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March 23, 2023

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CFPB Fall Supervisory Highlights Shed Light on Agency Priorities – Fair Lending

As 2021 came to an end, the Consumer Financial Protection Bureau (CFPB) released its 2021 Fall Supervisory Highlights, which cover the CFPB’s findings of examinations completed on the first half of the year. Though the CFPB’s Fair Lending Supervision Program reviews compliance with the Equal Credit Opportunity Act (ECOA) and its implementing regulation, Regulation B, and the Mortgage Disclosure Act (HMDA) and its implementing regulation, Regulation C, the CFPB focuses its attention on violations of the ECOA and Regulation B. In particular, the CFPB expresses concern with pricing and religious discrimination.

Pricing Discrimination

As for pricing discrimination, the Bureau notes mortgage lenders, in violation of ECOA, discriminated against Black and female borrowers when granting pricing exceptions for competitive offers. Likewise, the CFPB identified lenders with statistically significant disparities in pricing exceptions for these groups. The CFPB believes the violations were in part due to failure of officers to follow the lender’s own policies and procedures regarding pricing exceptions for competitive offers, lack of oversight over these officers, and the lender’s failure to take corrective action surrounding self-identified risks. Furthermore, the CFPB reports that although previous fair lending monitoring reports had exposed a lack of documentation supporting pricing exception decisions, lenders failed to improve documentation processes.

Religious Discrimination

Regulation B prohibits a creditor from inquiring about religion or taking religion into account in “any system of evaluating creditworthiness of applicants.” The CFPB found that applications used for small business loans extended to religious institutions contained explicit inquiries about religion. The Bureau deemed the practice to be in violation of the ECOA and Regulation B. The CFPB found further violations when lenders denied credit applications of religious institutions for failure to respond to these questions. In response to these findings, lenders updated the questionnaire and extended credit offers to the affected applicants.

The Fall Supervisory Highlights are particularly useful because they reveal the CFPB’s concerns and help predict where the Bureau will focus its regulatory power. As these violations demonstrate, where sound policies exist without a strong management and oversight system, violations may slip through the cracks, leaving lenders exposed to regulatory enforcement action. Also telling is the bureau’s focus on religious discrimination in small business loans. This is consistent with the greater regulatory trend toward increased regulation of non-consumer finance products. For more information about the Fall Supervisory Highlights, please refer to our recent post, “CFPB Fall Supervisory Highlights Shed Light on Agency Priorities,”

© 2023 Bradley Arant Boult Cummings LLPNational Law Review, Volume XII, Number 24

About this Author

Jessie Manzewitsch Houston Texas Associate Attorney Banking Finance Lawyer Bradley Arant Boult Cummings LLP

Jessie Manzewitsch is an associate in the Banking and Financial Services Practice Group.

Prior to joining Bradley, Jessie was a fall clerk for the Hon. David Hittner of the United States District Court for Southern District of Texas. Jessie received a J.D. (summa cum laude) from the University of Houston Law Center, where she was involved with the Houston Journal of International Law and Labor & Employment Law Society. She also participated in the University of Houston’s Civil Law Clinical program.

Andrew J. Narod Financial Lawyer Bradley Arant Boult Cummings LLP

Andrew Narod is an experienced litigator who represents bank and non-bank financial services institutions and other types of businesses in class-action litigation, complex commercial litigation, and other high-profile litigation disputes nationwide. His clients entrust him to navigate some of their most sensitive litigation matters in some of the most difficult venues in the country.

A considerable amount of Andrew’s practice is devoted to representing bank and non-bank financial services entities in class-action litigation and other consumer litigation matters. His clients include...

Christopher Friedman Nashville Lawyer Bradley Arant Boult Cummings Law Firm

Chris Friedman is a regulatory compliance attorney and litigator who focuses on helping consumer finance companies and small business lenders, as well as banks, fintech companies, and other participants in the financial services industry, address the challenges of operating in a highly regulated sector. Chris focuses on both small business lenders and alternative business finance products and has helped non-bank small business lenders, banks who make small business loans, commercial credit counselors, lead generators, and others in the industry. He helps clients launch new products,...