondiscriminatory access to credit for both 
individuals and communities.''
    During my tenure, the Bureau will continue to use all the tools 
Congress gave it, including enforcement, supervision, rulemaking, 
guidance, research, and education to ensure fair, equitable and 
nondiscriminatory access to credit. The Bureau will identify and act on 
opportunities to focus on consumers in underserved communities, while 
vigorously pursuing racial and economic justice. This includes, but is 
in no way limited to, robust enforcement of fair lending laws under the 
Bureau's jurisdiction.
    As we are in the midst of a national emergency the likes of which 
have not been seen in a lifetime, the time for bold action is now. The 
hard work has already begun. I am eager for all that the Bureau, and 
the Office of Fair Lending, will accomplish on behalf of all consumers.

Sincerely,
David K. Uejio.

Message From the Fair Lending Director

    The events of 2020 challenged our nation in many ways. The COVID-19 
pandemic has caused great physical, emotional, and economic suffering. 
Millions of Americans face economic uncertainty and financial 
insecurity, are underemployed or unemployed, are at the brink of 
eviction or foreclosure, and are desperate for help.
    Of those struggling, people and communities of color have been 
disproportionately affected. Women- and minority-owned small businesses 
are more likely to face more severe economic consequences than their 
white counterparts. Black and Hispanic homeowners are also less likely 
to access mortgage relief and forbearance, a troubling trend that the 
Bureau will continue to address.
    Further, I would be remiss to not say the names of Black men, 
women, and children like George Floyd, Breonna Taylor, Tamir Rice and 
Ahmaud Arbury, sadly among the many who were assaulted and murdered 
last year. These incidents highlight racial and economic inequities and 
their impacts on the country. As such, the Bureau's fair lending work 
is more important now than perhaps ever.
    I am proud of what we have been able to accomplish in the past 
year. After hearing questions from financial institutions and consumer 
and civil rights groups about ways to support financial inclusion, the 
Bureau issued guidance on special purpose credit programs, which are 
innovative ways to expand access to credit to traditionally underserved 
communities, including minority and other underserved consumers. The 
Bureau also continued to examine and investigate institutions for 
compliance with the Home Mortgage Disclosure (HMDA) and Equal Credit 
Opportunity (ECOA) Acts. Last year, the Bureau filed a lawsuit against 
Townstone Financial, Inc., a nonbank retail-mortgage creditor that 
alleged, among other things, that Townstone illegally discouraged 
prospective African-American applicants and prospective applicants 
living in African-American neighborhoods in the Chicago MSA from 
applying to Townstone for mortgage loans. We also embraced responsible 
innovation, hosting our first ever Tech Sprint, where participants 
creatively leveraged technology to develop innovative proposals on ways 
that lenders could better educate consumers by providing more useful 
explanations of adverse actions on their credit applications, and what 
those consumers can do to strengthen their next application for credit. 
Additionally, in 2020, Bureau staff participated in more than 90 
outreach events with our external stakeholders, allowing the Bureau to 
hear perspectives on emerging issues and topics to better inform policy 
decisions.
    Last year (2020) tested us, but 2021 will prove to be consequential 
for consumers as the Bureau vigorously works to ensure an equitable 
recovery from the economic fallout of the COVID-19 pandemic. As the 
Bureau enters its tenth year of existence in 2021, I am reminded of the 
crisis in which this agency was conceived, the Great Recession. I am 
also reminded of the difference the Bureau has made in the lives of 
consumers over that decade. Most of all, the Bureau is still here, and 
much work remains to be done. Looking toward the future of the Bureau, 
and the Office of Fair Lending, we remain committed to fulfilling our 
statutory mandate to ensure fair, equitable, and nondiscriminatory 
access to credit for all consumers.

Sincerely,
Patrice Alexander Ficklin.

1. From the Great Recession to a National Emergency: Marking the 10th 
Year of the Consumer Financial Protection Act During a Pandemic

    The year 2020 marked the 10th anniversary of the passage of the 
Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank 
Act), from which the Consumer Financial Protection Bureau (CFPB or 
Bureau) was born. At that time, the nation found itself at a 
crossroads, reeling from the Great Recession--what was thought to have 
been a ``once in a lifetime'' economic crisis that devastated 
communities and families across the country. At its inception, the 
Bureau's statutory lodestar was to make consumer financial markets work 
better for consumers, families, small businesses, and communities, for 
responsible lenders and financial institutions, and for the American 
economy as a whole. The agency was built on the understanding that when 
the rules are fair and are applied as such, we have a chance to build 
stronger families and a stronger nation. A key component to this has 
been the Bureau's fair lending work to ensure the fair, equitable, and 
nondiscriminatory access to credit for both individuals and their 
communities.
    This year, the nation once again finds itself at a crossroads, 
facing the fallout of the devastating COVID-19 pandemic

[[Page 22179]]

which, at the time of this publication, has resulted in the deaths of 
more than 550,000 of American lives, as well as the destruction of 
millions of livelihoods. The events of 2020 caused the Bureau to 
quickly pivot from planned activities to respond to the consumer 
protection issues of the day. Enactment of the Coronavirus Aid, Relief, 
and Economic Security Act (CARES Act) and the creation of the Small 
Business Administration's (SBA) Paycheck Protection Program (PPP) 
required new guidance and interpretation, detailed in section 4.2.3 of 
this report. Additionally, in 2020, prioritized supervisory assessments 
were executed to identify risks to consumers, further explained in 
section 2 of this report. The Bureau also launched a hub of web-based 
COVID-19 content for consumers and other stakeholders, with resources 
available in multiple languages.\1\
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    \1\ https://www.consumerfinance.gov/coronavirus/.
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    In the midst of the COVID-19 pandemic, racial injustice issues also 
came to the forefront of America's public dialogue. These issues were 
exposed by the inequitable burden communities and people of color bore 
from higher infection and mortality rates and greater resulting 
economic impacts, as well as high-profile deaths of Black and Brown 
Americans at the hands of law enforcement. Confronting the devastating 
impacts of the COVID-19 pandemic and resulting economic crisis, the 
Bureau's fair lending work necessarily carried on.
    The Bureau solicited feedback from the public in a Request for 
Information (RFI) about how to enhance compliance with the Equal Credit 
Opportunity Act (ECOA), a key civil rights law, and received over 140 
comments, further described in section 6.2.2 of this report. The Bureau 
also filed an enforcement action against an institution accused of 
redlining and another for violating the Home Mortgage Disclosure Act 
(HMDA) (see section 2.3.1 of this report) and provided guidance on 
special purpose credit programs to enable creditors to expand credit to 
traditionally underserved consumers and communities (see section 4.2.1 
of this report).
    The Bureau recognizes that the economic fallout from the pandemic 
is only beginning, and the pandemic's effects and impacts are not yet 
fully known. What is certain, though, is that the Bureau's fair lending 
work is and will continue to be a critical component of the Bureau and 
the Federal government's response to the pandemic and the elimination 
of racial injustice. In 2021, the Bureau's Fair Lending Office will be 
front and center in the agency's efforts to advance racial and economic 
equity.

2. Fair Lending Supervision and Enforcement

2.1 Risk-Based Prioritization
    Because Congress charged the Bureau with the responsibility of 
overseeing many lenders and products, the Bureau has long-used a risk-
based approach to prioritizing supervisory examinations and enforcement 
activity. This approach helps ensure that the Bureau focuses on areas 
that present substantial risk of credit discrimination for 
consumers.\2\
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    \2\ For additional information regarding the Bureau's risk-based 
approach in prioritizing supervisory examinations, see section 
2.2.3, Risk-Based Approach to Examinations, Supervisory Highlights 
Summer 2013, available at https://files.consumerfinance.gov/f/201308_cfpb_supervisory-highlights_august.pdf.
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    As part of the prioritization process, the Bureau identifies 
emerging developments and trends by monitoring key consumer financial 
markets. If this field and market intelligence identifies fair lending 
risks in a particular market, that information is used to determine the 
type and extent of attention required to address those risks.
    The prioritization process incorporates a number of additional 
factors, 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 data. As a result of its annual risk-based prioritization process 
for 2020, the Bureau focused its fair lending supervision efforts on 
mortgage origination, small business lending, and student loan 
origination.
    As in previous years, the Bureau's 2020 mortgage origination work 
continued to focus on redlining (and whether lenders intentionally 
discouraged prospective applicants living or seeking credit in minority 
neighborhoods from applying for credit); assessing whether there is 
discrimination in underwriting and pricing processes such as steering; 
and HMDA data integrity and validation reviews (both as standalone 
exams and in preparation for ECOA exams that will follow).
    The Bureau's small business lending work focused on assessing 
whether (1) there is discrimination in the application, underwriting, 
and pricing processes, (2) creditors are redlining, and (3) there are 
weaknesses in fair lending related compliance management systems (CMS).
    The Bureau's student loan origination work focused on whether there 
is discrimination in policies and practices governing underwriting and 
pricing.
    In May 2020, in response to the COVID-19 pandemic, the Bureau 
rescheduled about half of its planned examination work and instead 
conducted Prioritized Assessments. Prioritized Assessments were 
designed to cover a greater number of institutions than the typical 
examination schedule allows, gain a greater understanding of industry 
responses to pandemic-related challenges, and help ensure that entities 
were attentive to practices that may result in consumer harm. The 
Bureau's Supervision program evaluated fair lending risks through 
Prioritized Assessments in the small business lending and mortgage 
servicing, automobile loan servicing, and credit card markets.
2.2 Fair Lending Supervision
    The Bureau's Fair Lending Supervision program assesses compliance 
with Federal fair lending consumer financial laws and regulations at 
banks and nonbanks over which the Bureau has supervisory authority. As 
a result of the Bureau's efforts to fulfill its fair lending mission 
during 2020, the Bureau initiated 13 fair lending examinations/targeted 
reviews. The Bureau also initiated a significant number of Prioritized 
Assessments that included important fair lending components.
    In 2020, the Bureau issued several fair lending-related Matters 
Requiring Attention, directing entities to take corrective actions that 
will be monitored by the Bureau through follow-up supervisory events. 
The Bureau also issued Supervisory Recommendations in 2020 relating to 
weak or nonexistent fair lending policies and procedures, risk 
assessments, and fair lending training.\3\
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    \3\ Consumer Fin. Prot. Bureau, BCFP Bulletin 2018-01: Changes 
to types of supervisory communications (Sept. 25, 2018), https://files.consumerfinance.gov/f/documents/bcfp_bulletin-2018-01_changes-to-supervisory-communications.pdf. Additional activity has occurred 
with this matter since the end of this reporting period. On March 
31, 2021, the Bureau issued CFPB Bulletin 2021-01: Changes to Types 
of Supervisory Communications, which announces changes to how 
examiners articulate supervisory expectations to supervised entities 
in connection with supervisory events, https://files.consumerfinance.gov/f/documents/cfpb_bulletin_2021-01_changes-to-types-of-supervisory-communications_2021-03.pdf (Mar. 31, 2021).
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2.3 Fair lending enforcement
    The Bureau has the statutory authority to bring actions to enforce 
the requirements of ECOA and HMDA. The

