The Consumer Financial Protection Bureau (CFPB) announced they will scrutinize discriminatory conduct under federal UDAAP prohibitions. They also updated the Exam Manual for evaluating unfair, deceptive, and abusive acts and practices. The CFPB seeks to protect consumers from illegal discrimination even when existing fair lending laws, such as the Equal Credit Opportunity Act, do not apply.
Thus, the CFPB will pay close attention to potentially discriminatory conduct with respect to an institution’s decision-making in advertising, pricing, and other areas.
The updated exam manual explains that discrimination may meet the definition of “unfairness”
by causing substantial harm to consumers that they cannot reasonably avoid, where that harm is not outweighed by countervailing benefits to consumers or competition. Consumers can be harmed by discrimination regardless of whether it is intentional. Discrimination can be unfair in cases where the conduct may also be covered by ECOA, as well as in instances where ECOA does not apply. For example, denying access to a checking account because the individual is of a particular race could be an unfair practice even in those instances where ECOA may not apply.
Consider this a warning shot.
It also means now is a good time to review your practices, for both lending and deposits products and services, and ensure they are on the up and up.
The CFPB will be looking for discrimination in ALL consumer finance markets, from credit, servicing, collections, reporting, payments, remittances, and deposits.
The CFPB will also be looking for documentation as to your processes for assessing risk and discriminatory outcomes along with how you test and monitor your decision-making process for unfair discrimination.
Join your peers in the Monthly Connection to talk over this and other hot topics.
Published
2022/03/18
