On April 15, 2017, the CFPB issued its fifth annual Fair Lending Report (“Report”). The Report describes the CFPB’s 2016 fair lending supervisory, enforcement, and rulemaking activities, interagency collaboration, and outreach to stakeholders.

Most importantly, the Report outlines the CFPB’s fair lending priorities for 2017, indicating that the CFPB will increase its focus on redlining, mortgage and student loan servicing, and small business lending. The Report suggests that the CFPB’s focus is shifting its attention away from indirect auto lending.

Student loan servicing and small business lending are two areas, like indirect auto lending, where creditors are prohibited from collecting applicant characteristic data. To determine race and ethnicity in indirect auto lending actions, the CFPB has used the controversial Bayesian Improved Surname Geocoding (“BISG”) proxy methodology, which combines geography-based and surname-based information into a single proxy probability for race and ethnicity. The Report gives no indication whether the CFPB would rely on the same BISG proxy methodology in any future supervisory or enforcement actions against student loan servicers or small business lenders. Any effort by the CFPB to extend this proxy methodology to these areas, particularly small business lending, could ignite further controversy because Section 1071 of the Dodd-Frank Act requires the CFPB to promulgate a data collection rule for small business lending, a rule the CFPB has yet to propose.

The Report identifies key factors the CFPB considers in setting its fair lending priorities. These factors include:  the quality of an institution’s fair lending compliance management system (“CMS”); trends identified by the CFPB’s special population and markets offices; consumer complaints; tips from advocacy groups, whistleblowers, and other government agencies; supervisory and enforcement history; and analysis of Home Mortgage Disclosure Act and other data.  The Report also highlights both positive and deficient practices in offering services to consumers with limited English proficiency and notes that the CFPB generally takes a favorable view of special purpose credit programs.