Notice2024-14533
Fair Lending Report of the Consumer Financial Protection Bureau
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
July 2, 2024
Issuing agencies
Consumer Financial Protection Bureau
Abstract
The Consumer Financial Protection Bureau (CFPB) is issuing its eleventh Fair Lending Report of the Consumer Financial Protection Bureau (Fair Lending Report) to Congress. The CFPB is committed to ensuring fair, equitable, and nondiscriminatory access to credit for both individuals and communities. This report describes our fair lending activities in supervision and enforcement; guidance and rulemaking; interagency coordination; and outreach and education for calendar year 2023.
Full Text
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[Federal Register Volume 89, Number 127 (Tuesday, July 2, 2024)]
[Notices]
[Pages 54786-54799]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-14533]
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CONSUMER FINANCIAL PROTECTION BUREAU
Fair Lending Report of the Consumer Financial Protection Bureau
AGENCY: Consumer Financial Protection Bureau.
ACTION: Fair Lending Report of the Consumer Financial Protection
Bureau.
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SUMMARY: The Consumer Financial Protection Bureau (CFPB) is issuing its
eleventh Fair Lending Report of the Consumer Financial Protection
Bureau (Fair Lending Report) to Congress. The CFPB is committed to
ensuring fair, equitable, and nondiscriminatory access to credit for
both individuals and communities. This report describes our fair
lending activities in supervision and enforcement; guidance and
rulemaking; interagency coordination; and outreach and education for
calendar year 2023.
DATES: The CFPB released the 2023 Fair Lending Report on its website on
June 26, 2024.
FOR FURTHER INFORMATION CONTACT: Susan Grutza, Senior Policy Counsel,
Fair Lending, at 1-855-411-2372. If you require this document in an
alternative electronic format, please contact
<a href="/cdn-cgi/l/email-protection#de9d988e9c819fbdbdbbadadb7bcb7b2b7aaa79ebdb8aebcf0b9b1a8"><span class="__cf_email__" data-cfemail="9eddd8cedcc1dffdfdfbededf7fcf7f2f7eae7defdf8eefcb0f9f1e8">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
1. Fair Lending Enforcement and Supervision
1.1. Risk-Based Prioritization
Because Congress charged the Consumer Financial Protection Bureau
(CFPB) with the responsibility of overseeing many lenders and products,
the CFPB has long used a risk-based approach to prioritizing
supervisory examinations and enforcement activity. This approach helps
ensure that the CFPB focuses on areas that present substantial risk of
credit discrimination for consumers and small businesses.\1\
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\1\ See Risk-Based Approach to Examinations, Supervisory
Highlights Summer 2013 at 23, <a href="https://files.consumerfinance.gov/f/201308_cfpb_supervisory-highlights_august.pdf">https://files.consumerfinance.gov/f/201308_cfpb_supervisory-highlights_august.pdf</a>, for additional
information regarding the CFPB's risk-based approach in prioritizing
supervisory examinations.
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As part of the prioritization process, the CFPB identifies emerging
developments and trends by monitoring key consumer financial markets.
If this field and market intelligence identifies
[[Page 54787]]
fair lending risks in a particular market, that information is used to
determine the type and extent of assets applied to address those risks.
The prioritization process incorporates a number of additional
factors, including tips and leads from industry whistleblowers,
advocacy groups, and government agencies; supervisory and enforcement
history; consumer complaints; and results from analysis of Home
Mortgage Disclosure Act (HMDA) and other data.
As a result of its annual risk-based prioritization process, in
2023 the CFPB focused much of its fair lending supervision efforts on:
mortgage origination (including redlining, property valuation bias, and
HMDA and Regulation C compliance); credit card marketing and the use of
alternative data in digital marketing; and on the use of automated
systems and models, sometimes marketed as artificial intelligence (AI)
and machine learning models, in credit card originations.
As in previous years, the CFPB's 2023 mortgage origination work
continued to focus on redlining (intentional discrimination against
applicants and prospective applicants living or seeking credit in
minority neighborhoods, including by discouragement). The CFPB's
mortgage work also included assessing potential discrimination in
mortgage underwriting and pricing processes, including assessing
whether there were disparities in application, underwriting, and
pricing processes, and whether there were weaknesses in fair lending-
related compliance management systems. The CFPB's mortgage origination
work also included reviewing residential property appraisal service
providers to identify risks that may arise due to potential
discrimination or bias as well as HMDA data integrity and validation
reviews.
The CFPB's credit card work included assessing credit card lenders'
digital marketing practices relating to credit cards, as well as credit
card lenders' use of alternative data in that marketing. The CFPB's
credit card work also included evaluation of automated systems and
models, sometimes marketed as artificial intelligence and machine
learning models, used by credit card lenders in credit card
originations, as well as assessing whether there were disparities in
application, underwriting, and pricing processes, and whether the
institutions searched for less discriminatory alternatives to the
models used.
Across multiple markets, the CFPB continued to assess whether
lenders complied with the adverse action notice requirements of the
Equal Credit Opportunity Act (ECOA) and Regulation B and evaluated
whether lenders maintain policies and procedures that unlawfully
exclude property on the basis of geography in underwriting decisions,
unlawfully exclude certain types of income, and treat criminal history
in an unlawful manner.
1.2. Fair Lending Enforcement
Congress authorized the CFPB to bring actions to enforce the
requirements of eighteen enumerated statutes, including ECOA, HMDA, and
the Consumer Financial Protection Act of 2010 (CFPA), which prohibits
unfair, deceptive, and abusive acts or practices. The CFPB is able to
engage in research, conduct investigations, file administrative
complaints, hold hearings, and adjudicate claims through the CFPB's
administrative enforcement process. The CFPB also uses its independent
litigation authority to file cases in Federal court alleging violations
of fair lending laws under the CFPB's jurisdiction. Like other Federal
regulators, the CFPB is required to refer matters to the Department of
Justice (DOJ) when it has reason to believe that a creditor has engaged
in a pattern or practice of lending discrimination.\2\
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\2\ See 15 U.S.C. 1691e(g).
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1.2.1. ECOA-Related Public Enforcement Actions
In 2023, the CFPB announced two ECOA-related public enforcement
actions, relating to discrimination on the basis of race and national
origin, one against Citibank N.A. (Citibank) and the other against
Colony Ridge Development, LLC, and Colony Ridge BV, LLC, and affiliate
mortgage company Colony Ridge Land, LLC (collectively, the Colony Ridge
defendants). For more information on these ECOA-related enforcement
actions, see section 6.1.2 of this report.
1.2.2. HMDA-Related Public Enforcement Actions
HMDA, its implementing Regulation C, and Regulation B require
mortgage lenders to report certain information about loan applications
and originations to the CFPB and other Federal regulators. HMDA data
are the most comprehensive source of publicly available information on
the U.S. mortgage market. Both the public and regulators can use this
information to monitor whether financial institutions are serving the
housing needs of their communities, as well as to identify possible
discriminatory lending patterns.
In 2023, the CFPB announced public enforcement actions against two
repeat offenders for reporting false, erroneous, or incorrect HMDA
data: Freedom Mortgage Corporation (Freedom Mortgage) and Bank of
America, N.A.
The CFPB will continue to monitor the rate at which mortgage
lenders fail to collect and report applicants' demographic information.
The rate of nonreporting of demographic information has been increasing
since 2019, potentially compromising the ability of the CFPB and other
financial regulators, enforcement agencies, academics, other mortgage
lenders, and civil rights and consumer advocates, to detect and remedy
redlining, discouragement, and other forms of discrimination in the
mortgage market. The CFPB's evaluations will include assessments of
lenders' demographic reporting practices and HMDA compliance systems to
ensure they are monitoring for inaccurate or incomplete demographic
information reporting and complying with HMDA.
Freedom Mortgage
On October 10, 2023, the CFPB filed a lawsuit against Freedom
Mortgage, a residential mortgage loan originator and servicer, alleging
that it submitted legally-required mortgage loan data that were riddled
with errors.\3\ In 2020, Freedom Mortgage reported HMDA data on over
700,000 applications and originated nearly 400,000 HMDA-reportable
loans worth almost $100 billion, making it the third largest mortgage
lender in the United States by origination volume. Freedom Mortgage is
a repeat offender: at the time the CFPB filed its complaint, Freedom
was already under a CFPB Consent Order related to previous HMDA
violations. In 2019, the CFPB issued an order against Freedom finding
that it intentionally misreported certain HMDA data fields from at
least 2014 to 2017.\4\ In the CFPB's lawsuit, the CFPB alleges that the
mortgage loan data for 2020 that Freedom Mortgage submitted contained
widespread errors across multiple data fields, in violation of HMDA and
Regulation C. The CFPB's complaint further alleges that by reporting
inaccurate HMDA mortgage loan data for 2020, Freedom Mortgage also
violated the 2019 order and the CFPA. The CFPB seeks appropriate
injunctive relief and a civil money penalty.
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\3\ See <a href="https://www.consumerfinance.gov/enforcement/actions/freedom-mortgage-corporation-hmda-2023/">https://www.consumerfinance.gov/enforcement/actions/freedom-mortgage-corporation-hmda-2023/</a>.
\4\ See <a href="https://files.consumerfinance.gov/f/documents/cfpb_freedom-mortgage-corporation_consent-order_2019-05.pdf">https://files.consumerfinance.gov/f/documents/cfpb_freedom-mortgage-corporation_consent-order_2019-05.pdf</a>.
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Bank of America
On November 28, 2023, the CFPB issued an order against Bank of
America for routinely submitting falsified HMDA data.\5\ The CFPB found
that between 2016 and late 2020, hundreds of Bank of America's loan
officers failed to ask applicants for their race, ethnicity, and sex,
as required by law, and instead falsely recorded that the applicants
chose not to provide this information, in violation of HMDA, Regulation
C, and the CFPA. The CFPB's order requires Bank of America to pay a $12
million civil money penalty and to develop policies and procedures to
ensure compliance with HMDA and Regulation C, including recording and
auditing phone applications to make sure that HMDA data are accurately
collected and recorded.
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\5\ See <a href="https://www.consumerfinance.gov/enforcement/actions/bank-of-america-na-hmda-data-2023/">https://www.consumerfinance.gov/enforcement/actions/bank-of-america-na-hmda-data-2023/</a>.