[[Page 22180]]

Bureau has the authority to engage in research, conduct investigations, 
file administrative complaints, hold hearings, and adjudicate claims 
through the Bureau's administrative enforcement process regarding ECOA 
and HMDA. The Bureau also has independent litigation authority and can 
file cases in federal court alleging violations of fair lending laws 
under the Bureau's jurisdiction. Like other Federal regulators, the 
Bureau is required to refer matters to the Department of Justice (DOJ) 
when it has reason to believe that a creditor has engaged in a pattern 
or practice of lending discrimination.\4\
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    \4\ See 15 U.S.C. 1691e(h).
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2.3.1 Public Enforcement Actions
    In 2020, the Bureau announced two public fair lending enforcement 
actions: Townstone Financial Inc., and Washington Federal Bank, N.A.

Townstone Financial Inc.

    On July 15, 2020, the Bureau filed a lawsuit in federal district 
court in the Northern District of Illinois against Townstone Financial, 
Inc. (Townstone), a nonbank retail-mortgage creditor based in Chicago. 
On November 25, 2020, the Bureau amended the complaint.\5\ The Bureau 
alleges that Townstone violated ECOA and Regulation B. As alleged in 
the complaint, from 2014 through 2017, Townstone drew almost no 
applications for mortgages on properties in African American 
neighborhoods located in the Chicago-Naperville-Elgin Metropolitan 
Statistical Area (Chicago MSA) and few applications from African 
Americans throughout the Chicago MSA. The Bureau alleges that Townstone 
engaged in acts or practices, including making statements during its 
weekly radio shows and podcasts through which it marketed its services, 
that illegally discouraged African American prospective applicants from 
applying for mortgage loans and engaged in illegal redlining by 
engaging in acts or practices that discouraged prospective applicants 
living or seeking credit in African American neighborhoods in the 
Chicago MSA from applying for mortgage loans. The Bureau's complaint 
seeks an injunction against Townstone, as well as damages, redress to 
consumers, and the imposition of a civil money penalty. Litigation is 
ongoing.
---------------------------------------------------------------------------

    \5\ Consumer Fin. Prot. Bureau, Townstone Financial, Inc. (July 
15, 2020), https://www.consumerfinance.gov/enforcement/actions/townstone-financial-inc-and-barry-sturner/.
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Washington Federal Bank, N.A.

    On October 27, 2020, the Bureau settled with Washington Federal 
Bank, N.A. (Washington Federal), a federally-insured national bank, to 
address the Bureau's finding that it reported inaccurate HMDA data 
about its mortgage transactions for 2016 and 2017.\6\ Inaccurate HMDA 
data can make it difficult for the public and regulators to discover 
and stop discrimination in home mortgage lending or for public 
officials and lenders to tell whether a community's credit needs are 
being met. The settlement requires Washington Federal to pay a $200,000 
civil money penalty and develop and implement an effective compliance-
management system to prevent future violations.
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    \6\ Consent Order, In re Washington Federal Bank, N.A., CFPB No. 
2020-BCFP-0019 (Oct. 24, 2020), https://files.consumerfinance.gov/f/documents/cfpb_washington-federal-na_consent-order_2020-10.pdf.
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    Washington Federal reported HMDA data for over 7,000 mortgage 
applications in both 2016 and 2017. The Bureau found that these data 
included significant errors, with some samples having error rates as 
high as 40%. The Bureau found that the errors in Washington Federal's 
2016 HMDA data were caused by a lack of appropriate staffing, 
insufficient staff training, and ineffective quality control. The 
errors in its 2017 HMDA data were directly related to weaknesses in 
Washington Federal's compliance-management system. The Bureau found 
weaknesses in the areas of board and management oversight, monitoring, 
and policies and procedures. The significant errors in reported 
mortgage-application data violated HMDA and Regulation C. These 
violations also constituted violations of the Consumer Financial 
Protection Act.
2.3.2 ECOA Referrals to the Department of Justice
    The Bureau must refer to DOJ a matter when it has reason to believe 
that a creditor has engaged in a pattern or practice of lending 
discrimination in violation of ECOA.\7\ The Bureau may refer other 
potential ECOA violations to DOJ.\8\ In 2020, the Bureau referred four 
matters to DOJ about discrimination pursuant to section 706(g) of ECOA. 
Two referrals involved redlining in mortgage origination based on race 
and national origin. One referral involved discrimination based on 
receipt of public assistance income in mortgage origination and one 
referral involved pricing discrimination in mortgage origination based 
on race and sex.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 1691e(g).
    \8\ Id.
---------------------------------------------------------------------------

2.3.3 Implementing Enforcement Orders
    When an enforcement action is resolved through a public enforcement 
order, the Bureau (together with DOJ, when relevant) takes steps to 
ensure that the respondent or defendant complies with the requirements 
of the order. Depending on 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.
    In January 2020, DOJ and the Bureau, together with BancorpSouth 
Bank (BancorpSouth), submitted a joint motion for early termination of 
the Consent Order in the BancorpSouth case, which was granted by the 
court.\9\
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    \9\ Order, United States v. BancorpSouth Bank, No. 1:16-cv-
00118-MPM-DAS (N.D. Miss. Jan. 27, 2020), ECF No. 8, https://files.consumerfinance.gov/f/documents/cfpb_bancorpsouth_order-terminating-consent-order.pdf.
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    More information about our enforcement activity, past and present, 
is available at www.consumerfinance.gov/enforcement/actions/.
2.3.4 Pending Fair Lending Investigations
    In 2020, the Bureau had a number of ongoing and newly opened fair 
lending investigations of institutions. The Bureau investigated 
potential discrimination in several markets, including student lending, 
payday lending, credit cards, and mortgage lending, including the 
unlawful practice of redlining. These matters are ongoing.

3. Interagency Reporting on ECOA and HMDA

    The Bureau is statutorily required 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.\10\ In addition, the Bureau's annual HMDA reporting 
requirement calls for the Bureau, in consultation with the Department 
of Housing and Urban Development (HUD), to report annually on the 
utility of HMDA's requirement that covered lenders itemize certain 
mortgage loan data.\11\
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    \10\ 15 U.S.C. 1691f.
    \11\ 12 U.S.C. 2807.

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[[Page 22181]]

3.1 Reporting on ECOA Enforcement
    The enforcement efforts and compliance assessments made by the 
eleven agencies assigned enforcement authority under section 704 of 
ECOA are discussed in this section. Each of the agencies reported 
information describing their efforts to achieve general compliance.
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    \12\ 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 (Bureau) comprise the Federal Financial 
Institutions Examination Council (FFIEC). The State Liaison 
Committee was added to FFIEC in 2006 as a voting member. Federal 
Financial Institutions Examination Council, http://www.ffiec.gov 
(last visited Mar. 30, 2021).
    \13\ 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 
comes from the Packers and Stockyards Division, Fair Trade Practices 
Program, AMS.
    \14\ 15 U.S.C. 1691c.

