The most recent edition of the CFPB’s Supervisory Highlights (Summer 2023) included a section on Fair Lending including areas in which it has seen violations of the Equal Credit Opportunity Act and Regulation B. It specifically addressed instances of loan pricing discrimination and discriminatory lending restrictions such as treatment of criminal records and/or income derived from public assistance. Overall weaknesses in an institution’s policies and procedures, lenders not following policies and procedures and/or inconsistencies between lenders’ discretion were all noted as contributing factors in addition to a general lack of management oversight.
The CFPB suggested the institutions enhance or implement pricing exception policies and procedures to mitigate fair lending risks, including enhancing documentation standards and requiring clear exception criteria; enhance or implement policies requiring the retention of documentation for all pricing exceptions, including document regarding whether the pricing exception request was initiated by the consumer; develop and implement a monitoring and audit program to effectively identify and mitigate potential disparities and/or fair lending risks associated with the pricing exception approval process; or to identify and remediate harmed consumers. They also required institutions to revise and implement policies and procedures and enhance related systems to ensure public assistance income is evaluated under standards applicable to other sources of income.
It's clear that the CFPB is looking closely at Fair Lending. Your Management and Board has a duty to ensure your institution has adequate policies and procedures in place and that those are being carried out. Failure to do so could result in big problems.
Published
2023/08/28