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1.2.3. ECOA Referrals to Department of Justice
The CFPB must refer to DOJ any matter when it has reason to believe
that a creditor has engaged in a pattern or practice of lending
discrimination in violation of ECOA.\6\ The CFPB may refer other
potential ECOA violations to DOJ as well.\7\ In 2023, the CFPB referred
18 matters to DOJ pursuant to 15 U.S.C. 1691e(g). More information on
these referrals can be found in section 6.1.6 of this report.
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\6\ 15 U.S.C. 1691e(g).
\7\ Id.
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1.2.4. Implementing Enforcement Orders
When an enforcement action is resolved through a public enforcement
order, the CFPB (together with other government entities, when
relevant) takes steps to ensure that the respondent or defendant
complies with the requirements of the order. Depending on the specific
requirements of individual public enforcement orders, the CFPB may take
steps to ensure that borrowers who are eligible for compensation
receive remuneration and that the defendant has complied with the
injunctive provisions of the order, including implementing a
comprehensive fair lending compliance management system.
1.3. Fair Lending Supervision
The CFPB's Supervision program assesses compliance with Federal
consumer financial protection laws and regulations at banks and
nonbanks over which the CFPB has supervisory authority. As a result of
the CFPB's efforts to fulfill its fair lending mission during 2023, the
CFPB initiated 28 fair lending examinations or targeted reviews.
In 2023, two of the most frequently identified fair lending issues
in supervisory communications related to the granting of pricing
exceptions and HMDA violations.
In 2023, the CFPB issued several fair lending-related Matters
Requiring Attention and entered Memoranda of Understanding directing
entities to take corrective actions that the CFPB will monitor through
follow-up supervisory actions. In these communications, the CFPB
directed mortgage lenders to correct violations relating to redlining,
including by institutions providing consumer remediation designed to
spur lending in redlined areas. The CFPB also directed lenders to
enhance their fair lending compliance management systems in several
ways, including by directing institutions to, when testing and
approving credit scoring models, document the specific business needs
the models serve, as well as document specific standards for assessing
whether a model serves each stated business need. Further, the CFPB
also directed the institutions to test credit scoring models for
prohibited basis disparities and to require documentation of
considerations the institutions will give to how to assess those
disparities against the stated business needs. To ensure compliance
with ECOA and Regulation B, institutions were directed to develop a
process for the consideration of a range of less discriminatory models.
Additionally, institutions were directed to test and validate the
methodologies used to identify principal reasons in adverse action
notices required under ECOA and Regulation B. Finally, institutions
were directed to implement policies, procedures, and controls designed
to effectively manage HMDA compliance, including regarding integrity of
data collection.
During 2023, informed by the Director's priority to address risks
of consumer harm from advanced and emerging technologies in consumer
finance, the CFPB continued to increase its technical capacity and
analyses to ensure that the use of this technology does not pose risks
to consumers or violate Federal consumer financial law.
2. Rulemaking and Guidance
2.1. Rulemaking
During 2023, the CFPB issued a final rule on small business lending
data collection and issued a notice of proposed rulemaking on automated
valuation models (AVMs).
The CFPB publishes an agenda of its planned rulemaking activity
biannually, which is available at: <a href="https://www.consumerfinance.gov/rules-policy/regulatory-agenda">https://www.consumerfinance.gov/rules-policy/regulatory-agenda</a>.
2.1.1. Small Business Lending Data Collection Rulemaking
In section 1071 of the Dodd-Frank Act, Congress directed the CFPB
to adopt regulations governing the collection of small business lending
data.\8\ Section 1071 amended ECOA to require financial institutions to
compile, maintain, and submit to the CFPB certain data on applications
for credit for women-owned, minority-owned, and small businesses.
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\8\ 15 U.S.C. 1691c-2.
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Congress enacted section 1071 for the purpose of facilitating
enforcement of fair lending laws and enabling communities, governmental
entities, and creditors to identify business and community development
needs and opportunities for women-owned, minority-owned, and small
businesses.
On March 30, 2023, the CFPB issued a final rule amending Regulation
B to implement changes to ECOA made by section 1071 of the Dodd-Frank
Act.\9\ Consistent with section 1071, covered financial institutions
are required to collect and report to the CFPB data on applications for
credit for small businesses, including those that are owned by women or
minorities. The rule also addresses the CFPB's approach to privacy
interests and the publication of section 1071 data; shielding certain
demographic data from underwriters and other persons; recordkeeping
requirements; enforcement provisions; and the rule's effective and
compliance dates.
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\9\ CFPB, Small Business Lending under the Equal Credit
Opportunity Act (Regulation B) (Mar. 30, 2023), <a href="https://www.consumerfinance.gov/rules-policy/final-rules/small-business-lending-under-the-equal-credit-opportunity-act-regulation-b/">https://www.consumerfinance.gov/rules-policy/final-rules/small-business-lending-under-the-equal-credit-opportunity-act-regulation-b/</a>.
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In light of court orders in ongoing litigation, the CFPB has
announced plans to extend the compliance dates in the small business
lending rule.\10\ More information about pending litigation is
contained in section 5 of this report.
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\10\ More information is available at: <a href="https://www.consumerfinance.gov/1071-rule/">https://www.consumerfinance.gov/1071-rule/</a>, a page compiling key materials
related to the CFPB's small business rulemaking, including
information on the interim final rule to extend compliance
deadlines.
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2.1.2. Automated Valuation Models Rulemaking
On June 1, 2023, the CFPB, along with its interagency partners, the
Board of Governors of the Federal Reserve System (FRB), Office of the
Comptroller of the Currency (OCC), Federal Deposit Insurance
Corporation (FDIC), National
[[Page 54789]]
Credit Union Administration (NCUA), and Federal Housing Finance Agency
(FHFA) (collectively, the Agencies) requested public comment on a
proposed rule designed to ensure the credibility and integrity of
models used in real estate valuations.\11\ In particular, the proposed
rule would implement quality control standards for AVMs used by
mortgage originators and secondary market issuers in valuing real
estate collateral securing mortgage loans. AVMs are used as part of the
real estate valuation process, driven in part by advances in database
and modeling technology and the availability of larger property
datasets. While advances in AVM technology and data availability have
the potential to contribute to lower costs and reduce loan cycle times,
it is important that institutions using AVMs take appropriate steps to
ensure the credibility and integrity of their valuations. It is also
important that the AVMs that institutions are using adhere to quality
control standards designed to comply with applicable nondiscrimination
laws.
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\11\ CFPB, OCC, FHFA, FRB, FDIC, NCUA. Quality Control Standards
for Automated Valuation Models (June 1, 2023), <a href="https://files.consumerfinance.gov/f/documents/cfpb_automated-valuation-models_proposed-rule-request-for-comment_2023-06.pdf">https://files.consumerfinance.gov/f/documents/cfpb_automated-valuation-models_proposed-rule-request-for-comment_2023-06.pdf</a>.
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The proposed standards are designed to ensure a high level of
confidence in the estimates produced by AVMs; help protect against the
manipulation of data; seek to avoid conflicts of interest; require
random sample testing and reviews; and promote compliance with
applicable nondiscrimination laws.
The comment period for the proposed rule closed on August 21, 2023.
2.2. Guidance
The CFPB issues guidance to its various stakeholders in many forms,
including Consumer Financial Protection Circulars (Circulars), advisory
opinions, interpretive rules, statements, bulletins, publications such
as Supervisory Highlights.
2.2.1. Proposed Interagency Guidance on Reconsiderations of Value for
Residential Real Estate Valuations
On June 8, 2023, the CFPB, along with FRB, FDIC, NCUA, and OCC
requested public comment on proposed guidance addressing
reconsiderations of value (ROV) for residential real estate
transactions.\12\ ROVs are requests from a financial institution to an
appraiser or other preparer of a valuation report to reassess the value
of residential real estate. A ROV may be warranted if a consumer
provides information to a financial institution about potential
deficiencies or other information that may affect the estimated value.
The proposed guidance advises on policies that financial institutions
may implement to allow consumers to provide financial institutions with
information that may not have been considered during an appraisal, or
if deficiencies are identified in the original appraisal.
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\12\ CFPB, OCC, FRB, FDIC, NCUA, Interagency Guidance on
Reconsideration of Value of Residential Real Estate Valuations (June
8, 2023), <a href="https://files.consumerfinance.gov/f/documents/cfpb_interagency-guidance-reconsiderations-of-value-of-residential-real-estate_2023-06.pdf">https://files.consumerfinance.gov/f/documents/cfpb_interagency-guidance-reconsiderations-of-value-of-residential-real-estate_2023-06.pdf</a>.
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The comment period for the proposed guidance closed on September
19, 2023.
2.2.2. Consumer Financial Protection Circular 2023-03: Adverse Action
Notification Requirements and the Proper Use of the CFPB's Sample Forms
Provided in Regulation B
On September 19, 2023, the CFPB released a circular pertaining to
certain legal requirements that lenders must adhere to, including when
using artificial intelligence and other complex models.\13\ The
circular describes how, under ECOA and Regulation B, lenders must make
available to an applicant a statement of specific and accurate reasons
when taking adverse action against the applicant and cannot simply use
the CFPB sample adverse action forms and checklists if they do not
reflect the actual reason for the denial of credit or other adverse
action. This requirement is especially important with the growth of
advanced algorithms and personal consumer data in credit underwriting.
The legal requirement to explain the reasons for adverse actions helps
improve consumers' chances for future credit and protect consumers from
illegal discrimination and serve an educational role, allowing
consumers to understand the reasons for a creditor's action and take
steps to improve their credit status or rectify mistakes made by
creditors.
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\13\ CFPB, Consumer Financial Protection Circular 2023-03
Adverse action notification requirements and the proper use of the
CFPB's sample forms provided in Regulation B (Sept. 19. 2023),
<a href="https://www.consumerfinance.gov/compliance/circulars/circular-2023-03-adverse-action-notification-requirements-and-the-proper-use-of-the-cfpbs-sample-forms-provided-in-regulation-b/">https://www.consumerfinance.gov/compliance/circulars/circular-2023-03-adverse-action-notification-requirements-and-the-proper-use-of-the-cfpbs-sample-forms-provided-in-regulation-b/</a>.
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2.2.3. Coverage of Franchise Financing Under ECOA, Including the Small
Business Lending Rule
On June 5, 2023, the CFPB published a document affirming the extent
to which ECOA and Regulation B apply with respect to franchisees
seeking credit to finance their businesses.\14\ Franchising is a
significant portion of the small business ecosystem, and franchisees
generally obtain credit either directly from the franchisor or from
third party finance companies, which could be independent of the
franchisor or brokered by or affiliated with the franchisor. These
financing arrangements are likely ``credit'' and ``business credit''
under ECOA and Regulation B.