BILLING CODE 4810-AM-P
[GRAPHIC] [TIFF OMITTED] TN27AP21.000


[[Page 22182]]


BILLING CODE 4810-AM-C
3.1.1 Public Enforcement Actions
    In 2020, two of the eleven Federal agencies with ECOA enforcement 
authority brought public enforcement actions for violations of ECOA. 
The FTC brought an enforcement action in federal court against New York 
City car dealer Bronx Honda and its general manager, Carlo Fittanto, 
alleging that defendants violated ECOA and Regulation B by 
discriminating against African American and Hispanic consumers who 
financed vehicle purchases. According to the FTC's complaint, among 
other things, defendants charged African American and Hispanic 
customers higher markups and fees for financing than similarly situated 
non-Hispanic white consumers. In May 2020, the defendants agreed to pay 
$1.5 million to settle the charges. In addition, along with relief for 
other illegal practices alleged by the complaint, defendants are also 
required to establish a fair lending program that will, among other 
requirements, cap the amount of any additional interest markup they 
charge consumers. The FTC issued refunds totaling nearly $1.5 million 
to individuals affected by the allegedly unlawful financing and sales 
practices of defendants, with refunds averaging about $371 each to 
3,977 victims of Bronx Honda's practices.
    As described in section 2.3, in July 2020, the Bureau brought a 
public enforcement action in federal district court in the Northern 
District of Illinois against Townstone Financial, Inc., a nonbank 
retail-mortgage creditor based in Chicago, alleging discouragement of 
prospective applicants, redlining, and other violations of ECOA and 
Regulation B.
    Below is an overview of the number of ECOA enforcement actions by 
all Federal agencies since 2012:
[GRAPHIC] [TIFF OMITTED] TN27AP21.001

3.1.2 Number of Institutions Cited for ECOA/Reg B Violations
---------------------------------------------------------------------------

    \15\ Table 3 identifies public enforcement actions by the year 
they were initiated (when filed and announced publicly).
---------------------------------------------------------------------------

    In 2020, the Federal Banking Agencies and the CFPB reported citing 
81 institutions with violations of ECOA and/or Regulation B.\16\
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    \16\ For these purposes, the Federal Banking Agencies refer to 
the FDIC, FRB, and OCC. In addition to the number of institutions 
cited by the Federal Banking Agencies and the CFPB, the NCUA 
reported citing 116 credit unions for ECOA and/or Regulation B 
violations in 2020.
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    Below is an overview of the number of institutions cited with ECOA 
and Regulation B violations by the Federal Banking Agencies and the 
CFPB since 2014:

[[Page 22183]]

[GRAPHIC] [TIFF OMITTED] TN27AP21.002

3.1.3 Violations Cited During ECOA Examinations
---------------------------------------------------------------------------

    \17\ Table 4 reflects data provided only by the Federal Banking 
Agencies and the CFPB. NCUA data is not included in the table 
because the relevant data are unavailable for years 2014-2019. The 
NCUA reported citing 116 credit unions for ECOA and/or Regulation B 
violations in 2020.
    \18\ 12 CFR 1002.4(a).
    \19\ 12 CFR 1002.7(d)(1).
    \20\ 12 CFR 1002.7(d)(1).
    \21\ 12 CFR 1002.4(a) and 1002.4(b).
    \22\ 12 CFR 1002.9(a)(2), 1002.9(b)(2).
    \23\ 12 CFR 1002.9(a)(1), 1002.9(a)(2), 1002.9(b)(2).
    \24\ 12 CFR 1002.9(a)(1)(i), 1002.9(a)(1)(ii), 1002.9(a)(2).
    \25\ 12 CFR 1002.9 (a)(2), 1002.9(b)(2).
    \26\ 12 CFR 1002.9(a)(1); 1002.9(a)(2); 1002.9(b)(2).
    \27\12 CFR 1002.14(a)(1), 1002.14(a)(2).
    \28\12 CFR 1002.14(a)(1), 1002.14(a)(2), ID02.14(a)(3), 
1002.14(a)(4).
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    Among institutions examined for compliance with ECOA and Regulation 
B, the FFIEC agencies reported that the most frequently cited 
violations were as follows:






                         Table 5--Regulation B Violations Cited by FFIEC Agencies, 2020
----------------------------------------------------------------------------------------------------------------
             Regulation B violations: 2020                               FFIEC agencies reporting
----------------------------------------------------------------------------------------------------------------
12 CFR 1002.4(a), 1002.4(b), 1002.7(d)(1):               NCUA,\18\ OCC,\19\ FRB,\20\ CFPB.\21\
 Discrimination: Discrimination on a prohibited basis
 in a credit transaction; discouragement of prospective
 applicants on a prohibited basis; a creditor shall not
 inquire about the race, color, religion, national
 origin, or sex of an applicant or any other person in
 connection with a credit transaction; improperly
 considering receipt of public assistance in a system
 of evaluating applicant creditworthiness; improperly
 requiring the signature of the applicant's spouse or
 other person.
12 CFR 1002.9(a)(1), (a)(1)(i)-(ii), (a)(2), (b)(2):     FDIC,\22\ NCUA,\23\ OCC,\24\ FRB,\25\ CFPB.\26\
 Adverse Action: Failure to provide notice to the
 applicant 30 days after receiving a completed
 application concerning the creditor's approval of,
 counteroffer or adverse action on the application;
 failure to provide appropriate notice to the applicant
 30 days after taking adverse action on an incomplete
 application; failure to provide sufficient information
 in an adverse action notification, including the
 specific reasons for the action taken.
12 CFR 1002.12(b)(1): Record Retention: Failure to       CFPB.
 preserve application records.
12 CFR 1002.14 (a)(1), (a)(2), (a)(3), (a)(4):           OCC,\27\ FDIC.\28\
 Appraisals and Valuations: Failure to provide
 appraisals and other valuations.
----------------------------------------------------------------------------------------------------------------

    Among institutions examined for compliance with ECOA and Regulation 
B, the Non-FFIEC agencies reported that the most frequently cited 
violations were as follows:



[[Page 22184]]



                Table 6--Regulation B Violations Cited by Non-FFIEC Agencies Enforcing ECOA, 2020
----------------------------------------------------------------------------------------------------------------
             Regulation B violations: 2020                             Non-FFIEC agencies reporting
----------------------------------------------------------------------------------------------------------------
12 CFR 1002.9(a)(1)(i): Adverse Action: Failure to       FCA.
 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.
----------------------------------------------------------------------------------------------------------------

    The AMS, SEC, and the SBA reported that they received no complaints 
based on ECOA or Regulation B in 2020. In 2020, the DOT Office of 
Aviation Enforcement and Proceedings reported that it ``may have 
received a relatively small number of consumer inquiries or complaints 
concerning credit matters possibly covered by ECOA,'' which it 
``processed informally.''
3.1.4 Additional Efforts To Ensure Compliance With ECOA and Regulation 
B
    The agencies with administrative enforcement responsibilities under 
ECOA engage in other activities to ensure compliance with ECOA and 
Regulation B. Below is a sample of activities that agencies reported 
for 2020:
     Hosting or participating in meetings, conferences, and 
trainings with consumer advocates, industry representatives, and 
interagency groups on fair lending and consumer protection issues.
     Releasing publications focused on consumer compliance.
     Hosting or participating in interagency webinars on fair 
lending supervision.
     Providing technical assistance and outreach to educate 
community banks regarding the requirements of the regulation.
     Providing comments in response to the Bureau's Request for 
Information on ECOA and Regulation B.
     Providing training and workshops for military consumers on 
protections provided by ECOA and Regulation B.
     Issuing blog posts for consumers and businesses regarding 
ECOA and Regulation B on important topics, such as artificial 
intelligence.
3.1.5 Referrals to the Department of Justice
    The agencies assigned enforcement authority under section 704 of 
ECOA must refer a matter to DOJ when there is reason to believe that a 
creditor has engaged in a pattern or practice of lending discrimination 
in violation of ECOA.\29\ They also may refer other potential ECOA 
violations to DOJ.\30\ In 2020, four agencies (CFPB, FDIC, FRB, and 
NCUA) made twelve such referrals to DOJ involving discrimination in 
violation of ECOA. A brief description of those matters follows.
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    \29\ 15 U.S.C. 1691e(g).
    \30\ Id.
---------------------------------------------------------------------------

    As reported in section 2.3.2, in 2020, the Bureau referred four 
matters to DOJ. Two referrals involved redlining in mortgage 
origination based on race and national origin. One referral involved 
discrimination based on receipt of public assistance income in the 
mortgage servicing context and one referral involved pricing 
discrimination in mortgage origination based on race and sex.
    In 2020, FDIC referred three matters to DOJ. The first referral 
involved discrimination in the underwriting of unsecured consumer loans 
on the basis of age and receipt of public assistance income. The second 
referral involved discrimination in the pricing of unsecured consumer 
loans on the basis of marital status. The third referral involved 
discrimination in underwriting and the pricing of unsecured consumer 
loans on the bases of age, sex, and receipt of public assistance 
income.
    The NCUA referred three matters to DOJ in 2020. One referral was 
for discrimination on the prohibited basis of age and two referrals 
were for discrimination on the basis of marital status.
    In 2020, FRB referred two matters to DOJ. One matter involved 
discrimination based on marital status in requiring spousal guarantees 
on loans. The second matter involved a pattern or practice of redlining 
in mortgage lending based on race or national origin.
    Below is an overview of the number of ECOA referrals to DOJ by all 
Federal agencies since 2012:

[[Page 22185]]

[GRAPHIC] [TIFF OMITTED] TN27AP21.003

3.2 Reporting on HMDA
    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.\31\ The 
Bureau, in consultation with HUD, finds that itemization and tabulation 
of these data furthers the purposes of HMDA.
---------------------------------------------------------------------------

    \31\ 12 U.S.C. 2807.
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4. Guidance and Rulemaking

4.1 ECOA and Regulation B Rulemaking
4.1.1 Small Business Lending and Data Collection
    In the Dodd-Frank Act, Congress directed the Bureau to adopt 
regulations governing the collection of small business lending data. 
Section 1071 of the Dodd-Frank Act (section 1071) amended ECOA to 
require financial institutions to compile, maintain, and submit to the 
Bureau certain data on applications for credit for women-owned, 
minority-owned, and small businesses.
    Congress enacted section 1071 for the purpose of facilitating 
enforcement of fair lending laws and enabling communities, governmental 
entities, and creditors to identify business and community development 
needs and opportunities for women-owned, minority-owned, and small 
businesses.
    Under the process established by Congress in the Small Business 
Regulatory Enforcement Fairness Act of 1996 (SBREFA), the Bureau is 
required to consult with representatives of small entities likely to be 
directly affected by the regulations the Bureau is considering 
proposing and to obtain feedback on the likely impacts the rules under 
consideration would have on small entities.
    In September 2020, the Bureau released its Outline of Proposals 
Under Consideration and Alternatives Considered for Section 1071 of the 
Dodd-Frank Act governing small business lending data collection and 
reporting, which described proposals under consideration to implement 
section 1071 along with the relevant law, the regulatory process, and 
an economic analysis of the potential impacts of the proposals on 
directly affected small entities.\32\
---------------------------------------------------------------------------

