A recent blog post on the official Consumer Financial Protection Bureau website laid out the agency’s priorities regarding consumer lending in the New Year. The blog is aimed at consumers rather than industry, but the remarks do signal an adjustment in CFPB focus. However, the topics are consistent with the CFPB’s rule-making agenda and five-year strategic plan published in 2013.
According to the post, “Because the Consumer Bureau is responsible for overseeing so many products and so many lenders, we re-prioritize our work from time to time, to make sure that we are focused on the areas of greatest risk to consumers.” After touting its past regulatory achievements, the bureau states that it continues to identify new and emerging “fair lending risks” that will be strictly monitored for compliance. “Going forward,” stated the post, “we are increasing our focus in these areas.” Those areas are redlining, loan servicing and small business lending.
Redlining is a discriminatory practice by banks or other financial institutions to deny or avoid providing credit services to a consumer because of the racial demographics of the neighborhood in which the consumer lives. It is a violation of the Equal Credit Opportunity Act (ECOA). Entities targeted by the CFPB in the past have argued that offering or denying credit is based only upon the credit-worthiness of the applicant, and that it is a coincidence if those who are not credit-worthy live in a certain area.
The quality of servicing on mortgage and student loans will also be a focus of the CFPB in 2017. Specifically, the Bureau intends to “determine whether some borrowers who are behind on their mortgage or student loan payments may have more difficulty working out a new solution with the servicer because of their race or ethnicity.”
Also, according to the CFPB, Congress has expressed concern that women-owned and minority-owned businesses may experience discrimination when they apply for credit, and has required the CFPB to take steps to ensure their fair access to credit. The Bureau stated that it expects to scrutinize lenders in this area because it presents a “substantial risk of credit discrimination for consumers.”
Noting that the nation has recently marked the 40th anniversary of the ECOA, the Bureau’s blog post promised continued vigilance. The blog post was not specific about the strategies to be employed when focusing on these three areas. However, its recent activities suggest that an increasing use of mystery shoppers and civil investigative demands (CID) are likely to figure prominently.