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\14\ CFPB, Coverage of Franchise Financing Under the Equal
Credit Opportunity Act, Including the Small Business Lending Rule
(May 2023), <a href="https://files.consumerfinance.gov/f/documents/cfpb_coverage-of-franchise-financing_2023-05.pdf">https://files.consumerfinance.gov/f/documents/cfpb_coverage-of-franchise-financing_2023-05.pdf</a>.
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2.2.4. Supervisory Highlights
The CFPB's Supervisory Highlights reports provide general
information about the CFPB's supervisory activities at banks and
nonbanks without identifying specific entities. These reports
communicate the CFPB's key examination findings and operational changes
to the CFPB's supervision program. In 2023, the CFPB published three
issues of Supervisory Highlights.\15\
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\15\ CFPB Issue 29, Junk Fees Special Edition, Winter 2023;
Issue 30, Summer 2023; Issue 31, Junk Fees Update Special Edition
Fall 2023.
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The CFPB released the 30th edition of Supervisory Highlights on
July 26, 2023, which covered examinations completed between July 1,
2022, and March 31, 2023.\16\ This report included findings of ECOA and
Regulation B violations in several areas, including pricing
discrimination and discriminatory lending restrictions. Specifically,
examiners found that mortgage lenders violated ECOA and Regulation B by
discriminating in the incidence of granting pricing exceptions for
competitive offers across a range of ECOA-protected characteristics,
including race, national origin, sex, and age.
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\16\ CFPB, Issue 30, Summer 2023 (July 31, 2023), <a href="https://files.consumerfinance.gov/f/documents/cfpb_supervisory-highlights_issue-30_2023-07.pdf">https://files.consumerfinance.gov/f/documents/cfpb_supervisory-highlights_issue-30_2023-07.pdf</a>.
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Additionally, this edition detailed examiners' findings on certain
lending restrictions, including how lenders handled the treatment of
applicants' criminal records. The use of criminal history in credit
decisioning may create a heightened risk of violating ECOA and
Regulation B. In this review, examiners uncovered risky policies and
procedures relating to the use of criminal history information at
several institutions in several areas of credit, including mortgage
origination, auto lending, and credit cards, but most notably within
small business lending.
Further, examiners identified institutions improperly treating
income derived from public assistance. In some instances, lenders
imposed stricter standards on income derived from public assistance
programs, while in
[[Page 54790]]
other instances, institutions excluded income derived from certain
public assistance programs.
In 2023, the CFPB issued two other editions of Supervisory
Highlights, which pertained specifically to junk fees.
All issues of Supervisory Highlights are available at: <a href="https://www.consumerfinance.gov/compliance/supervisory-highlights/">https://www.consumerfinance.gov/compliance/supervisory-highlights/</a>.
2.2.5. HMDA Guidance and Resources
Given the importance of accurate HMDA data, including to the CFPB's
fair lending mission and for transparency in the mortgage market, the
CFPB maintains a comprehensive suite of resources on its public website
to help filers fulfill their reporting requirements under HMDA and
Regulation C and to allow others to evaluate and study mortgage
lending. A complete accounting of the CFPB's materials for HMDA data
users and filers can be found in Appendix A of this report.
3. Stakeholder Engagement
The CFPB engages with external stakeholders, including Tribal
governments, consumer advocates, civil rights organizations, industry,
academia, and other government agencies. This engagement comes in
varied forms, including disseminating the CFPB's work and policy
priorities through blogs, press releases, or speeches, as well as
reaching out directly to advocates and consumers through website
updates and social media. The CFPB also regularly issues research and
reports analyzing data and market conditions. To further an all-of-
government approach to fair lending enforcement, the CFPB also
participates in several interagency groups.
3.1. Promoting and Broadcasting the Fair Lending and Access to Credit
Mission
3.1.1. CFPB Blog Posts, Press Releases, and Other Communications
The CFPB regularly uses blog posts, statements, press releases,
guides, brochures, social media, media interviews, and other tools to
timely and effectively communicate with stakeholders.
In 2023, the CFPB published numerous blog posts relating to fair
lending topics, including: the joint letter sent to The Appraisal
Foundation, urging it to revise its draft ethics rule; \17\ the CFPB's
Statement of Interest filed in Connolly & Mott v. Lanham et al. and the
CFPB's commitment to ensuring fair and accurate appraisals; \18\ the
CFPB's Statement of Interest filed in Roberson v. Health Career
Institute LLC; \19\ an interagency proposed rulemaking on AVMs; \20\ a
blog explaining how chatbots, including those supported by large
language models and those marketed as AI can fail to provide adequate
customer service; \21\ the CFPB's Amicus brief in Saint-Jean v.
Emigrant Mortgage Company; \22\ the publication of the 2022 Annual Fair
Lending Report to Congress; \23\ the CFPB's initiative to better
understand the financial experiences of immigrants in the United
States; \24\ and the Appraisal Subcommittee's November 1 public hearing
to discuss the challenges and solutions to preventing bias in the home
appraisal process.\25\
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\17\ Patrice Alexander Ficklin and Tim Lambert, Appraisal
standards must include federal prohibitions against discrimination
(Feb. 14, 2023), <a href="https://www.consumerfinance.gov/about-us/blog/appraisal-standards-must-include-federal-prohibitions-against-discrimination">https://www.consumerfinance.gov/about-us/blog/appraisal-standards-must-include-federal-prohibitions-against-discrimination</a>.
\18\ Seth Frotman, Zixta Q. Martinez, and Jon Seward, Protecting
homeowners from discriminatory home appraisals, (Mar. 13, 2023),
<a href="https://www.consumerfinance.gov/about-us/blog/protecting-homeowners-from-discriminatory-home-appraisals/">https://www.consumerfinance.gov/about-us/blog/protecting-homeowners-from-discriminatory-home-appraisals/</a>.
\19\ Seth Frotman, Protecting people from discriminatory
targeting (Apr. 14, 2023), <a href="https://www.consumerfinance.gov/about-us/blog/protecting-people-from-discriminatory-targeting/">https://www.consumerfinance.gov/about-us/blog/protecting-people-from-discriminatory-targeting/</a>.
\20\ Rohit Chopra, Algorithms, artificial intelligence, and
fairness in home appraisals (June 1, 2023), <a href="https://www.consumerfinance.gov/about-us/blog/algorithms-artificial-intelligence-fairness-in-home-appraisals/">https://www.consumerfinance.gov/about-us/blog/algorithms-artificial-intelligence-fairness-in-home-appraisals/</a>.
\21\ Eric Halperin and Lorelei Salas, The CFPB has entered the
chat (June 7, 2023), <a href="https://www.consumerfinance.gov/about-us/blog/cfpb-has-entered-the-chat/">https://www.consumerfinance.gov/about-us/blog/cfpb-has-entered-the-chat/</a>.
\22\ Seth Frotman, Protecting consumers' right to challenge
discrimination (June 26, 2023), <a href="https://www.consumerfinance.gov/about-us/blog/protecting-consumers-right-to-challenge-discrimination/">https://www.consumerfinance.gov/about-us/blog/protecting-consumers-right-to-challenge-discrimination/</a>.
\23\ Patrice Alexander Ficklin, The CFPB's 2022 fair lending
annual report to congress (June 29, 2023), <a href="https://www.consumerfinance.gov/about-us/blog/the-cfpbs-2022-fair-lending-annual-report-to-congress/">https://www.consumerfinance.gov/about-us/blog/the-cfpbs-2022-fair-lending-annual-report-to-congress/</a>.
\24\ Sonia Lin, Protecting immigrant access to fair credit
opportunities, (Oct. 12, 2023), <a href="https://www.consumerfinance.gov/about-us/blog/protecting-immigrant-access-to-fair-credit-opportunities/">https://www.consumerfinance.gov/about-us/blog/protecting-immigrant-access-to-fair-credit-opportunities/</a>.
\25\ CFPB, Next public hearing on appraisal bias: November 1
(Oct. 23, 2023), <a href="https://www.consumerfinance.gov/about-us/blog/next-public-hearing-on-appraisal-bias-november-1/">https://www.consumerfinance.gov/about-us/blog/next-public-hearing-on-appraisal-bias-november-1/</a>.
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The CFPB also issued several press releases relating to fair
lending topics, including announcements regarding: the availability of
the 2022 HMDA modified loan application register data; \26\ the
finalization of the small business lending rule,\27\ the issuance of a
joint statement confirming that automated systems and advanced
technology is not an excuse for law-breaking behavior; \28\ the
publication of the proposed AVM rule and request for public comment;
\29\ an issue spotlight on AI chatbots in banking; \30\ the publication
of two new reports on the financial opportunities and challenges facing
Southern communities; \31\ the availability of 2022 HMDA data; \32\ a
roundtable on special purpose credit programs (SPCPs); \33\ the
issuance of Consumer Financial Protection Circular 2023-03, Adverse
action notification requirements and the proper use of the CFPB's
sample forms provided in Regulation B; \34\ the Freedom Mortgage
enforcement action for reporting allegedly erroneous data under HMDA;
\35\ the issuance of the CFPB and DOJ's joint statement reminding
financial institutions that all credit applicants are protected from
[[Page 54791]]
discrimination on the basis of race, national origin, race, and other
characteristics covered by ECOA, regardless of their immigration
status; \36\ the publication of a new analysis on State Community
Reinvestment Act (CRA) laws, highlighting how states ensure financial
institutions' lending, services, and investment activities meet the
credit needs of their communities; \37\ the Citibank enforcement
action; \38\ the Bank of America enforcement action; \39\ and the
Colony Ridge enforcement action.\40\
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\26\ CFPB, 2022 HMDA Data on Mortgage Lending Now Available
(Mar. 20, 2023), <a href="https://www.consumerfinance.gov/about-us/newsroom/2022-hmda-data-on-mortgage-lending-now-available/">https://www.consumerfinance.gov/about-us/newsroom/2022-hmda-data-on-mortgage-lending-now-available/</a>.
\27\ CFPB, CFPB Finalizes Rule to Create a New Data Set on Small
Business Lending in America (Mar. 30, 2023), <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-finalizes-rule-to-create-a-new-data-set-on-small-business-lending-in-">https://www.consumerfinance.gov/about-us/newsroom/cfpb-finalizes-rule-to-create-a-new-data-set-on-small-business-lending-in-</a> america/.