    \32\ Consumer Fin. Prot. Bureau, Small Business Advisory Review 
Panel For Consumer Financial Protection Bureau Small Business 
Lending Data Collection Rulemaking (Sept. 15, 2020), https://files.consumerfinance.gov/f/documents/cfpb_1071-sbrefa_outline-of-proposals-under-consideration_2020-09.pdf.
---------------------------------------------------------------------------

    The Bureau also convened a Small Business Advocacy Review panel in 
October 2020. The panel was comprised of a representative from the 
Bureau, the Chief Counsel for Advocacy of the SBA, and a representative 
from the Office of Information and Regulatory Affairs in the Office of 
Management and Budget. The panel collected comments and recommendations 
from representatives of small entities that are likely to be subject to 
the regulation that the Bureau is considering proposing.
    In December 2020, the Bureau released the Final Report of the Small 
Business Review Panel on the CFPB's Proposals Under Consideration for 
the Small Business Lending Data Collection Rulemaking.\33\ This report 
includes a summary of the feedback received from small entity 
representatives (SERs) during the panel process, and findings and 
recommendations made by the panel.
---------------------------------------------------------------------------

    \33\ Consumer Fin. Prot. Bureau, Final Report of the Small 
Business Review Panel on the CFPB's Proposals Under Consideration 
for the Small Business Lending Data Collection Rulemaking (Dec. 14, 
2020), https://files.consumerfinance.gov/f/documents/cfpb_1071-sbrefa-report.pdf.
---------------------------------------------------------------------------

    In their feedback, SERs were generally supportive of the Bureau's 
statutory mission to enact rules under section 1071 and several SERs 
stated that a 1071 rulemaking is necessary to better understand the 
small business lending market. Further, SERs requested, and the panel 
agreed that, among other things, the Bureau should issue implementation 
and guidance materials specifically to assist small financial 
institutions in complying with an eventual section 1071 rule, and to 
consider providing sample disclosure language.
    The feedback from small entity representatives and the panel's 
findings and recommendations will be used by the Bureau as it prepares 
a notice of

[[Page 22186]]

proposed rulemaking to implement section 1071.
4.2 ECOA and Regulation B Guidance
4.2.1 Special Purpose Credit Program Interpretive Rule
    In December 2020, the Bureau issued an interpretive rule, styled as 
an Advisory Opinion, related to special purpose credit programs, 
clarifying the regulations and promoting equitable access to credit for 
historically economically disadvantaged groups and communities.\34\ 
This interpretive rule followed the Bureau's issuance of an RFI on ECOA 
and Regulation B (see section 6.2.2), where the Bureau sought public 
opinion on, among other things, special purpose credit programs. 
Through extensive stakeholder feedback and comments received in 
response to the RFI, the Bureau learned that stakeholders were 
interested in additional guidance to help them develop compliant 
special purpose credit programs.
---------------------------------------------------------------------------

    \34\ Consumer Fin. Prot. Bureau, Consumer Financial Protection 
Bureau Issues Advisory Opinion to Help Expand Fair, Equitable, and 
Nondiscriminatory Access to Credit (Dec. 21, 2020), https://www.consumerfinance.gov/about-us/newsroom/consumer-financial-protection-bureau-issues-advisory-opinion-to-help-expand-fair-equitable-and-nondiscriminatory-access-to-credit.
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    As detailed in the interpretive rule, ECOA and Regulation B 
prohibit discrimination on certain prohibited bases in any aspect of a 
credit transaction, but the statute and regulation clarify that it is 
not discrimination for for-profit organizations to provide special 
purpose credit programs designed to meet special social needs. The 
Bureau does not determine whether individual programs qualify for 
special purpose credit status. Instead, the creditor offering the 
special purpose credit program must determine the status of its 
program. Regulation B provides creditors with general guidance for 
developing special purpose credit programs that are compliant with 
ECOA.
    To guide this determination and to address regulatory uncertainty, 
the Bureau issued this interpretive rule with the hope that more 
creditors will offer special purpose credit programs and increase 
access to credit to underserved groups. Specifically, the Bureau 
clarified the content that a for-profit organization must include in a 
written plan that establishes and administers a special purpose credit 
program under Regulation B. The interpretive rule also clarified the 
type of research and data that may be appropriate to inform a for-
profit organization's determination that a special purpose credit 
program would benefit a certain class of people.
    This, and other interpretive rules issued by the Bureau, are 
available at www.consumerfinance.gov/compliance/advisory-opinion-program/.
4.2.2 ECOA Valuations Rule Fact Sheets
    Regulation B requires creditors to provide applicants free copies 
of all appraisals and other written valuations developed in connection 
with an application for a loan to be secured by a first lien on a 
dwelling. Known as the ECOA Valuations Rule, the rule also requires 
creditors to notify applicants in writing that copies of appraisals 
will be provided to them promptly upon completion or no later than 
three business days before consummation or account opening, whichever 
is earlier. In April 2020, the Bureau released two factsheets on the 
ECOA Valuations Rule. The factsheets provide information on transaction 
coverage \35\ under the Valuations Rule and delivery method and timing 
requirements for appraisals and other written valuations.\36\ The 
Bureau also published a frequently asked questions sheet (FAQ) related 
to the ECOA Valuations Rule in light of the COVID-19 pandemic.\37\
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    \35\ Consumer Fin. Prot. Bureau, Factsheet: Transaction coverage 
under the ECOA Valuations Rule (May 14, 2020), https://www.consumerfinance.gov/documents/8736/cfpb_ecoa-valuation_transaction-coverage-factsheet.pdf.
    \36\ Consumer Fin. Prot. Bureau, Factsheet: Delivery of 
appraisals (June 5, 2020), https://www.consumerfinance.gov/documents/8737/cfpb_ecoa-valuation_delivery-of-appraisals-factsheet.pdf.
    \37\ Consumer Fin. Prot. Bureau, The Bureau's Mortgage 
Origination Rules FAQs related to the COVID-19 Emergency (Apr. 29, 
2020), https://files.consumerfinance.gov/f/documents/cfpb_mortgage-origination-rules_faqs-covid-19.pdf.
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4.2.3 Paycheck Protection Program FAQs
    On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and 
Economic Security Act (the CARES Act),\38\ which included a temporary 
small business lending program known as the Paycheck Protection Program 
(PPP). Under this program, small businesses could receive loans from 
private lenders to cover eligible payroll, costs, business mortgage 
payments and interest, rent, and utilities for either an 8- or 24-week 
period after disbursement. Each loan is fully guaranteed by the SBA, 
which administers the PPP; small business borrowers do not have to make 
any payments during the first six months of the loan term and may 
receive a deferral up to one year; and small businesses may receive 
complete or partial forgiveness of their loans if they use their loans 
to cover certain expenses and meet other requirements. A wide range of 
financial institutions were eligible to participate as lenders in the 
PPP, including institutions that normally do not participate in the 
SBA's 7(a) lending program.\39\ This includes federally insured 
depository institutions, credit unions, and nonbanks.\40\
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    \38\ Coronavirus Aid, Relief, and Economic Security Act, Public 
Law 116-136, 134 Stat. 281 (Mar. 27, 2020).
    \39\ The 7(a) loan program is the SBA's primary program for 
providing financial assistance to small businesses. The program's 
name comes from section 7(a) of the Small Business Act, 15 U.S.C. 
636(a). The SBA offers several different types of loans through the 
program.
    \40\ Institutions that were not SBA-certified did have to apply 
to the SBA and receive delegated authority to process PPP loan 
applications.
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    In May 2020, the Bureau issued clarifying FAQs to support small 
businesses that applied for a loan under the PPP.\41\ Creditors are 
generally required under ECOA and Regulation B to notify applicants 
within 30 days of receiving a ``completed application'' of the 
creditor's approval, counteroffer, denial or other adverse notice 
regarding the application. Regulation B notifications of action taken 
are designed to help consumers and businesses by providing transparency 
to the credit underwriting process in a timely manner. Information that 
is generally included in a complete application includes any approvals 
or reports by governmental agencies or others who can guarantee, 
insure, or provide security for the credit or collateral. In its FAQs, 
the Bureau clarified that a PPP application is only a ``completed 
application'' once the creditor has received a loan number from the SBA 
or a response about the availability of funds. This ensures that the 
time awaiting this information from the SBA does not count toward the 
30-day notice requirement, and that applications will therefore not 
``time out'' during the process.
---------------------------------------------------------------------------

    \41\ Consumer Fin. Prot. Bureau, Consumer Financial Protection 
Bureau Issues Clarifications to Support Small Business Applying for 
PPP Loans (May 6, 2020), https://www.consumerfinance.gov/about-us/newsroom/cfpb-issues-clarifications-support-small-business-applying-ppp-loans/.
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    The FAQs also made clear that if the creditor denies an application 
without ever sending the application to the SBA, the creditor must give 
notice of this adverse action within 30 days. The FAQs further 
clarified that a creditor cannot deny a loan application based on 
incompleteness, where an application is incomplete regarding matters 
the applicant cannot provide, such as a loan number or response about 
the availability of funds from the SBA.

