December 6, 2021

Volume XI, Number 340


December 03, 2021

Subscribe to Latest Legal News and Analysis

CFPB, DOJ and OCC Take Action Against National Bank for Alleged Redlining

The CFPB and DOJ, in cooperation with the OCC, filed a complaint and proposed consent order last week in the Western District of Tennessee against a national bank alleging that the bank violated the Fair Housing Act (FHA), the Equal Credit Opportunity Act (ECOA) and its implementing regulation, Regulation B, and the Consumer Financial Protection Act of 2010 (CFPA).  Specifically, the joint complaint alleges that the bank:

  • Avoided locating branches in majority-Black and Hispanic communities;

  • Avoided assigning loan officers to majority-Black and Hispanic communities;

  • Failed to monitor its fair lending compliance; and

  • Discouraged applicants and prospective applicants in majority-Black and Hispanic neighborhoods.

If entered by the court, the consent order would require the bank to:

  • Invest $3.85 million via a loan subsidy program;

  • Increase physical presence in and outreach to majority-Black and Hispanic neighborhoods;

  • Comply with fair lending requirements; and

  • Pay a civil penalty of $5 million to the CFPB, and will credit the $4 million penalty collected by the OCC toward the satisfaction of this amount.

Related to this complaint, the DOJ announced the launch of its new “Combatting Redlining Initiative” – “the department’s most aggressive and coordinated enforcement effort to address redlining.”  The DOJ’s initiative will be led by the Civil Rights Division’s Housing and Civil Enforcement Section in partnership with U.S. Attorney’s Offices. This initiative will:

  • Utilize U.S. Attorneys’ Offices to ensure that fair lending enforcement is informed by local expertise on housing markets and the credit needs of local communities of color;

  • Expand the department’s analyses of potential redlining to both depository and non-depository institutions.

  • Strengthen partnerships with financial regulatory agencies to ensure the identification and referrals of fair lending violations to the DOJ; and

  • Increase coordination with State Attorneys General on potential fair lending violations.

Putting It Into Practice:  After the announcement of its recent initiative, we should anticipate a substantial increase in fair lending enforcement from each of these agencies.  Notably, the DOJ’s announcement calls out non-depository lenders that are not traditional banks, which historically have not been DOJ redlining enforcement targets.  Also, less than a month after the confirmation of Director Chopra, the CFPB issued its first fair lending enforcement action, which Chopra has made clear be a top priority in the Bureau’s fair lending-focused agenda.  Fair lending compliance should be at the top of lenders’ compliance efforts with heightened attention at the federal level, and increasing cooperation from state regulators.  For fair lending compliance, lenders should review their application and origination activities, including their compliance monitoring and policies and procedures.

Copyright © 2021, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume XI, Number 298

About this Author

Moorari Shah Bankruptcy Lawyer Sheppard Mullin Law Firm

Moorari Shah is a partner in the Finance and Bankruptcy Practice Group in the firm's Los Angeles and San Francisco offices. 

Areas of Practice

Moorari combines deep in-house and law firm experience to deliver practical, business-minded legal advice. He represents banks, fintechs, mortgage companies, auto lenders, and other nonbank institutions in transactional, licensing, regulatory compliance, and government enforcement matters covering mergers and acquisitions, consumer and commercial lending, equipment finance and leasing, and supervisory examinations,...

A.J. S. Dhaliwal Bankruptcy Attorney Sheppard Mullin Washington DC

A.J. is an associate in the Finance and Bankruptcy Practice Group in the firm's Washington, D.C. office. 

A.J. has over a decade of experience helping banks, non-bank financial institutions, and other companies providing financial products and services in a wide range of matters including government enforcement actions, civil litigation, regulatory examinations, and internal investigations.

With a diversified regulatory, compliance, and enforcement background, A.J. counsels financial institutions in matters involving...