\28\ CFPB, CFPB and Federal Partners Confirm Automated Systems
and Advanced Technology Not an Excuse for Lawbreaking Behavior (Apr.
25, 2023), <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-federal-partners-confirm-automated-systems-advanced-technology-not-an-excuse-for-lawbreaking-behavior/">https://www.consumerfinance.gov/about-us/newsroom/cfpb-federal-partners-confirm-automated-systems-advanced-technology-not-an-excuse-for-lawbreaking-behavior/</a>.
\29\ CFPB, Agencies Request Comment on Quality Control Standards
for Automated Valuation Models Proposed Rule (June 1, 2023), <a href="https://www.consumerfinance.gov/about-us/newsroom/agencies-request-comment-on-quality-control-standards-for-automated-valuation-models-proposed-rule">https://www.consumerfinance.gov/about-us/newsroom/agencies-request-comment-on-quality-control-standards-for-automated-valuation-models-proposed-rule</a>.
\30\ CFPB, CFPB Issue Spotlight Analyzes ``Artificial
Intelligence'' Chatbots in Banking (June 6, 2023), <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-issue-spotlight-analyzes-artificial-intelligence-chatbots-in-banking/">https://www.consumerfinance.gov/about-us/newsroom/cfpb-issue-spotlight-analyzes-artificial-intelligence-chatbots-in-banking/</a>.
\31\ CFPB, CFPB Releases Reports on Banking Access and Consumer
Finance in Southern States (June 20, 2023), <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-releases-reports-on-banking-access-and-consumer-finance-in-southern-states/">https://www.consumerfinance.gov/about-us/newsroom/cfpb-releases-reports-on-banking-access-and-consumer-finance-in-southern-states/</a>.
\32\ CFPB, FFIEC Announces Availability of 2022 Data on Mortgage
Lending (June 29, 2023), <a href="https://www.consumerfinance.gov/about-us/newsroom/ffiec-announces-availability-of-2022-data-on-mortgage-lending/">https://www.consumerfinance.gov/about-us/newsroom/ffiec-announces-availability-of-2022-data-on-mortgage-lending/</a>.
\33\ CFPB, Agencies to Host Roundtable on Special Purpose Credit
Programs (Aug. 24, 2023), <a href="https://www.consumerfinance.gov/about-us/newsroom/agencies-to-host-roundtable-on-special-purpose-credit-programs/">https://www.consumerfinance.gov/about-us/newsroom/agencies-to-host-roundtable-on-special-purpose-credit-programs/</a>.
\34\ CFPB, CFPB Issues Guidance on Credit Denials by Lenders
Using Artificial Intelligence (Sept. 19, 2023), <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-issues-guidance-on-credit-denials-by-lenders-using-artificial-intelligence/">https://www.consumerfinance.gov/about-us/newsroom/cfpb-issues-guidance-on-credit-denials-by-lenders-using-artificial-intelligence/</a>.
\35\ CFPB, CFPB Sues Repeat Offender Freedom Mortgage
Corporation for Providing False Information to Federal Regulators
(Oct. 10, 2023), <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-sues-repeat-offender-freedom-mortgage-corporation-for-providing-false-information-to-federal-regulators/">https://www.consumerfinance.gov/about-us/newsroom/cfpb-sues-repeat-offender-freedom-mortgage-corporation-for-providing-false-information-to-federal-regulators/</a>.
\36\ CFPB, CFPB and Justice Department Issue Joint Statement
Cautioning that Financial Institutions May Not Use Immigration
Status to Illegally Discriminate Against Credit Applicants (Oct. 12,
2023), <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-and-justice-department-issue-joint-statement-cautioning-that-financial-institutions-may-not-use-immigration-status-to-illegally-discriminate-against-credit-applicants/">https://www.consumerfinance.gov/about-us/newsroom/cfpb-and-justice-department-issue-joint-statement-cautioning-that-financial-institutions-may-not-use-immigration-status-to-illegally-discriminate-against-credit-applicants/</a>.
\37\ CFPB, CFPB Issues New Report on State Community
Reinvestment Laws (Nov. 2, 2023), <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-issues-new-report-on-state-community-reinvestment-laws/">https://www.consumerfinance.gov/about-us/newsroom/cfpb-issues-new-report-on-state-community-reinvestment-laws/</a>.
\38\ CFPB, CFPB Orders Citi to Pay $25.9 Million for
Intentional, Illegal Discrimination Against Armenian Americans (Nov.
8, 2023), <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-orders-citi-to-pay-25-9-million-for-intentional-illegal-discrimination-against-armenian-">https://www.consumerfinance.gov/about-us/newsroom/cfpb-orders-citi-to-pay-25-9-million-for-intentional-illegal-discrimination-against-armenian-</a> americans/.
\39\ CFPB, CFPB Orders Bank of America to Pay $12 Million for
Reporting False Mortgage Data (Nov. 28, 2023), <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-orders-bank-of-america-to-pay-12-million-for-reporting-false-mortgage-data/">https://www.consumerfinance.gov/about-us/newsroom/cfpb-orders-bank-of-america-to-pay-12-million-for-reporting-false-mortgage-data/</a>.
\40\ CFPB, CFPB and Justice Department Sue Developer and Lender
Colony Ridge for Bait-and-Switch Land Sales and Predatory Financing
(Dec. 20, 2023), <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-and-doj-sue-developer-and-lender-colony-ridge-for-bait-and-switch-land-sales-and-predatory-financing/">https://www.consumerfinance.gov/about-us/newsroom/cfpb-and-doj-sue-developer-and-lender-colony-ridge-for-bait-and-switch-land-sales-and-predatory-financing/</a>.
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3.1.2. CFPB Engagements With Stakeholders
The CFPB often engages directly with external stakeholders to
inform the CFPB's policy developments and message the CFPB's priorities
and recent work. In 2023, CFPB staff participated in 69 stakeholder
engagements related to fair lending and access to credit issues.
Through speeches, presentations, podcasts, roundtables, webinars, and
other smaller discussions on fair lending topics, the CFPB strives to
keep abreast of economic and market realities that impact the lives of
individuals, small businesses, and communities the CFPB is charged with
protecting.
Throughout 2023, numerous engagements centered around the use of
advanced technologies including their use in discriminatory targeting,
consumer surveillance, and digital redlining; redlining; discrimination
on the basis of receipt of public assistance income; false and
erroneous HMDA data reporting; student lending; and credit reporting.
3.2. Data and Reports
3.2.1. State Community Reinvestment Act: Summary of State Laws
On November 2, 2023, the CFPB published a new analysis of state-
specific versions of CRA laws, highlighting how States ensure financial
institutions' lending, services, and investment activities meet the
credit needs of their communities. Many States adopted laws similar to
the Federal CRA in the decades following the 1977 passage of the
landmark Federal anti-redlining law. The report examined the laws of
seven States (Connecticut, Illinois, Massachusetts, New York, Rhode
Island, Washington, West Virginia) and the District of Columbia, and
found that data collected by Federal agencies, such as HMDA, are often
used for State CRA compliance and other oversight purposes.\41\
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\41\ CFPB, State Community Reinvestment Act: Summary of State
Laws (Nov. 2, 2023), <a href="https://www.consumerfinance.gov/data-research/research-reports/state-community-reinvestment-acts-summary-of-state-laws/">https://www.consumerfinance.gov/data-research/research-reports/state-community-reinvestment-acts-summary-of-state-laws/</a>.
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3.2.2. Banking and Credit Access in the Southern Region of the United
States
On June 21, 2023, the CFPB published a data spotlight, Banking and
Credit Access in the Southern Region of the U.S.\42\ Spanning the
States of Alabama, Arkansas, Georgia, Louisiana, Mississippi, North
Carolina, South Carolina, and Tennessee, this report seeks to identify
gaps as well as opportunities to increase financial access in the
region, particularly through branch presence and bank account access,
and capital access such as mortgage lending and small business lending.
The analysis looks at trends by State, the region as a whole, and
differences between rural and non-rural areas. Utilizing HMDA data, the
analysis also identified differences for mortgage originations and
denials by race and ethnicity in both rural and non-rural communities.
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\42\ CFPB, Banking and Credit Access in the Southern Region of
the U.S. (June 21, 2023), <a href="https://files.consumerfinance.gov/f/documents/cfpb_ocp-data-spotlight_banking-and-credit-access_2023-06.pdf">https://files.consumerfinance.gov/f/documents/cfpb_ocp-data-spotlight_banking-and-credit-access_2023-06.pdf</a>.
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3.2.3. Consumer Finances in Rural Areas of the Southern Region
On June 21, 2023, the CFPB published a data spotlight, Consumer
Finances in Rural Areas of the Southern Region.\43\ This report is the
second in a series profiling the finances of consumers in rural
communities. Nearly 48 million people live in the southern region
examined in this report, which includes Alabama, Arkansas, Georgia,
Louisiana, Mississippi, North Carolina, South Carolina, and Tennessee.
Intended to provide a starting point in better understanding the
financial lives of consumers in rural areas of the southern United
States, this report takes a broad survey of consumer financial
profiles, including credit scores, financial distress, medical debt,
and other debt categories and compares profiles of consumers in the
rural South to those in other geographies. Among other things, the
report examines originations for auto loans by credit score and
majority-minority census tracts, by State and for the region as a
whole.
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\43\ CFPB, Consumer Finances in Rural Areas of the Southern
Region (June 21, 2023), <a href="https://files.consumerfinance.gov/f/documents/cfpb_or-data-point_consumer-finances-in-rural-south_2023-06.pdf">https://files.consumerfinance.gov/f/documents/cfpb_or-data-point_consumer-finances-in-rural-south_2023-06.pdf</a>.
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3.2.4. Availability of 2022 HMDA Data
On March 20, 2023, the CFPB announced the initial availability of
the 2022 HMDA modified loan application register data on the Federal
Financial Institutions Examination Council's (FFIEC) HMDA Platform for
approximately 4,394 HMDA filers.\44\ These published data contain loan-
level information filed by financial institutions, modified to protect
consumer privacy.\45\
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\44\ CFPB, 2021 HMDA Data on Mortgage Lending Now Available
(Mar. 20, 2023), <a href="https://www.consumerfinance.gov/about-us/newsroom/2022-hmda-data-on-mortgage-lending-now-available/">https://www.consumerfinance.gov/about-us/newsroom/2022-hmda-data-on-mortgage-lending-now-available/</a>.