[[Page 22187]]

4.2.4 Supervisory Highlights Issue 22, Summer 2020
    The Bureau periodically publishes Supervisory Highlights to 
communicate about the Bureau's supervisory activity and to share key 
examination findings. These reports also communicate operational 
changes to our supervision program and provide a convenient and easily 
accessible resource for information on our recent guidance documents.
    In September 2020, the Bureau published Issue 22 of Supervisory 
Highlights.\42\ In this edition, the Bureau noted that one or more 
lenders violated ECOA and Regulation B by intentionally redlining 
majority minority neighborhoods in two MSAs by engaging in acts or 
practices directed at prospective applicants that may have discouraged 
reasonable people from applying for credit.
---------------------------------------------------------------------------

    \42\ Consumer Fin. Prot. Bureau, Supervisory Highlights, Summer 
2020 (Sept. 2020), https://files.consumerfinance.gov/f/documents/cfpb_supervisory-highlights_issue-22_2020-09.pdf.
---------------------------------------------------------------------------

    Additionally, Bureau examiners found that one or more lenders 
violated ECOA and Regulation B by maintaining a policy and practice 
that excluded certain forms of public assistance income, including 
unemployment compensation and Supplemental Nutrition Assistance Program 
(SNAP benefits)--commonly known as food stamps, from consideration in 
determining a borrower's eligibility for mortgage modification 
programs. ECOA and Regulation B prohibit lenders from discriminating in 
any aspect of a credit transaction against an applicant ``because all 
or part of the applicant's income derives from any public assistance 
program.'' \43\
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    \43\ 15 U.S.C. 1691(a)(2); 12 CFR 1002.2(z).
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    All editions of Supervisory Highlights are available at 
www.consumerfinance.gov/compliance/supervisory-highlights/.
4.2.5 Help Desk Program
    To promote fair lending compliance, during 2020, the Bureau hosted 
``Fair Lending Help Desks.'' The help desks, hosted at two external 
stakeholder conferences, allowed conference participants to engage with 
Bureau subject matter experts on regulatory compliance issues relating 
to ECOA and Regulation B, as well as HMDA and Regulation C.
4.3 HMDA and Regulation C Rulemaking
4.3.1 Final Rule Raising Reporting Thresholds Under HMDA
    In April 2020, the Bureau issued a final rule raising the loan-
volume coverage thresholds for financial institutions reporting data 
under HMDA. The final rule, amending Regulation C, increased the 
permanent threshold for collecting, recording, and reporting data about 
closed-end mortgage loans from 25 to 100 loans, effective July 1, 2020. 
The final rule will also amend Regulation C to increase the permanent 
threshold for collecting, recording, and reporting data about open-end 
lines of credit from 100 to 200, effective January 1, 2022, when the 
current temporary threshold of 500 of open-end lines of credit expires.
4.3.2 HMDA Notices of Proposed Rulemaking
    In the Fall 2020 Rulemaking Agenda, the Bureau announced that it 
anticipated publishing two Notices of Proposed Rulemaking (NPRMs) in 
early 2021 concerning possible revisions to the 2015 HMDA rule. One of 
these indicated that it followed an Advance Notice of Proposed 
Rulemaking in May 2019 concerning certain data points that are required 
to be reported under the HMDA rule and coverage of certain business or 
commercial purpose loans, addressing concerns about regulatory burden. 
The second indicated it would address the public disclosure of HMDA 
data in light of consumer privacy interests, so that stakeholders can 
concurrently consider and comment on the collection and reporting of 
data points and public disclosure of those data points. Concurrent with 
the publication of the Fall 2020 Unified Agenda, the Bureau's Office of 
Regulations issued a blog post on the Bureau's website stating that the 
data points and disclosure rules may not be released by the anticipated 
February target in the Unified Agenda.
4.4 HMDA and Regulation C Guidance
4.4.1 HMDA Data Point Articles With Observations of the 2019 HMDA Data
    In 2020, the Bureau released two HMDA data point articles 
presenting Bureau analysis of the 2019 HMDA data. The first was issued 
in June 2020, which describes mortgage market activity over time based 
on data reported under HMDA. It summarizes the historical data points 
in the 2019 HMDA data, as well as recent trends in mortgage and housing 
markets.
    The second article was released in August 2020. The focus of the 
article was on the data points newly added or revised by the 2015 HMDA 
rule, specifically through cross-sectional analyses, i.e., using the 
data contained in one year's loan application register (LAR) to explore 
various patterns and relationships between different data fields to 
provide some initial observations. To the extent some of those patterns 
or relationships might have changed significantly over the last year, 
the article highlighted such changes. Otherwise, the majority of the 
analyses were limited to the data collected in 2019 and reported in 
2020.
4.4.2 HMDA Reporting Notification Program
    On occasion, the Bureau will send notification letters to advise 
recipients that the Bureau has information that appears to show that 
the recipients might be in violation of Federal consumer financial law. 
The letters are not accusations of wrongdoing. Instead, they are 
intended to help recipients review certain practices to ensure that 
they comply with Federal law. One such letter pertains to compliance 
with HMDA, through the Bureau's HMDA Reporting Notification Program 
(HMDA RNP).
    As part of the HMDA RNP, in September 2020, the Bureau issued 
notification letters to 40 non-depository mortgage lenders regarding 
potential non-compliance with certain reporting requirements of HMDA 
and Regulation C. Specifically, the letters informed recipients that 
they may be required to collect, record, and report data about their 
mortgage-lending activity under HMDA and Regulation C, and that they 
may be in violation of those requirements. The letters also provided 
information about specific reporting requirements under HMDA and 
Regulation C and provided links to educational resources for HMDA 
reporters. The letters urged recipients to review their practices to 
ensure compliance with all relevant laws. The recipients were 
encouraged to respond to the Bureau to advise if they had taken, or 
would take, steps to ensure compliance with the law. Recipients were 
invited to tell the Bureau if they thought their activities did not 
meet HMDA reporting thresholds.
    The Bureau's HMDA RNP sought to increase HMDA compliance through 
education and direct outreach to potential non-reporting mortgage 
lenders, and to improve HMDA data quality and completeness through 
accurate reporting. Since commencing the HMDA non-reporters project 
pilot in 2016, more than 224,000 previously

[[Page 22188]]

unreported mortgage loan records have now been reported.
4.4.3 HMDA Data Browser Webinars
    HMDA data are the most comprehensive source of publicly available 
information on the U.S. mortgage market. Each year, thousands of 
financial institutions are required to maintain, report, and publicly 
disclose loan-level information about mortgages under HMDA. These data 
serve multiple purposes: Helping to show whether lenders are serving 
the housing needs of their communities, giving public officials 
information that helps them make decisions and policies, and shedding 
light on lending patterns that could be discriminatory. The public data 
are modified to protect applicant and borrower privacy.
    In 2019, the HMDA Data Browser was launched as a tool to access 
HMDA data collections for the years 2018 and onward. While a single 
year of HMDA data may contain tens of millions of records and require 
special software to analyze, the HMDA Data Browser allows users to 
filter and download more manageable and targeted HMDA datasets, 
including by geographic area. Upon selection, users can download a 
comma separated values (CSV) file, compatible with Excel, that includes 
this geographic data, along with all 99 public data fields. If a user 
would like to filter data further, they can select from up to two of 11 
available variables. Users can then view an aggregated summary table of 
the data requested and download a CSV file of the filtered data.
    In 2020, the Bureau hosted five webinars on HMDA and the HMDA Data 
Browser, which were presented to educate civil rights groups, consumer 
advocates, industry, and other government agencies on the tool. These 
skill-building webinars provided background information on HMDA, 
including the types of mortgage transactions and the specific data 
points reported under the law and a step-by-step demonstration on how 
to use the HMDA Data Browser.
    A recorded version of the live HMDA Data Browser webinar is 
available at www.consumerfinance.gov/about-us/events/archive-past-events/hmda-data-browser/.
    Access to the HMDA Data Browser is available at https://ffiec.cfpb.gov/data-browser/. For questions or suggestions about HMDA 
or the HMDA Data Browser, contact [email protected].
4.4.4 Other HMDA Guidance and Resources
    The Bureau maintains a suite of resources on its public website to 
help facilitate compliance with HMDA and Regulation C, including an 
Executive Summary of HMDA rule changes; Small Entity Compliance Guide; 
Key Dates Timeline; Institutional and Transactional Coverage Charts; 
Reportable HMDA Data Chart; sample data collection form; and FAQs, in 
addition to downloadable webinars, which provide an overview of the 
HMDA rule. The Bureau also provides on its website an Interactive 
Bureau Regulations version of Regulation C.
    The Bureau routinely updates its HMDA resources throughout the year 
to ensure HMDA reporters have the most up-to-date information. For 
example, in November 2020, the Bureau released the 2021 Filing 
Instructions Guide (FIG) and the Supplemental Guide for Quarterly 
Filers. Together with the FFIEC, in January 2020, the Bureau also 
published the 2020 edition of the HMDA Getting it Right Guide. The 
Bureau also works with the FFIEC to publish data submission resources 
for HMDA filers and vendors on its Resources for HMDA Filers website, 
https://ffiec.cfpb.gov.
    In addition, HMDA reporters can ask technical questions about HMDA 
and Regulation C, including how to submit HMDA data, by emailing the 
Bureau's HMDA Help at [email protected]. The Bureau also offers 
financial institutions, service providers, and others, informal staff 
guidance on specific questions about the statutes and rules the Bureau 
implements, including ECOA and Regulation B and HMDA and Regulation C, 
through its Regulation Inquiries platform at 
www.reginquiries.consumerfinance.gov. Additionally, questions about 
HMDA may be asked at the Bureau's Fair Lending Help Desks as referenced 
in section 4.2.5.

