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CFPB issues annual fair lending report

The CFPB has issued a new annual report covering its fair lending activities during 2017.  Since Mick Mulvaney did not become Acting Director until the end of November 2017, the fair lending activities described in the report largely took place under former Director Cordray’s leadership.

The Bureau’s last annual fair lending report under former Director Cordray (which covered its fair lending activities in 2016) identified the Bureau’s 2017 fair lending priorities.  Consistent with those priorities, the new report indicates that, in 2017, the Bureau focused on redlining, mortgage and student loan servicing, and small business lending.  The new report, however, provides no insights into the Bureau’s 2019 fair lending priorities.

Indeed, even if the report had identified 2019 priorities, it is unclear how meaningful that would have been given that the CFPB will be led by Kathy Kraninger, its new Director, in 2019.  Ms. Kraninger is likely to play a significant role in setting the Bureau’s fair lending agenda going forward.  During her initial press conference as Director earlier this week, Ms. Kraninger deflected questions she was asked about fair lending matters, including the Bureau’s use of the disparate impact theory to prove violations of ECOA, by saying that she has not reached any conclusions about the Bureau’s future fair lending policy and awaits staff briefings.

In the report’s section on supervisory activities, the Bureau reviews information previously provided in its Spring 2017 and Summer 2017 editions of Supervisory Highlights.  In the section on enforcement, the Bureau reviews its two public 2017 fair lending enforcement actions and its implementation of several consent orders.  It also reports that it referred two matters with ECOA violations to the Justice Department in 2017 and the DOJ declined to open its own investigation, deferring to the Bureau’s handling of both matters.  The Bureau states that at the end of 2017, it had a number of pending redlining investigations as well as a number of pending investigations in other areas.

In the section on rulemaking, the Bureau discusses various HMDA/Regulation C developments and its final rule amending Regulation B to facilitate Regulation C compliance.  In discussing its progress in developing rules on the collection of small business lending data to implement Section 1071 of Dodd-Frank, the Bureau references its May 2017 RFI seeking information on the small business lending market.  (Dodd-Frank Section 1071 amended the ECOA to require financial institutions to collect and maintain certain data in connection with credit applications made by women- or minority-owned businesses and small businesses.  Such data includes the race, sex, and ethnicity of the principal owners of the business.)  In the Bureau’s Spring 2018 rulemaking agenda, the Section 1071 rulemaking was included in the list of current rulemakings, with an estimated March 2019 date for prerule activities.  Its Fall 2018 agenda, however, reclassifies the Section 1071 rulemaking as a long-term action item.

The report also contains sections that discuss the Bureau’s coordination with other federal agencies on fair lending issues and outreach to industry and consumers (such as through speaking engagements and roundtables, blog posts, and supervisory highlights).  Another section is intended to satisfy certain ECOA and HMDA reporting requirements, including providing a summary of other agencies’ ECOA enforcement efforts and reporting on the utility of certain HMDA reporting requirements.

Copyright © by Ballard Spahr LLP

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Culhane, Ballard, Partner
Partner

John L. Culhane, Jr., is known for his work advising on interstate direct and indirect consumer and residential mortgage loan and leasing programs, through both traditional brick-and-mortar facilities and e-commerce. Before joining Ballard Spahr, Mr. Culhane was associate counsel with Mellon Bank, N.A.; associate counsel with Bank of America NT&SA; and senior attorney (section chief) with the National Credit Union Administration, the federal agency regulating federal credit unions.

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