\45\ Additional activity has occurred since the close of this
reporting period. On March 26, 2024, the CFPB announced the
availability of the HMDA modified loan application data for 2023,
available at <a href="https://ffiec.cfpb.gov/data-publication/modified-lar/2023">https://ffiec.cfpb.gov/data-publication/modified-lar/2023</a>.
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On June 29, 2023, the FFIEC announced the availability of static
``Snapshot'' HMDA data, a static dataset of 2022 mortgage lending
transactions at 4,460 financial institutions reported under HMDA as of
May 1, 2023.\46\ These data include a total of 48 data points providing
information about the applicants, the property securing the loan or
proposed to secure the loan in the case of non-originated applications,
the transaction, and identifiers.
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\46\ CFPB, FFIEC Announces Availability of 2022 Data on Mortgage
Lending (June 29, 2023), <a href="https://www.consumerfinance.gov/about-us/newsroom/ffiec-announces-availability-of-2022-data-on-mortgage-lending/">https://www.consumerfinance.gov/about-us/newsroom/ffiec-announces-availability-of-2022-data-on-mortgage-lending/</a>.
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3.2.5. Report on the Home Mortgage Disclosure Act Rule Voluntary Review
On March 3, 2023, the CFPB published a report containing the
findings of the CFPB's voluntary review of the CFPB's final HMDA rule
(issued in October 2015) and related
[[Page 54792]]
amendments (collectively, the HMDA Rule).\47\ The report analyzed,
among other key issues, how changes in reporting thresholds and other
amendments affected HMDA data coverage and the available data on the
supply over time of open-ended lines of credit and closed-end mortgage
loans; how new or revised HMDA data points have contributed to
predicting underwriting and pricing outcomes; and how revised and
expanded reporting of race and ethnicity helped provide additional data
on subpopulation groups in the residential mortgage market.
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\47\ CFPB, Report on the Home Mortgage Disclosure Act Rule
Voluntary Review (Mar. 3, 2023), <a href="https://files.consumerfinance.gov/f/documents/cfpb_hmda-voluntary-review_2023-03.pdf">https://files.consumerfinance.gov/f/documents/cfpb_hmda-voluntary-review_2023-03.pdf</a>.
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3.2.6. Data Point: 2022 Mortgage Market Activity and Trends
On September 27, 2023, the CFPB released its annual report on
residential mortgage lending activity and trends for 2022.\48\ The
report shows that in 2022, mortgage applications and originations
declined markedly from the prior year, while rates, fees, discount
points, and other costs increased. Overall affordability declined
significantly, with borrowers spending more of their income on mortgage
payments and lenders more often denying applications for insufficient
income. Most refinances during the reported period were cash-out
refinances, and, in a reversal of recent trends, the median credit
score of refinance borrowers declined below the median credit score of
purchase borrowers. As in years past, independent lenders continued to
dominate home mortgage lending, with the exception of home equity lines
of credit.
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\48\ CFPB, Data Point: 2022 Mortgage Market Activity and Trends
(Sept. 27, 2022), <a href="https://www.consumerfinance.gov/data-research/research-reports/data-point-2022-mortgage-market-activity-trends/">https://www.consumerfinance.gov/data-research/research-reports/data-point-2022-mortgage-market-activity-trends/</a>.
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4. Interagency Engagement
The CFPB regularly coordinates with other Tribal, Federal, State,
county, municipal, and international government entities; policymakers;
and the organizations that represent them regarding current and
emerging fair lending risks. Through numerous interagency organizations
and taskforces, the CFPB coordinated its 2023 fair lending regulatory,
supervisory, and enforcement activities to promote consistent,
efficient, and effective enforcement of Federal fair lending laws.
The CFPB, along with the Department of Housing and Urban
Development (HUD), Federal Trade Commission (FTC), FDIC, FRB, NCUA,
OCC, DOJ, and FHFA, constitute the Interagency Task Force on Fair
Lending. This Task Force meets regularly to discuss fair lending
enforcement efforts, share current methods of conducting supervisory
and enforcement fair lending activities, and coordinate fair lending
policies. In 2023, the NCUA was the Chair of this Task Force.
Through the FFIEC, the CFPB has robust engagements with other
partner agencies that focus on fair lending issues. For example,
throughout the reporting period, the CFPB has continued to chair the
HMDA and CRA Data Collection Subcommittee, a subcommittee of the FFIEC
Task Force on Consumer Compliance. This subcommittee oversees FFIEC
projects and programs involving HMDA data collection and dissemination,
the preparation of the annual FFIEC budget for processing services, and
the development and implementation of other related HMDA processing
projects as directed by this Task Force.
Together with DOJ, HUD, and FTC, the CFPB also participates in the
Interagency Working Group on Fair Lending Enforcement, a standing
working group of Federal agencies that meets regularly to discuss
issues relating to fair lending enforcement. The agencies use these
meetings to also discuss fair lending developments and trends,
methodologies for evaluating fair lending risks and violations, and
coordination of fair lending enforcement efforts.
As required by section 1022 of the Dodd-Frank Act, the CFPB also
consults with other agencies as part of its rulemaking process.\49\ For
example, in 2023, while developing its small business lending data
collection final rule, the CFPB consulted or offered to consult with
FRB, FDIC, NCUA, OCC, HUD, DOJ, FTC, the Department of Agriculture, the
Department of the Treasury, the Economic Development Administration,
the Farm Credit Administration (FCA), the Financial Crimes Enforcement
Network, and the Small Business Administration (SBA) including, among
other things, on consistency with any prudential, market, or systemic
objectives administered by such agencies.
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\49\ 12 U.S.C. 5512.
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In addition to the established interagency organizations, CFPB
personnel meet regularly with personnel from other agencies, including
with DOJ, HUD, FTC, FHFA, State Attorneys General, and the prudential
regulators to coordinate and discuss the CFPB's fair lending work.
4.1. Special Purpose Credit Program Interagency Roundtable
On September 12, 2023, the CFPB, along with HUD, OCC, and FHFA
hosted a roundtable discussion on SPCPs.\50\ In addition to remarks by
the respective leaders of the participating agencies, the event
included a roundtable discussion with representatives from community
groups and trade organizations that are focused on the opportunities
and benefits of SPCPs. The event was open to the public via livestream.
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\50\ CFPB, Agencies to Host Roundtable on Special Purpose Credit
Programs, (Aug. 24, 2023), <a href="https://www.consumerfinance.gov/about-us/newsroom/agencies-to-host-roundtable-on-special-purpose-credit-programs/">https://www.consumerfinance.gov/about-us/newsroom/agencies-to-host-roundtable-on-special-purpose-credit-programs/</a>.
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4.2. Joint Statements
On April 25, 2023, the CFPB, along with DOJ, Equal Employment
Opportunity Commission, and FTC issued a joint statement committing to
enforcement efforts against discrimination and bias in automated
systems.\51\ In the statement, all four agencies resolved to vigorously
enforce their collective authorities and to monitor the development and
use of automated systems, including those sometimes marketed as AI.
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\51\ CFPB; Dept. of Justice Civil Rights Div.; Equal Opportunity
Comm'n; Federal Trade Comm'n; Joint Statement on Enforcement Efforts
Against Discrimination and Bias in Automated Systems, (Apr. 25,
2023), <a href="https://files.consumerfinance.gov/f/documents/cfpb_joint-statement-enforcement-against-discrimination-bias-automated-systems_2023-04.pdf">https://files.consumerfinance.gov/f/documents/cfpb_joint-statement-enforcement-against-discrimination-bias-automated-systems_2023-04.pdf</a>.
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On October 12, 2023, the CFPB along with DOJ, issued a joint
statement reminding financial institutions that, while ECOA and
Regulation B do not expressly prohibit consideration of immigration
status, they prohibit creditors from using immigration status to
discriminate on the basis of national origin, race, or any other
characteristic covered by ECOA.\52\
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\52\ CFPB; Dept. of Justice Civil Rights Div. Joint Statement on
Fair Lending and Credit Opportunities for Noncitizen Borrowers under
the Equal Credit Opportunity Act (Oct. 12, 2023), <a href="https://files.consumerfinance.gov/f/documents/cfpb-joint-statement-on-fair-lending-and-credit-opportunities-for-noncitizen-b_jA2oRDf.pdf">https://files.consumerfinance.gov/f/documents/cfpb-joint-statement-on-fair-lending-and-credit-opportunities-for-noncitizen-b_jA2oRDf.pdf</a>.
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4.3. Appraisal Bias
Appraisal bias is a key fair lending priority of the CFPB.
Throughout 2023, the CFPB has been very active with its interagency
partners to advance work to combat appraisal bias through the FFIEC
Appraisal Subcommittee (ASC), correspondence, court briefs, proposed
guidance, and work of the Property
[[Page 54793]]
Appraisal and Valuation Equity Task Force.
The ASC comprises designees from the CFPB and certain other Federal
agencies, including FDIC, HUD, FRB, OCC, NCUA, and FHFA, and is tasked
with providing Federal oversight of State appraiser and appraisal
management company regulatory programs, as well as a monitoring and
reviewing framework for The Appraisal Foundation, the private,
nongovernmental organization that sets appraisal standards. CFPB Deputy
Director Zixta Martinez currently serves as the Chairperson of the ASC.
Through the ASC, the CFPB addresses topics including discriminatory
bias in home appraisals.
The ASC held its first-ever hearing about appraisal bias on January
24, 2023. The hearing served to raise awareness of the issue of
appraisal bias by focusing on its scope and impact, and to provide
information on the role of the ASC in the appraisal regulatory system.
On May 19, 2023, the ASC held its second public hearing, which explored
the appraisal regulatory system and focused on appraisal standards,
appraiser qualification criteria and barriers to entry into the
profession, appraisal practice, and State regulation. The ASC held its
third public hearing on November 1, 2023, which discussed how a
residential appraisal is developed and reviewed, the ROV process for
residential real estate valuations, and the development of rural
appraisals. These hearings were the first three in a series of four
planned hearings relating to appraisal bias.
On February 14, 2023, senior officials from the CFPB, FDIC, HUD,
NCUA, FRB, DOJ, OCC, and FHFA submitted a joint letter to The Appraisal
Foundation. The letter urged The Appraisal Foundation to revise its
draft Ethics Rule for appraisers to include a detailed statement of
Federal prohibitions against discrimination that exist under the FHA
and ECOA. The agencies expressed concern that some appraisers may be
unaware of these prohibitions and, of particular concern, that the
draft Ethics Rule emphasized that ``[a]n appraiser must not engage in
unethical discrimination,'' implying that appraisers may engage in
``ethical'' discrimination, a concept foreign to current law and
practice.