5. Tech Sprints: Using Innovative Technology To Address Fair Lending 
Compliance

    The Bureau's Tech Sprint Program gathers regulators, technologists, 
academics, financial institutions, vendors, and subject matter experts 
from key stakeholders for several days to work together to develop 
innovative solutions to specific challenges at the intersection of 
emerging technology and Federal consumer protection laws. Inspired by a 
similar program successfully launched by the Financial Conduct 
Authority in the United Kingdom, the Tech Sprint program aims to (1) 
develop actionable technology-focused solutions to a variety of 
regulatory and consumer protection challenges; (2) harness technology 
to reduce burden, improve results, and create greater efficiencies 
across financial markets; and (3) explore how technology can reshape 
compliance and speed effective interaction between regulators and 
financial institutions.
    During a Tech Sprint, participants work together in small teams. 
The teams include participants from both the regulator and a diversity 
of entities to ensure the inclusion of regulatory, consumer advocate, 
industry, academic, and technologist perspectives. The regulator 
assigns a specific regulatory compliance or market problem to each team 
and challenges the teams to solve or mitigate the problem using modern 
technologies and approaches. The teams then work for several days to 
produce actionable ideas, write computer code, and present their 
solutions. On the final day, each team presents their solutions to an 
independent panel of evaluators that selects the outstanding teams in 
several categories. The most promising ideas can then be further 
developed either in collaboration with the regulator or by external 
parties.
    In June 2020, the Bureau announced its first Tech Sprint which was 
held October 5-9, 2020, virtually, due to the pandemic. This Tech 
Sprint focused on electronically delivered adverse action notices that 
that serve statutory purposes under ECOA and the Fair Credit Reporting 
Act (FCRA).\44\ The event challenged participants to develop innovative 
approaches to electronically-delivered ways to notify consumers of, and 
inform them about, adverse credit actions. Teams were asked to show how 
their solution could improve on current adverse action notices to 
better realize three core goals:
---------------------------------------------------------------------------

    \44\ Consumer Fin. Prot. Bureau, CFPB Announces Tech Sprints To 
Empower Consumers, Reduce Regulatory Burden (June 29, 2020), https://www.consumerfinance.gov/about-us/newsroom/tech-sprints. Additional 
activity has occurred with this matter since the end of the 
reporting period. The second Tech Sprint occurred from March 22-26, 
2021. During this week, 17 teams, with over 100 total members 
participated in the Tech Sprint. Teams presented their solutions to 
a panel of evaluators on the last day, which included many novel and 
innovative solutions to the problem statement.
---------------------------------------------------------------------------

     Accuracy--using accurate information to take adverse 
action;
     Anti-discrimination--preventing illegal discrimination in 
credit decisions; and
     Education--helping consumers fare better in future credit 
applications.
    Participants were informed that innovations could include any 
aspect, or potential aspect, of adverse action communication. The Tech 
Sprint attracted numerous expressions of interest, and more than 80 
participants formed into 13 ``sprint teams.'' Participants represented 
a wide variety

[[Page 22189]]

of stakeholders including large financial institutions, community and 
consumer organizations, FinTechs, research organizations, and academia.
    On the final day of the Tech Sprint, the teams presented their 
solutions to a panel of evaluators. The solutions developed by the 
sprint teams were creative and varied. Some of the solutions included 
providing more detailed information on what role each denial reason 
played in the credit decision; identifying how the denied applicant 
might obtain a credit approval in the future by, for example, raising 
the credit score to a certain level, decreasing credit inquiries to a 
certain number, or requesting a different loan term or amount; 
delivering additional information or educational content with the 
electronic notice to the consumer to assist them in making more 
informed financial decisions; and proposing methodologies for 
identifying principal reasons for adverse action when algorithms--
including, potentially, algorithms that make use of artificial 
intelligence--are used in the credit decision.
    Following the conclusion of the Tech Sprint, some of the 
participants informed the Bureau that they would work to incorporate 
their innovations into their delivery of adverse action notices or 
would consider working with the Bureau to further develop their ideas. 
The creative solutions presented will also help better inform the 
Bureau's policy making.
    The Bureau also announced its second Tech Sprint, focused on 
improvements to submitting and publishing HMDA data, to be held between 
March 22-26, 2021.\45\ Participants in this Tech Sprint were invited to 
help create additional tools for users on the HMDA Platform and to 
develop and document HMDA Platform Applicant Programming Interfaces 
(APIs). Alternatively, participants may develop additional enhancements 
to HMDA data products and services, or new ways to interact with 
existing products, data analysis capabilities, or interfaces to other 
datasets. Details about the HMDA Tech Sprint will be published in the 
2022 Annual Report.
---------------------------------------------------------------------------

    \45\ Id.
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6. Outreach: Promoting Fair Lending Compliance and Education

    Pursuant to the Dodd-Frank Act, the Bureau regularly engages in 
outreach with 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 its 
policy decisions.\46\
---------------------------------------------------------------------------

    \46\ Consumer Fin. Prot. Bureau, Fiscal Year 2020: Annual 
Performance Plan and Report, and Budget Overview, Performance goal 
2.1.1, at 69 (Feb. 2021), https://files.consumerfinance.gov/f/documents/cfpb_performance-plan-and-report_fy20.pdf.
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    In coordinating fair lending efforts Bureau-wide, throughout 2020, 
the Office of Fair Lending worked closely with other Bureau offices to 
execute the Bureau's fair lending outreach and education efforts.
6.1 Educating Stakeholders About Fair Lending Compliance and Access to 
Credit Issues
6.1.1 Bureau Blog Posts, Statements, Reports, and Press Releases
    The Bureau regularly uses blog posts, statements, reports, and 
press releases as tools to timely and effectively communicate with 
consumers, small business owners, financial institutions, and other 
stakeholders about fair lending issues, emerging areas of concern, 
Bureau initiatives, and more. In 2020, the Bureau published seven blog 
posts related to fair lending topics including the announcement of the 
2019 Fair Lending Annual Report to Congress; \47\ the importance of 
fair and equitable access to credit for minority and women-owned 
businesses, including businesses applying for PPP relief; \48\ 
providing adverse action notices when using artificial intelligence and 
machine learning models; \49\ announcing an RFI related to ECOA; \50\ 
expanding access to credit to underserved communities through the 
special purpose credit programs provisions of ECOA and Regulation B; 
\51\ the availability of Bureau resources for consumers in multiple 
languages; \52\ a request for public comments to inform Bureau guidance 
on serving LEP consumers; \53 54\ and the Bureau's first tech sprint on 
improving electronically-delivered adverse action notices to 
consumers.\55\ The Bureau's blog posts, including those related to fair 
lending, may be accessed at www.consumerfinance.gov/blog.
---------------------------------------------------------------------------

    \47\ Patrice Alexander Ficklin and J. Frank Vespa-Papaleo, 
Consumer Fin. Prot. Bureau, Protecting consumers and encouraging 
innovation: 2019 Fair Lending Report to Congress (Apr. 30, 2020), 
https://www.consumerfinance.gov/about-us/blog/protecting-consumers-and-encouraging-innovation-2019-fair-lending-report-congress/.
    \48\ Patrice Alexander Ficklin, Grady Hedgespeth, and Lora 
McCray, Consumer Fin. Prot. Bureau, The importance of fair and 
equitable access to credit for minority and women-owned businesses 
(Apr. 27, 2020), https://www.consumerfinance.gov/about-us/blog/fair-equitable-access-credit-minority-women-owned-businesses/.
    \49\ Patrice Alexander Ficklin, Tom Pahl, and Paul Watkins, 
Consumer Fin. Prot. Bureau, Innovation spotlight: Providing adverse 
action notices when using AI/ML models (July 7, 2020), https://www.consumerfinance.gov/about-us/blog/innovation-spotlight-providing-adverse-action-notices-when-using-ai-ml-models/.
    \50\ Kathleen L. Kraninger, Consumer Fin. Prot. Bureau, The 
Bureau is taking action to build a more inclusive financial system 
(July 28, 2020), https://www.consumerfinance.gov/about-us/blog/bureau-taking-action-build-more-inclusive-financial-system/.
    \51\ Susan M. Bernard and Patrice Alexander Ficklin, Consumer 
Fin. Prot. Bureau, Expanding access to credit to underserved 
communities (July 31, 2020), https://www.consumerfinance.gov/about-us/blog/expanding-access-credit-underserved-communities/.
    \52\ Desmond Brown, Keo Chea, and Frank Vespa-Papaleo, Consumer 
Fin. Prot. Bureau, More CFPB resources available in multiple 
languages (Aug. 26, 2020), https://content.consumerfinance.gov/about-us/blog/cfpb-multilingual-resources-webinar/.
    \53\ Elena Babinecz and Frank Vespa-Papaleo, Consumer Fin. Prot. 
Bureau, Bureau seeks formal comments to inform forthcoming guidance 
on serving LEP consumers (Nov. 16, 2020), https://www.consumerfinance.gov/about-us/blog/bureau-seeks-formal-comments-to-inform-forthcoming-guidance-serving-lep-consumers/.
    \54\ Additional activity has occurred with this issue since the 
end of this reporting period. In January 2021, the Bureau issued a 
statement to encourage financial institutions to better serve 
consumers with limited English proficiency (LEP) and to provide 
principles and guidelines to assist financial institutions in 
complying with the Dodd-Frank Act, ECOA, and other applicable laws. 
More information can be found here: https://www.consumerfinance.gov/rules-policy/notice-opportunities-comment/open-notices/statement-regarding-the-provision-of-financial-products-and-services-to-consumers-with-limited-english-proficiency/.
    \55\ Albert Chang, Tim Lambert, and Jennifer Lassiter, Consumer 
Fin. Prot. Bureau, CFPB's first tech sprint on October 5-9, 2020: 
Help improve consumer adverse action notices (Sept. 1, 2020), 
https://www.consumerfinance.gov/about-us/blog/cfpb-tech-sprint-october-2020-consumer-adverse-action-notices/.
---------------------------------------------------------------------------

