On January 5, 2021, the CFPB’s (the “Bureau”) Taskforce on Federal Consumer Financial Law (the “Taskforce”) released a report (the “Report”) recommending how consumer protection in the financial marketplace may be improved. Chartered by the Bureau in January of 2020, the Taskforce was charged with “examin[ing] the existing legal and regulatory environment facing consumers and financial services providers,” and “report[ing] its recommendations for ways to improve and strengthen consumer financial laws and regulations.”
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Fair Lending
CFPB Outlines Small Business Data Collection Proposals
By David Stein on
Posted in Consumer, Rulemakings
On September 15, 2020, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) released an Outline of Proposals under Consideration and Alternatives Considered for the small business data collection rulemaking mandated by Section 1071 of the Dodd-Frank Act and a High-Level Summary of the outline of proposals. The release signals that a Small Business Advisory Panel will convene in October 2020 as required by the Small Business Regulatory Enforcement Fairness Act of 1996 (“SBREFA”) to assess the impact of the Bureau’s outline of proposals under consideration. Participants in the SBREFA panel are invited to submit written comments by November 9, 2020; other interested stakeholders are invited to submit written comments by December 14, 2020.
Section 1071 amends the Equal Credit Opportunity Act to require financial institutions to collect certain data regarding applications for credit for women-owned, minority-owned, and small businesses, maintain records of responses, and report the data to the CFPB on an annual basis, in accordance with rules and guidance issued by the CFPB. The purpose of Section 1071 is “to facilitate enforcement of fair lending laws and enable communities, governmental entities, and creditors to identify business and community development needs and opportunities of women-owned, minority-owned, and small businesses.” 15 U.S.C. § 1691o-2(a).
The Bureau’s proposals under Section 1071 have been long-awaited by industry associations, consumer groups, state regulators, Congress, and many other stakeholders, and the convening of the SBREFA panel represents the start of a rigorous and potentially lengthy rulemaking process.
A short list of highlights of the proposals follows after the jump, and we plan to publish a more detailed client alert on the CFPB’s outline of proposals in the near future.
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Release of 2017 HMDA Data
By Nikhil Gore on
The Federal Financial Institutions Examination Council (FFIEC) released yesterday data on mortgage lending at institutions covered by the Home Mortgage Disclosure Act (HMDA) — a total of just under 6,000 banks, credit unions and non-bank mortgage lenders. Concurrently, the Consumer Financial Protection Bureau (CFPB) released a “first look” report on mortgage market activity and trends based on a selection of the newly released data.
As the CFPB points out, this year’s release is notable for two reasons, among others:
- First, it reflects recent changes to the CFPB’s Regulation C, which generally exempted institutions from HMDA reporting if, in either of the two preceding calendar years, they originated less 25 reportable home purchase loans (including refinancings). This contributed to a modest 13% decline in the number of participating institutions. (We previously discussed other aspects of the CFPB’s amendments to Regulation C, including in these posts.)
- Second, it reflects the first year during which HMDA data will be available in a dynamically updated format through the FFIEC HMDA Platform.
CFPB Issues its First No-Action Letter
By Randy Benjenk on
On September 14, 2017, the Consumer Financial Protection Bureau (the “CFPB” or the “Bureau”) issued a no-action letter for the first time, after having finalized its no-action letter policy in February 2016. The Bureau’s letter grants a request by Upstart Network, Inc. (“Upstart”), an online lender that uses both traditional and non-traditional credit scoring data, regarding the application of the Equal Credit Opportunity Act and Regulation B to Upstart’s automated model for underwriting applicants for unsecured non-revolving credit. In its press release accompanying the letter, the Bureau explicitly referenced its ongoing interest in learning more about the benefits and risks of using alternative data in credit scoring, an issue the Bureau raised in February 2017.
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CFPB Announces Fair Lending Priorities in Fifth Annual Fair Lending Report
By David Stein on
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.
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CFPB Releases Fall 2016 Supervisory Highlights Together With New Guidance on Student Loan Servicing, Fair Lending, Reverse Mortgage Servicing
By David Stein & Nikhil Gore on
Posted in Consumer, Enforcement
The CFPB released yesterday its Supervisory Highlights for Fall 2016. The Supervisory Highlights state that, taking into account non-public enforcement actions, “recent supervisory activities […] resulted in approximately $11.3 million in restitution to more than 225,000 consumers” during the May-August 2016 review period.
The Highlights reflect continued focus by the CFPB on many of the same issues and products it has targeted throughout the past several quarters, including automobile loan origination and servicing, debt collection, and mortgage origination, as discussed more fully below.
At the same time, the Supervisory Highlights flag a renewed focus on student loan servicing, including in connection with (i) denials of applications for income-driven repayment plans; (ii) failures to provide borrowers with “effective” choices on how to allocate their payments among various loans; and (iii) providing misleading billing statements about the allocation of payments to principal and interest when funds are “paid ahead” for future months.
Contemporaneous with the release of the Supervisory Highlights for Fall 2016, the CFPB also formally released:
- revised Education Loan Examination Procedures covering student loan servicing, accompanied by a press release in which CFPB Director Cordray called out “student loan servicers and other financial institutions” for purported “sloppy or callous practices”;
- updated CFPB guidance on the risk-based oversight of service providers (this updated guidance was published in the Federal Register last week); and
- new Reverse Mortgage Servicing Examination Procedures.
In addition, the Supervisory Highlights contain a lengthy discussion of supervisory observations relating to fair lending, with a particular focus on the assessment of redlining risk and the provision of language services to non-English-proficient customers.