On March 13, 2023, the CFPB filed a joint statement of interest
with DOJ in Connolly & Mott v. Lanham et al., explaining the
application of the FHA and ECOA to lenders relying on discriminatory
home appraisals. For more information on this statement of interest,
see section 5.1 of this report.
On June 1, 2023, the CFPB, in conjunction with the FRB, FDIC, FHFA,
NCUA, and OCC, proposed a rule regarding quality control standards for
AVMs. For more information on this rulemaking, see section 2.1.2 of
this report.
On June 8, 2023, the CFPB, in conjunction with the FRB, FDIC, NCUA,
and OCC, requested public comment on proposed guidance addressing ROV
for residential real estate transactions. The proposed guidance would
advise on policies that financial institutions may implement to allow
consumers to provide financial institutions with information that may
not have been considered during an appraisal or if deficiencies are
identified in the original appraisal. For more information on this
proposed guidance, see section 2.2.1 of this report.
In 2023, the CFPB also continued to engage with other agencies on
issues of bias in home appraisals through the Interagency Task Force on
Property Appraisal and Valuation Equity. More information on this Task
Force is available at <a href="https://pave.hud.gov">https://pave.hud.gov</a>.
5. Amicus Program and Other Litigation
5.1. Amicus Briefs and Statements of Interest
The CFPB files amicus, or ``friend-of-the-court,'' briefs in
significant court cases concerning Federal consumer financial
protection laws, including cases involving ECOA. These briefs provide
courts with the CFPB's views and help ensure that consumer financial
protection statutes are correctly and consistently interpreted. In
2023, the CFPB filed two fair lending related amicus briefs and a
statement of interest.
On June 23, 2023, the CFPB filed an amicus brief in Saint-Jean et
al. v. Emigrant Mortgage Co. & Emigrant Bank in support of Plaintiffs
who won a jury verdict against Emigrant Mortgage Company and Emigrant
Bank (Emigrant) for violating ECOA.\53\ The jury found that Emigrant
had for years targeted Black and Latino borrowers and neighborhoods in
New York City with predatory mortgage loans and practices. The CFPB's
brief addresses three issues raised on appeal to explain why the jury
verdict should be affirmed: (1) the timeliness of Plaintiff's claims
under the doctrine of equitable tolling, (2) the propriety of the
district court's jury instructions under ECOA, and (3) the public
policy goals undermined by enforcing a waiver of claims in a loan
modification agreement.\54\
---------------------------------------------------------------------------
\53\ Brief for CFPB as Amici Curiae Supporting Plaintiff-
Appellees, Saint-Jean v. Emigrant Mortg. Co., 50 F. Supp. 3d 300
(E.D.N.Y. 2014) (No. 22-3094).
\54\ See <a href="https://files.consumerfinance.gov/f/documents/cfpb_saint-jean-et-al-v-emigrant-mortgage-coemigrant-bank_2023-06.pdf">https://files.consumerfinance.gov/f/documents/cfpb_saint-jean-et-al-v-emigrant-mortgage-coemigrant-bank_2023-06.pdf</a>.
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On April 14, 2023, the CFPB filed an amicus brief in Roberson v.
Health Career Institute LLC.\55\ In the brief, the CFPB explained that
discriminatory targeting violates ECOA. In particular, the CFPB's brief
explains that ECOA's prohibition on discrimination applies to ``any
aspect of a credit transaction,'' meaning it covers every aspect of a
borrower's dealings with a creditor, not just the specific terms of a
loan--like the interest rate or fees. The CFPB's brief also explains
that in order to survive a motion to dismiss under ECOA, plaintiffs
need only plead facts that plausibly allege discrimination, rather than
the elements of a prima facia case, which is not a pleading requirement
but rather an evidentiary standard.\56\
---------------------------------------------------------------------------
\55\ Statement of Interest of the CFPB in Support of Plaintiffs,
Roberson et al v. Health Career Institute LLC, et al. (S.D.Fla.
2023) (No. 9:22CV81883).
\56\ See <a href="https://www.consumerfinance.gov/compliance/amicus/briefs/roberson-v-health-career-institute-llc/">https://www.consumerfinance.gov/compliance/amicus/briefs/roberson-v-health-career-institute-llc/</a>.
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On March 13, 2023, the CFPB and DOJ filed a joint statement of
interest in Connolly & Mott v. Lanham et al. explaining that relying on
discriminatory home appraisals can violate ECOA.\57\ The law is clear
that mortgage lenders cannot take race, sex, or any other prohibited
bases into account when evaluating the creditworthiness of an
applicant. As such, lenders cannot rely on a discriminatory appraisal
if they knew, or should have known, that the appraisal was
discriminatory. The statement of interest also explains that, to
survive a motion to dismiss under ECOA, plaintiffs need only plead
facts that plausibly allege discrimination, rather than establish a
prima facie case, which is not a pleading requirement but rather an
evidentiary standard. In the statement of interest, the Department of
Justice also addresses how the FHA applies to discriminatory
appraisals.\58\
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\57\ Statement of Interest for the United States, Connolly et
al. v. Lanham et al., 685 F.Supp.3d 312 (No. 1:22CV02048).
\58\ See <a href="https://www.consumerfinance.gov/compliance/amicus/briefs/connolly-mott-v-lanham-et-al/">https://www.consumerfinance.gov/compliance/amicus/briefs/connolly-mott-v-lanham-et-al/</a>.
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More information regarding the CFPB's amicus program is available
on the CFPB's website.\59\
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\59\ See generally <a href="https://www.consumerfinance.gov/policy-compliance/amicus/">https://www.consumerfinance.gov/policy-compliance/amicus/</a>.
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5.2. Litigation
In September 2022, the CFPB was sued in the U.S. District Court for
the
[[Page 54794]]
Eastern District of Texas by the U.S. Chamber of Commerce et al.,
challenging an update to the UDAAP section of the CFPB's examination
manual. The updated manual clarified that discriminatory conduct may
violate the CFPA's prohibition on unfair practices and provided
guidance to examiners on how discriminatory conduct should be examined
to determine whether it violates the unfairness prohibition. The court
granted plaintiffs' motion for summary judgment, vacated the manual
update, and permanently enjoined the CFPB from engaging in any
examination, supervision, or enforcement action against any member of
the plaintiff associations based on the CFPB's interpretation of its
unfairness authority set forth in the updated manual. The CFPB filed a
notice of appeal in November 2023, and the appeal was stayed by the
Fifth Circuit pending the Supreme Court's resolution of CFPB v.
CFSA.\60\
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\60\ Additional activity has occurred since the close of this
reporting period. On May 16, 2024, the Supreme Court issued a
decision in CFPB v. CFSA. See CFPB v. Cmty. Fin. Servs. Ass'n of
Am., Ltd., 601 U.S. 416 (2024).
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On March 30, 2023, the CFPB issued its final rule on small business
lending under ECOA, as required by section 1071 of the Dodd-Frank
Act.\61\ On April 26, 2023, the Texas Bankers Association and Rio Bank
sued the CFPB in the U.S. District Court for the Southern District of
Texas challenging the validity of the final rule. The court entered a
preliminary injunction enjoining the CFPB from enforcing or
implementing the rule against plaintiffs (including the American
Bankers Association, who had joined as a plaintiff via an amended
complaint filed on May 14, 2023) and their members, and stayed the
compliance dates for plaintiffs and their members pending a decision in
CFPB v. CFSA.\62\ On October 26, 2023, the court extended that order to
apply to all covered entities following the intervention of other
plaintiffs seeking to join the lawsuit. Separately, on August 11, 2023,
the Kentucky Bankers Association and several Kentucky banks sued to
challenge the rule in the U.S. District Court for the Eastern District
of Kentucky. The court preliminarily enjoined the CFPB from enforcing
the rule pending a decision in CFPB v. CFSA.\63\ A third lawsuit was
filed on December 26, 2023, in the U.S. District Court for the Southern
District of Florida by the Revenue Based Finance Coalition, a trade
association representing merchant cash advance providers.
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\61\ See <a href="https://www.consumerfinance.gov/rules-policy/final-rules/small-business-lending-under-the-equal-credit-opportunity-act-regulation-b/">https://www.consumerfinance.gov/rules-policy/final-rules/small-business-lending-under-the-equal-credit-opportunity-act-regulation-b/</a>.
\62\ Additional activity has occurred since the close of this
reporting period. See n.65, supra.
\63\ Additional activity has occurred since the close of this
reporting period. See n.65, supra.
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6. Interagency Reporting on ECOA and HMDA
The CFPB is statutorily required to file a report to Congress
annually describing the administration of its functions under ECOA,
summarizing public enforcement actions taken by other agencies with
administrative enforcement responsibilities under ECOA, and providing
an assessment of the extent to which compliance with ECOA has been
achieved.\64\ In addition, the CFPB's annual HMDA reporting requirement
calls for the CFPB, in consultation with HUD, to report annually on the
utility of HMDA's requirement that covered lenders itemize certain
mortgage loan data.\65\ The information below provides the required
reporting.
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\64\ 15 U.S.C. 1691f.
\65\ 12 U.S.C. 2807.
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6.1. Reporting on ECOA Enforcement
The enforcement and compliance efforts and assessments made by the
eleven agencies assigned enforcement authority under section 704 of
ECOA are discussed in this section, as reported by the agencies.
BILLING CODE 4810-AM-P
[[Page 54795]]
[GRAPHIC] [TIFF OMITTED] TN02JY24.001
[GRAPHIC] [TIFF OMITTED] TN02JY24.002
6.1.1. Public Enforcement Actions
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\66\ Collectively, the Board of Governors of the Federal Reserve
System (FRB), the Federal Deposit Insurance Corporation (FDIC), the
National Credit Union Administration (NCUA), the Office of the
Comptroller of the Currency (OCC), and the Consumer Financial
Protection Bureau (Bureau) comprise the Federal Financial
Institutions Examination Council (FFIEC). The State Liaison
Committee was added to FFIEC in 2006 as a voting member. Federal
Financial Institutions Examination Council, <a href="http://www.ffiec.gov">http://www.ffiec.gov</a>
(last visited Mar. 30, 2021).>
\67\ The Grain Inspection, Packers and Stockyards Administration
(GIPSA) was eliminated as a stand-alone agency within USDA in 2017.