    In 2020, the Bureau also issued ten press releases related to fair 
lending topics including the flexibilities provided to financial 
institutions during the COVID-19 pandemic relating to certain HMDA 
reporting requirements; \56\ the release of the Bureau's Outline of 
Proposals Under Consideration and Alternatives Considered regarding 
section 1071 of the Dodd-Frank Act; \57\ the release of 2019 HMDA data 
to the public; \58\ the Bureau's analysis of 2019 HMDA data

[[Page 22190]]

points; \59\ the issuance of a final HMDA rule raising data reporting 
thresholds; \60\ the issuance of an RFI on ECOA \61\ and an extension 
of its public comment period; \62\ the Bureau's announcements of public 
enforcement actions against Townstone Financial, Inc.\63\ and 
Washington Federal Bank \64\; and the issuance of an interpretive rule 
pertaining to special purpose credit programs.\65\
---------------------------------------------------------------------------

    \56\ Consumer Fin. Prot. Bureau, CFPB Provides Flexibility 
During COVID-19 Pandemic (March 26, 2020), https://www.consumerfinance.gov/about-us/newsroom/cfpb-provides-flexibility-during-covid-19-pandemic/.
    \57\ Consumer Fin. Prot. Bureau, CFPB Releases Outline of 
Proposals Under Consideration to Implement Small Business Lending 
Data Collection Requirements (Sept. 15, 2020), https://www.consumerfinance.gov/about-us/newsroom/cfpb-releases-outline-proposals-implement-small-business-lending-data-collection-requirements/.
    \58\ Consumer Fin. Prot. Bureau, FFIEC Announces Availability of 
2019 Data on Mortgage Lending (June 24, 2020), https://www.consumerfinance.gov/about-us/newsroom/ffiec-announces-availability-2019-data-mortgage-lending/.
    \59\ Consumer Fin. Prot. Bureau, CFPB Issues Analysis of HMDA 
Data Points (Aug. 27, 2020), https://www.consumerfinance.gov/about-us/newsroom/cfpb-issues-analysis-hmda-data-points/.
    \60\ Consumer Fin. Prot. Bureau, CFPB Issues Final Rule Raising 
Data Reporting Thresholds Under the Home Mortgage Disclosure Act 
(Apr. 16, 2020), https://www.consumerfinance.gov/about-us/newsroom/cfpb-issues-final-rule-raising-data-reporting-thresholds-under-hmda/.
    \61\ Consumer Fin. Prot. Bureau, CFPB Requests Information on 
Ways to Prevent Credit Discrimination and Build a More Inclusive 
Financial System (July 28, 2020), https://www.consumerfinance.gov/about-us/newsroom/cfpb-rfi-prevent-credit-discrimination-build-more-inclusive-financial-system/.
    \62\ Consumer Fin. Prot. Bureau, CFPB Extends Comment Period on 
Request for Information on Ways to Prevent Credit Discrimination and 
Build a More Inclusive Financial System (Aug. 19, 2020), https://www.consumerfinance.gov/about-us/newsroom/cfpb-extends-rfi-comment-period-ways-prevent-credit-discrimination-build-more-inclusive-financial-system/.
    \63\ Consumer Fin. Prot. Bureau, CFPB Files Suit Against 
Mortgage Creditor for Discriminatory Mortgage-Lending Practices 
(July 15, 2020), https://www.consumerfinance.gov/about-us/newsroom/cfpb-files-suit-against-mortgage-creditor-discriminatory-mortgage-lending-practices/.
    \64\ Consumer Fin. Prot. Bureau, CFPB Announces Settlement With 
Washington Federal Bank, N.A. For Flawed Mortgage-Loan Data 
Reporting (Oct. 27, 2020), https://www.consumerfinance.gov/about-us/newsroom/consumer-financial-protection-bureau-announces-settlement-washington-federal-bank-na-flawed-mortgage-loan-data-reporting/.
    \65\ Consumer Fin. Prot. Bureau, Consumer Financial Protection 
Bureau Issues Advisory Opinion to Help Expand Fair, Equitable, and 
Nondiscriminatory Access to Credit (Dec. 21, 2020), https://www.consumerfinance.gov/about-us/newsroom/consumer-financial-protection-bureau-issues-advisory-opinion-to-help-expand-fair-equitable-and-nondiscriminatory-access-to-credit/.
---------------------------------------------------------------------------

    The Bureau's statements and press releases, including those related 
to fair lending, may be accessed at www.consumerfinance.gov/about-us/newsroom.
6.1.2 Bureau Outreach Engagements With Stakeholders
    Bureau staff participated in 93 outreach engagements throughout 
2020 about fair lending compliance and access to credit issues. In many 
of those engagements, Bureau personnel also received information and 
feedback on the Bureau's policy decisions.
    Specifically, in 2020, the Bureau communicated directly with 
stakeholders through speeches, presentations, webinars, and smaller 
discussions on issues pertaining to fair, equitable, and 
nondiscriminatory access to credit. Some examples of the topics covered 
in these engagements included the impacts of the COVID-19 pandemic on 
the economy, and racial and economic justice issues; fair lending 
supervision and enforcement priorities; innovations in lending; HMDA 
and Regulation C; ECOA and Regulation B; small business lending; access 
to credit for LEP consumers; providing adverse action notices when 
using machine learning models; and the use of alternative data in 
credit underwriting.
6.2 Listening to Stakeholders To Inform the Bureau's Policy Decisions
6.2.1 Bureau Outreach Engagements With Stakeholders
    As described above in section 6.1, Bureau outreach engagements with 
stakeholders inform the Bureau's policy decisions. In these events, 
Bureau staff received feedback from stakeholders on issues pertaining 
to fair, equitable, and nondiscriminatory access to credit.
    For example, in July 2020, the Bureau hosted a roundtable 
discussion on credit access issues faced by Limited English Proficient 
(LEP) consumers and the challenges financial institutions face when 
addressing language access needs. Throughout 2020, the Bureau engaged 
in eight additional meetings with stakeholders to inform Bureau 
guidance on serving LEP consumers.\66\
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    \66\ Additional activity has occurred regarding this issue since 
the end of this reporting period. On January 13, 2021, in response 
to requests for additional guidance regarding providing products and 
services to LEP consumers, the Bureau issued a statement to 
encourage financial institutions to better serve consumers with 
limited English proficiency and to provide principles and guidelines 
to assist financial institutions in complying with the Dodd-Frank 
Act, ECOA, and other applicable laws. More information can be found 
here: https://www.consumerfinance.gov/rules-policy/notice-opportunities-comment/open-notices/statement-regarding-the-provision-of-financial-products-and-services-to-consumers-with-limited-english-proficiency/.
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    The Bureau also engaged with stakeholders throughout the year on a 
variety of other issues related to fair lending, including section 1071 
governing small business lending data collection and reporting; HMDA; 
agricultural and rural lending; student lending; alternative data; 
artificial intelligence and machine learning methods; and credit 
reporting.
6.2.2 Request for Information: Building a More Inclusive Financial 
System
    On July 28, 2020, the Bureau issued an RFI on the following topics 
under ECOA and Regulation B:
     Disparate impact.
     Serving LEP consumers.\67\
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    \67\ Id.
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     Special Purpose Credit Programs.
     Affirmative advertising to disadvantaged groups.
     Small business lending.
     Sexual orientation and gender identity discrimination.\68\
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    \68\ Additional activity has occurred regarding this issue since 
the end of this reporting period. On March 9, 2021, the Bureau 
issued an interpretive rule clarifying that the prohibition against 
sex discrimination under ECOA and Regulation B includes sexual 
orientation discrimination and gender identity discrimination. This 
prohibition also covers discrimination based on actual or perceived 
nonconformity with traditional sex- or gender-based stereotypes, and 
discrimination based on an applicant's social or other associations. 
More information can be found here: https://www.consumerfinance.gov/about-us/newsroom/cfpb-clarifies-discrimination-by-lenders-on-basis-of-sexual-orientation-and-gender-identity-is-illegal/.
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     Scope of federal preemption of state law.
     Public assistance income.
     Artificial intelligence and machine learning.
     Adverse action notices under ECOA.
    The Bureau received 144 comments from consumer and civil rights 
advocates, industry, academics and researchers, government agencies and 
entities, as well as individuals, attorneys, and law firms. The 
information provided will help the Bureau continue to explore ways to 
address regulatory compliance challenges while fulfilling the Bureau's 
core mission to prevent unlawful discrimination.
    For example, in response to many commenters' requests for 
additional guidance regarding the special purpose credit programs 
provisions of ECOA and Regulation B, in December 2020, the Bureau 
issued an interpretive rule styled as an Advisory Opinion to address 
regulatory uncertainty regarding Regulation B, as it applies to certain 
aspects of special purpose credit programs. Additional information 
regarding the interpretive rule on special purpose credit programs can 
be found in section 4.2.1 of this report.

