CFPB’s Fair Lending Report: Executive Summary

CFPB released its Fair Lending report to Congress as part of its commitment to accountability and transparency.  The report starts out with the CFPPB affirming its mission of providing consumer financial protection and making consumer financial markets work for American consumers, businesses and the economy.  The report avows that the Bureau continues to sharpen its focus and commit resources to those institutions, products, and markets that pose the highest fair lending risk to American consumers, while continuing to listen and provide guidance to CFPB-supervised institutions.

Key Developments

  1. Increasing efficiencies in fair lending activity.
    CFPB has created, refined, and implemented a process to ensure that their supervisory work focuses on the areas presenting the greatest fair lending risk to consumers.

  2. Guidance on supervisory reviews.
    The Bureau publicly released information about methods used to conduct three types of fair lending supervisory reviews: ECOA Baseline Reviews, ECOA Targeted Reviews, and HMDA Data Integrity Reviews. Through these supervisory activities, the Bureau detected some violations of ECOA and HMDA; they also found that many lenders have instituted and maintained strong fair lending compliance management systems (CMS) and had no violations of ECOA or HMDA. Using the guidance issued by the Bureau describing these reviews, lenders may self-assess their own compliance with ECOA and HMDA.

  3. Supervision and enforcement priorities.
    The Bureau identified mortgage lending and auto finance as key priorities for supervision and enforcement work.

    1. ​​Mortgage lending. CFPB concluded fair lending supervisory reviews of a number of mortgage lenders, and found that many lenders have strong fair-lending compliance management systems and had no violations of ECOA or HMDA. They also discovered some instances of fair lending noncompliance. The Bureau took enforcement action against two mortgage lenders for violating HMDA, which resulted in the assessment of civil money penalties and other relief. In addition to jointly investigating certain matters with the United States Department of Justice (DOJ), the CFPB also made several referrals to the DOJ for violations of ECOA, one of which resulted in a recent enforcement action.
    2. Auto finance. The Bureau has focused on indirect auto lenders’ discretionary dealer markup and compensation policies. A CFPB Auto Bulletin highlighted to indirect auto lenders their existing compliance obligations under ECOA. In fact, the Bureau and the DOJ recently took enforcement action against an indirect auto lender for violations of ECOA. The CFPB will continue to evaluate potential fair lending risks in the auto finance market as part of their ongoing supervision program.
    3. Other product areas. The Bureau has ongoing supervision and enforcement work in other markets, such as credit cards. The CFPB took enforcement action against one lender for violations of ECOA in unsecured consumer lending. The CFPB also referred three lenders to the DOJ for violations of ECOA in unsecured consumer lending. CFPB remains committed to assessing and evaluating fair lending risk in all credit markets under the Bureau’s supervision.
  4. Outreach to industry, advocates, consumers, and other stakeholders.
    The Bureau continues to initiate and encourage industry and consumer engagement opportunities to discuss fair lending compliance and education.

  5. Interagency coordination and collaboration.
    The Bureau continues to coordinate with the Federal Financial Institutions Examination Council (FFIEC) agencies, as well as the DOJ, the Federal Trade Commission (FTC), and the Department of Housing and Urban Development (HUD), as each play a role in enforcing our nation’s fair lending statutes. In fact, in 2012, the CFPB formalized its fair lending enforcement relationship with the DOJ via a Memorandum of Understanding (MOU).

The entire report can be found on the CFPB website, here.

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