The functions previously performed by GIPSA have been incorporated
into the Agricultural Marketing Service (AMS), and ECOA reporting
comes from the Packers and Stockyards Division, Fair Trade Practices
Program, AMS.
\68\ 15 U.S.C. 1691c.
---------------------------------------------------------------------------
In 2023, of the Federal agencies with ECOA enforcement authority,
the CFPB, FDIC, and FTC brought a total of four fair lending
enforcement actions. Information on the DOJ's fair lending
[[Page 54796]]
program and fair lending related public enforcement actions can be
found at: <a href="https://www.justice.gov/crt/fair-lending-program-0">https://www.justice.gov/crt/fair-lending-program-0</a>.
6.1.2. CFPB Enforcement Actions
In 2023, the CFPB brought two fair lending enforcement actions:
Citibank and Colony Ridge.
Citibank
On November 8, 2023, the CFPB ordered Citibank, N.A. to pay $25.9
million in fines and consumer redress for intentionally and illegally
discriminating against credit card applicants the bank identified as
Armenian American.\69\ From at least 2015 through 2021, Citibank
discriminated against retail services credit card applicants with
surnames that Citibank employees associated with consumers of Armenian
national origin, targeting applicants with surnames ending in ``-ian''
and ``-yan'' as well as applicants in or around Glendale, California.
Nicknamed ``Little Armenia,'' Glendale is home to approximately 15
percent of the Armenian American population in the U.S. When Citibank
identified credit card applicants as potentially being of Armenian
national origin, the bank applied more stringent criteria to these
applications, including denying them outright and requiring additional
information or placing a block on the account.
---------------------------------------------------------------------------
\69\ See <a href="https://www.consumerfinance.gov/enforcement/actions/citibank-n-a/">https://www.consumerfinance.gov/enforcement/actions/citibank-n-a/</a>.
---------------------------------------------------------------------------
Further, Citibank supervisors conspired to hide the discrimination
by instructing employees not to discuss the discriminatory practices in
writing or on recorded phone lines. Citibank employees also lied about
the bases of denial, providing false reasons to denied applicants.
Colony Ridge
On December 20, 2023, the CFPB, together with DOJ, filed a
complaint against the Texas-based Colony Ridge defendants.\70\ The
lawsuit alleges Colony Ridge sells unsuspecting families flood-prone
land without water, sewer, or electrical infrastructure, and that the
company sets borrowers up to fail with loans they cannot afford. As
alleged in the complaint, roughly one in four Colony Ridge loans ends
in foreclosure, after which the company repurchases the properties and
sells them to new borrowers. As alleged in the complaint, Colony Ridge
targets Hispanic borrowers. In particular, Colony Ridge advertises
almost exclusively in Spanish, often on TikTok or other social media
platforms, often featuring national flags and regional music from Latin
America. In their marketing, Colony Ridge promised consumers the
American dream of home ownership with its own seller financing: an
easy-to-obtain loan product that requires no credit check and only a
small deposit. The complaint alleges that foreclosure and property deed
records from September 2019 through September 2022 show that Colony
Ridge initiated foreclosures on at least 30 percent of seller-financed
lots within just three years of the purchase date, with most loan
failures occurring even sooner. Records also confirm that Colony Ridge
accounted for more than 92 percent of all foreclosures recorded in
Liberty County, Texas between 2017 and 2022.
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\70\ See <a href="https://www.consumerfinance.gov/enforcement/actions/colony-ridge/">https://www.consumerfinance.gov/enforcement/actions/colony-ridge/</a>.
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In the complaint, the CFPB and DOJ allege that defendants violated
ECOA by targeting consumers of Hispanic origin with a predatory loan
product. The CFPB separately alleges that the Colony Ridge defendants
violated the CFPA by making deceptive representations to consumers;
that Colony Ridge Development and Colony Ridge BV violated the
Interstate Land Sales Full Disclosure Act (ILSA) by making untrue
statements, omitting material facts, failing to provide required
accurate translations, and failing to report and disclose required
information; and that defendants violated the CFPA by virtue of their
violations of ECOA and ILSA, respectively. DOJ further alleges
defendants' conduct violated the FHA.
The joint complaint seeks, among other things, injunctions against
defendants to prevent future violations of Federal consumer financial
laws, redress to consumers, damages, and the imposition of civil money
penalties.
6.1.3. Interagency Enforcement Actions
In 2023, the FTC, along with the State of Wisconsin, brought an
enforcement action in Federal court against Rhinelander, a Wisconsin
auto dealer group, its current and former owners, and general manager
Daniel Towne, alleging, among other things, that defendants violated
ECOA and Regulation B by discriminating against American Indian
consumers by charging them higher financing costs and fees.\71\ Among
other things, the settlement with Rhinelander's current owners and
Defendant Towne requires the company to establish a comprehensive fair
lending program that will, among other components, allow consumers to
seek outside financing for a purchase, and cap the additional interest
markup Rhinelander can charge consumers, as well as require the current
owners and Defendant Towne to pay $1 million to refund affected
consumers.\72\ The former owners, Rhinelander Auto Center, Inc. and
Rhinelander Motor Company, agreed to a separate settlement, that
requires the companies to permanently wind down the businesses and pay
$100,000 to refund affected consumers.\73\
---------------------------------------------------------------------------
\71\ FTC v. Rhinelander Auto Ctr., Inc., No. 23-cv-737 (W.D.
Wis., filed Oct. 24, 2023), available at <a href="https://www.ftc.gov/system/files/ftc_gov/pdf/1-ComplaintbyFTC-WIagainstRhinelander.pdf">https://www.ftc.gov/system/files/ftc_gov/pdf/1-ComplaintbyFTC-WIagainstRhinelander.pdf</a>.
\72\ FTC v. Rhinelander Auto Ctr., Inc., No. 23-cv-737 (W.D.
Wis. Nov. 6, 2023) (stipulated order for permanent injunction,
monetary judgment, and other relief as to Defendants Rhinelander
Auto Group LLC, Rhinelander Import Group LLC, and Daniel Towne),
<a href="https://www.ftc.gov/system/files/ftc_gov/pdf/18-ConsentJudgmentEnteredastoRAGRMGandTowne.pdf">https://www.ftc.gov/system/files/ftc_gov/pdf/18-ConsentJudgmentEnteredastoRAGRMGandTowne.pdf</a>.
\73\ FTC v. Rhinelander Auto Ctr., Inc., No. 23cv737 (W.D. Wis.
Nov. 6, 2023) (stipulated order for permanent injunction, monetary
judgment, and other relief as to Defendants Rhinelander Auto Center,
Inc., and Rhinelander Motor Company), <a href="https://www.ftc.gov/system/files/ftc_gov/pdf/17-ConsentJudgmentEnteredastoRACandRMC.pdf">https://www.ftc.gov/system/files/ftc_gov/pdf/17-ConsentJudgmentEnteredastoRACandRMC.pdf</a>.
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On March 8, 2023, the FDIC issued a public consent order for Cross
River bank under section 3(q) of the Federal Deposit Insurance Act
(Act), 12 U.S.C. 1813(q). The FDIC determined that Cross River bank
engaged in unsafe or unsound banking practices related to its
compliance with applicable fair lending laws and regulations by failing
to establish and maintain internal controls, information systems, and
prudent credit underwriting practices in conformance with the Safety
and Soundness Standards contained in appendix A of 12 CFR part 364, or
the violations of ECOA, 15 U.S.C. 1691, et seq., as implemented by
Regulation B, 12 CFR part 1002, and the Truth in Lending Act, 15 U.S.C.
1601, et seq., as implemented by Regulation Z, 12 CFR part 1026.
6.1.4. Number of Institutions Cited for ECOA/Regulation B Violations
In 2023, the agencies and the CFPB collectively reported citing 189
institutions with violations of ECOA and/or Regulation B.
6.1.5. Violations Cited During ECOA Examinations
Among institutions examined for compliance with ECOA and Regulation
B, the FFIEC agencies reported that the most frequently cited
violations were as follows:
[[Page 54797]]
Table 3--Regulation B Violations Cited by FFIEC Agencies, 2023
------------------------------------------------------------------------
FFIEC Agencies
Regulation B violations: 2023 reporting
------------------------------------------------------------------------
12 CFR 1002.4, 1002.7(d)(1): Discrimination-- NCUA,\74\ CFPB.\75\
Discrimination on a prohibited basis in a
credit transaction; improperly requiring the
signature of the applicant's spouse or other
person.
12 CFR 1002.5(b), 12 CFR 1002.5(c), 12 CFR FDIC,\76\ OCC.\77\
1002.5(d): Inquiring about protected class--
Inquiring about the race, color, religion,
national origin, or sex of an applicant or any
other person in connection with a credit
transaction, except as permitted in sec.
1002.5(b)(1) and (b)(2), or sec.1002.8 in the
case of a special purpose credit program;
requesting any information concerning an
applicant's spouse or former spouse, except as
permitted in sec. 1002.5(c)(2); requesting the
marital status of a person applying for
individual, unsecured credit, except as
permitted in sec. 1002.5(d)(1) (for credit
other than individual, unsecured, a creditor
may inquire about the applicant's marital
status, but must only use the terms
``married,'' ``unmarried,'' and ``separated'');
inquiring as to whether income stated in an
application is derived from alimony, child
support, or separate maintenance payments,
except as permitted in sec.1002.5(d)(2); or
requesting information about birth control
practices, intentions concerning the bearing or
rearing of children, or capability to bear
children, except as permitted in sec.
1002.5(d)(3).
12 CFR 1002.6 (b)(2), (5): Specific rules CFPB.
concerning use of information--Improperly
evaluating age, receipt of public assistance in
a credit transaction..
12 CFR 1002.9(a)(1)(i), (a)(2), (b)(1); (b)(2); OCC,\78\ NCUA,\79\
(c): Adverse Action--Failure to provide notice FRB,\80\ FDIC,\81\
to the applicant 30 days after receiving a CFPB.\82\
completed application concerning the creditor's
approval of, counteroffer to, or adverse action
on the application; failure to provide
appropriate notice to the applicant 30 days
after taking adverse action on an incomplete
application; failure to provide sufficient
information in an adverse action notification,
including the specific reasons for the action
taken.
12 CFR 1002.13(a)(1), (b): Information for OCC.
Monitoring Purposes--Failure to obtain
information for monitoring purposes; failure to
request information on an application
pertaining to the applicant's ethnicity or race.