7. Amicus Program and Other Litigation

    The Bureau files amicus, or ``friend-of-the-court,'' briefs in 
significant court cases concerning Federal consumer financial 
protection laws, including ECOA.
    In 2020, the Bureau and the FTC jointly filed an amicus brief in 
TeWinkle v. Capital One, N.A., explaining that the term ``applicant'' 
in ECOA and Regulation B includes both those who are currently seeking 
credit and those currently receiving credit. This interpretation is the 
best reading of the

[[Page 22191]]

statute itself, and any doubt whether the term ``applicant'' includes 
current borrowers is put to rest by Regulation B, which for decades has 
expressly defined the term to include current borrowers. Information 
regarding the Bureau's amicus program, including a description of 
previously filed amicus briefs, is available on the Bureau's website, 
at www.consumerfinance.gov/policy-compliance/amicus/.
    With regard to other litigation, in 2019, the Bureau was sued in 
the U.S. District Court for the Northern District of California by the 
California Reinvestment Coalition, et al., regarding the Bureau's 
obligation to issue rules implementing section 1071. In February 2020, 
the court approved a stipulated settlement agreement. As part of the 
agreement, the Bureau agreed to a September 15, 2020, deadline for the 
release of an outline of proposals under consideration and alternatives 
considered, consistent with SBREFA. The settlement agreement also 
provided a process for setting appropriate deadlines for the issuance 
of a proposed and final rule implementing section 1071. The Bureau has 
made significant progress with this rulemaking. For a comprehensive 
update on 1071 activity, see section 4.1.1 of this report.
    In August 2020, the Bureau was sued in the U.S. District Court for 
the District of Columbia by the National Community Reinvestment 
Coalition, et al., over the Bureau's final rule amending Regulation C 
to raise the loan-volume coverage thresholds for financial institutions 
reporting data under HMDA (the 2020 HMDA rule). The Plaintiffs argue 
that the 2020 HMDA rule violates the Administrative Procedure Act. The 
litigation is ongoing.

8. Interagency Coordination and Engagement

    Throughout 2020, the Bureau coordinated 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. Interagency 
engagement occurs in numerous ways, including through several 
interagency organizations.
    In 2020, the FFIEC was chaired by the Bureau's Director.\69\ 
Through the FFIEC, the Bureau has robust engagement with other partner 
agencies that focus on fair lending issues. For example, in 2020, the 
Bureau chaired the FFIEC HMDA/Community Reinvestment Act (CRA) Data 
Collection Subcommittee of the FFIEC Task Force on Consumer Compliance. 
This subcommittee 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 FFIEC Task 
Force.
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    \69\ Collectively, the FRB, FDIC, NCUA, OCC, and 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 Mar. 30, 2021). The 
State Liaison Committee was added to FFIEC in 2006 as a voting 
member. Additional activity has occurred on this issue since the end 
of this reporting period. In April 2021, the NCUA's Chairman took 
over as chair of the FFIEC.
---------------------------------------------------------------------------

    Additionally, 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 Association (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. In 2020, the Bureau chaired the Interagency Task Force, 
which met regularly to discuss fair lending enforcement efforts, share 
current methods of conducting supervisory and enforcement fair lending 
activities, and coordinate fair lending policies.\70\
---------------------------------------------------------------------------

    \70\ Additional activity has occurred since the end of this 
reporting period. In 2021, the FDIC took over as chair of the 
Interagency Task Force on Fair Lending.
---------------------------------------------------------------------------

    Further, the Bureau also participated in the Interagency Working 
Group on Fair Lending Enforcement, a standing working group of Federal 
agencies--DOJ, HUD, and FTC--that met regularly to discuss issues 
relating to fair lending enforcement. The agencies use these meetings 
to also discuss fair lending developments and trends, methods for 
evaluating fair lending risks
    The Bureau is also a member of the FFIEC's Appraisal Subcommittee 
(ASC) that provides federal oversight of state appraiser and appraisal 
management company regulatory programs, and a monitoring framework for 
the Appraisal Foundation and the Federal Financial Institutions 
Regulatory Agencies in their roles to protect federal financial and 
public policy interests in real estate appraisals utilized in federally 
related transactions. The ASC is considering its authorities and 
ability to promote fairness and equity, and prevent bias, in 
appraisals.\71\
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    \71\ The Appraisal Subcommittee includes the FFIEC agencies, 
HUD, and the FHFA.
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    Also, in October 2020, the Bureau signed a Memorandum of 
Understanding (MOU) with the FTC, HUD, FDIC, FRB, NCUA, OCC, DOJ, and 
FHFA--representing Federal agencies that, in addition to the Bureau, 
conduct fair lending analyses. The MOU allows economists from the 
agencies to voluntarily share confidential information with respect to 
analytical methodologies used to understand and assess compliance with 
fair lending laws.\72\
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    \72\ For more information on the MOU, see Director Kraninger's 
Remarks During ``Current Priorities in Consumer Financial Protection 
Seminar'' At Harvard Kennedy School (Oct. 29, 2020), https://www.consumerfinance.gov/about-us/newsroom/director-kraningers-remarks-current-priorities-seminar-harvard-kennedy-school/.
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    In addition to these established interagency organizations, Bureau 
personnel meet regularly with the DOJ, HUD, state Attorneys General, 
and the prudential regulators to coordinate the Bureau's fair lending 
work.

9. Coordination With the Bureau's Innovation Programs

    The Dodd-Frank Act established the Bureau's mission to include both 
fair lending and innovation components. Specifically, the Bureau is 
authorized to exercise its authorities under Federal consumer financial 
law for the purposes of ensuring--with respect to consumer financial 
products and services--that consumers are protected from unfair, 
deceptive, or abusive acts and practices and from discrimination,\73\ 
and that markets for consumer financial products and services operate 
transparently and efficiently to facilitate access and innovation.\74\
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    \73\ Dodd-Frank Act sec. 1021(b)(2).
    \74\ Dodd-Frank Act sec. 1021(b)(5).
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    As part of its coordination function, the Office of Fair Lending 
worked in 2020 with the Office of Innovation regarding applications to 
the Bureau's innovation programs that involved fair lending and access 
to credit matters.
    Review of such applications included consideration of the potential 
fair lending risks associated with the proposed product or service, as 
well as its potential for expanding access to credit for underserved or 
underbanked populations. In addition, after an application related to 
fair lending or access to credit has been granted by the Bureau, the 
two offices continue to collaborate, for example by reviewing any data 
submitted by the recipient relating to fair lending and access issues 
during the monitoring period.

[[Page 22192]]

    In 2020, Upstart Network, Inc. (Upstart) was granted a No-Action 
Letter (NAL). \75\ Upstart, a company that that uses alternative data 
and machine learning in making credit underwriting and pricing 
decisions, received a NAL pertaining to regulatory uncertainty under 
ECOA and Regulation B.\76\
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    \75\ Consumer Fin. Prot. Bureau, Upstart Network No-Action 
Letter (Nov. 30, 2020), https://files.consumerfinance.gov/f/documents/cfpb_upstart-network-inc_no-action-letter_2020-11.pdf. In 
addition to the Upstart NAL, in 2020, the Bureau granted a total of 
three Approvals under the Compliance Assistance Sandbox policy and 
six NAL or NAL Templates. These applications, however, do not 
directly pertain to fair lending issues. All granted applications 
can be found on the Bureau's website, at https://www.consumerfinance.gov/rules-policy/innovation/granted-applications.
    \76\ On September 14, 2017, Upstart was granted a NAL for a term 
of three years. This NAL expired on December 1, 2020.

                        Appendix A--Defined Terms
------------------------------------------------------------------------
             Term                              Definition
------------------------------------------------------------------------
AMS..........................  Agricultural Marketing Service of the
                                U.S. Department of Agriculture.
APA..........................  Administrative Procedure Act.
API..........................  Application Programming Interface.
ASC..........................  FFIEC's Appraisal Subcommittee.
Bureau.......................  Consumer Financial Protection Bureau/
                                Bureau of Consumer Financial Protection.
CARES Act....................  Coronavirus Aid, Relief, and Economic
                                Security Act.
CMS..........................  Compliance Management System.
COVID-19.....................  Coronavirus Disease/Pandemic 2019.
Dodd-Frank Act...............  Dodd-Frank Wall Street Reform and
                                Consumer Protection Act.
DOJ..........................  U.S. Department of Justice.
DOT..........................  U.S. Department of Transportation.
ECOA.........................  Equal Credit Opportunity Act.
FCA..........................  Farm Credit Administration.
FCRA.........................  Fair Credit Reporting Act.
FDIC.........................  Federal Deposit Insurance Corporation.
FHFA.........................  Federal Housing Finance Agency.
Federal Reserve Board or FRB.  Board of Governors of the Federal Reserve
                                System.
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.........................  Home Mortgage Disclosure Act.
HUD..........................  U.S. Department of Housing and Urban
                                Development.
LAR..........................  Loan Application Register (HMDA).
LEP..........................  Limited English Proficient.
MSA..........................  Metropolitan Statistical Area.
MOU..........................  Memorandum of Understanding.
NCUA.........................  National Credit Union Administration.
NPRM.........................  Notice of Proposed Rulemaking.
OCC..........................  Office of the Comptroller of the
                                Currency.
PPP..........................  Paycheck Protection Program (CARES Act).
RFI..........................  Request for Information.
SBA..........................  Small Business Administration.
SBREFA.......................  Small Business Regulatory Enforcement
                                Fairness Act of 1996.
SEC..........................  Securities and Exchange Commission.
SER..........................  Small Entity Representatives.
SNAP.........................  Supplemental Nutrition Assistance Program
                                (``Food Stamps'').
USDA.........................  U.S. Department of Agriculture.
------------------------------------------------------------------------

Signing Authority

    The Acting Director of the Bureau, David Uejio, having reviewed and 
approved this document, is delegating the authority to electronically 
sign this document to Laura Galban, a Bureau Federal Register Liaison, 
for purposes of publication in the Federal Register.

    Dated: April 22, 2021.
Laura Galban,
Federal Register Liaison, Bureau of Consumer Financial Protection.
[FR Doc. 2021-08716 Filed 4-26-21; 8:45 am]
BILLING CODE 4810-AM-P