12 CFR 1002.14 (a)(1), (a)(2), (a)(3), (a)(4): OCC,\83\ NCUA.\84\
Appraisals and Valuations--Failure to provide
appraisals and other valuations.
------------------------------------------------------------------------
Among institutions examined for compliance with ECOA and Regulation
B, the Non-FFIEC agencies reported that the most frequently cited
violations were as follows:
---------------------------------------------------------------------------
\74\ 12 CFR 1002.4(a).
\75\ 12 CFR 1002.4, 1002.7(d)(1).
\76\ 12 CFR 1002.5(b)-(d).
\77\ 12 CFR 1002.5(b).
\78\ 12 CFR 1002.9(a)(2); 1002.9(a)(1)(i); 1002.9(b)(2).
\79\ 12 CFR 1002.9(a)(1); 1002.9(a)(2); 1002.9(b)(2).
\80\ 12 CFR 1002.9(a)(1)(i); 1002.9(b)(2).
\81\ 12 CFR 1002.9(a)(1);(a)(2); (b)(2).
\82\ 12 CFR 1002.9(a)(1),(2); 1002.9(b); 1002.9(c).
\83\ 12 CFR 1002.14(a)(1); 1002.14(a)(2).
\84\ 12 CFR 1002.14(a)(2).
TABLE 4: Regulation B Violations Cited by Non-FFIEC Agencies Enforcing
ECOA, 2023
------------------------------------------------------------------------
Non-FFIEC agencies
Regulation B violations: 2023 reporting
------------------------------------------------------------------------
12 CFR 1002.9(a)(1)(i), (a)(2): Adverse Action-- FCA.
Failure to provide notice to the applicant 30
days after receiving a completed application
concerning the creditor's approval of,
counteroffer to, or adverse action on the
application; failure to provide sufficient
information in an adverse action notification,
including the specific reasons for the action
taken.
12 CFR 1002.13: Failure to request and collect FCA.
information for monitoring purposes--Failure to
obtain information for monitoring purposes.
------------------------------------------------------------------------
The AMS, SEC, and the SBA reported that they received no complaints
based on ECOA or Regulation B in 2023. The FTC is an enforcement agency
and does not conduct compliance examinations.
6.1.6. Referrals to the Department of Justice
The agencies assigned enforcement authority under section 704 of
ECOA must refer a matter to DOJ when there is reason to believe that a
creditor has engaged in a pattern or practice of lending discrimination
in violation of ECOA.\85\ They also may refer other potential ECOA
violations to DOJ.\86\ In 2023, 5 agencies (FDIC, NCUA, FRB, OCC and
CFPB) collectively made 33 such referrals to DOJ involving
discrimination in violation of ECOA. This is an increase of 175 percent
in such referrals since 2020 (12 referrals). A brief description of
those matters follows.
---------------------------------------------------------------------------
\85\ 15 U.S.C. 1691e(g).
\86\ Id.
---------------------------------------------------------------------------
In 2023, the CFPB referred 18 fair lending matters to DOJ. The
referrals included: discrimination on the basis of race and national
origin in mortgage lending (redlining); discrimination in underwriting
on the basis of receipt of public assistance income; predatory
targeting on the basis of race and national origin; discrimination in
pricing exceptions on the basis of race, national origin, sex, and age;
and discrimination in credit cards on the basis of national origin and
race.
In 2023, the FDIC referred seven fair lending matters to DOJ. The
referrals included: one matter involving discrimination on the basis of
race in mortgage lending (redlining); three matters for discrimination
on the basis of race and national origin in mortgage lending
(redlining); one matter involving discrimination in underwriting in
commercial loans on the basis of race, color, national origin, and
religion; one matter involving discrimination in auto loan pricing on
the basis of sex or gender; and one matter for discrimination in auto
loan pricing on the basis of race and national origin.
NCUA referred six ECOA matters to DOJ which involved discrimination
[[Page 54798]]
based on age and discrimination based on marital status.
The OCC made one referral to DOJ for a matter that involved
discrimination on the basis of race, color, or national origin in
mortgage lending (redlining).
The FRB referred one fair lending matter to DOJ. The matter
involved discrimination on the basis of marital status in agricultural
and commercial lending.
6.2. Reporting on HMDA
The CFPB's annual HMDA reporting requirement calls for the CFPB, in
consultation with HUD, to report annually on the utility of HMDA's
requirement that covered lenders itemize loan data in order to disclose
the number and dollar amount of certain mortgage loans and
applications, grouped according to various characteristics.\87\ The
CFPB, in consultation with HUD, finds that itemization and tabulation
of these data furthers the purposes of HMDA.
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\87\ 12 U.S.C. 2807.
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7. Looking Forward & Focus on Digital Discrimination
The CFPB has made clear that the same laws and regulations apply to
all technologies, regardless of the complexity or novelty of the
technology deployed by institutions, including when it comes to
combatting unlawful discrimination or explaining how certain credit
decisions are made. ECOA is a powerful means to address unlawful
digital discrimination in any aspect of a credit transaction. In 2023,
the CFPB continued to combat digital discrimination through enforcement
matters,\88\ supervisory matters,\89\ rulemaking,\90\ guidance,\91\ and
using an all-of-government interagency approach.\92\
---------------------------------------------------------------------------
\88\ See <a href="https://www.consumerfinance.gov/enforcement/actions/colony-ridge/">https://www.consumerfinance.gov/enforcement/actions/colony-ridge/</a>.
\89\ See section 1.3, supra.
\90\ CFPB, OCC, FHFA, FRB, FDIC, NCUA, Quality Control Standards
for Automated Valuation Models (June 1, 2023), <a href="https://files.consumerfinance.gov/f/documents/cfpb_automated-valuation-models_proposed-rule-request-for-comment_2023-06.pdf">https://files.consumerfinance.gov/f/documents/cfpb_automated-valuation-models_proposed-rule-request-for-comment_2023-06.pdf</a>.
\91\ CFPB, Consumer Financial Protection Circular 2023-03
Adverse action notification requirements and the proper use of the
CFPB's sample forms provided in Regulation B (Sept. 19. 2023),
<a href="https://www.consumerfinance.gov/compliance/circulars/circular-2023-03-adverse-action-notification-requirements-and-the-proper-use-of-the-cfpbs-sample-forms-provided-in-regulation-b/">https://www.consumerfinance.gov/compliance/circulars/circular-2023-03-adverse-action-notification-requirements-and-the-proper-use-of-the-cfpbs-sample-forms-provided-in-regulation-b/</a>.
\92\ CFPB, OCC, FRB, FDIC, NCUA, Interagency Guidance on
Reconsideration of Value of Residential Real Estate Valuations (June
8, 2023), <a href="https://files.consumerfinance.gov/f/documents/cfpb_interagency-guidance-reconsiderations-of-value-of-residential-real-estate_2023-06.pdf">https://files.consumerfinance.gov/f/documents/cfpb_interagency-guidance-reconsiderations-of-value-of-residential-real-estate_2023-06.pdf</a>; CFPB; Dept. of Justice Civil Rights Div.;
Equal Opportunity Comm'n; Federal Trade Comm'n; Joint Statement on
Enforcement Efforts Against Discrimination and Bias in Automated
Systems (Apr. 25, 2023), <a href="https://files.consumerfinance.gov/f/documents/cfpb_joint-statement-enforcement-against-discrimination-bias-automated-systems_2023-04.pdf">https://files.consumerfinance.gov/f/documents/cfpb_joint-statement-enforcement-against-discrimination-bias-automated-systems_2023-04.pdf</a>.
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Looking forward, the CFPB will continue to enforce the law to root
out unlawful discrimination, including when discrimination may be
disguised by other processes within credit transactions. This includes
actions that financial institutions take around the selection and
procurement of data for use in advanced technological methods. Data
brokers sell myriad types of personal data and sensitive information
about consumers, some of which may directly implicate protected bases
under ECOA. These data, alone or in combination with other data, may
create proxies for, or have a disparate impact on, any of the ECOA
prohibited bases. Creditors subject to ECOA and Regulation B may
violate these laws if they use these data to engage in discriminatory
targeting, steering, redlining, or in other ways that create unlawful
discrimination.
The same holds true for fraud screens purported to facilitate
compliance with other consumer protection and banking laws. While fraud
detection compliance regimes may serve important purposes, institutions
that are subject to ECOA and Regulation B may not use fraud screens and
associated policies and procedures as an excuse to violate or
circumvent fair lending laws.\93\
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\93\ Discrimination on a prohibited basis can violate ECOA and
Regulation B when it occurs in any aspect of a credit transaction,
including when it occurs through practices that entities may
characterize as related to fraud detection. See, e.g., <a href="https://www.consumerfinance.gov/enforcement/actions/citibank-n-a/">https://www.consumerfinance.gov/enforcement/actions/citibank-n-a/</a>.
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Further, as the CFPB continues to monitor markets and institutions
for fair lending compliance, the CFPB will also continue to review the
fair lending testing regimes of financial institutions. Robust fair
lending testing of models should include regular testing for disparate
treatment and disparate impact, including searches for and
implementation of less discriminatory alternatives using manual or
automated techniques. CFPB exam teams will continue to explore the use
of open-source automated debiasing methodologies to produce potential
alternative models to the insitutions' credit scoring models.
In 2024 and beyond, the CFPB will continue to combat digital
discrimination and also continue to take steps to be a leader when it
comes to building the Federal government's capabilities to address
these types of transformative technologies.
Appendix A: HMDA Resources
As stated in section 2.2.5, the CFPB maintains a comprehensive
suite of resources pertaining to the reporting and use of HMDA data, in
addition to the annual HMDA filing guides released annually by the
FFIEC. These resources include: Executive Summaries of HMDA rule
changes; \94\ Small Entity Compliance Guide; \95\ Institutional and
Transactional Coverage Charts; \96\ Reportable HMDA Data Chart; \97\
sample data collection form; \98\ FAQs; \99\ a Beginners Guide to
Accessing and Using HMDA Data; \100\ and downloadable webinars,\101\
which provide an overview of the HMDA rule. In June of 2023, the CFPB
published a summary of the 2022 data on mortgage lending.\102\ The CFPB
also provides on its website an interactive version of Regulation C
that is easier to access and navigate than the printed version of
Regulation C.\103\
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\94\ CFPB, Executive Summary of the 2020 Home Mortgage
Disclosure Act (Regulation C) Final Rule (Apr. 16, 2020), <a href="https://files.consumerfinance.gov/f/documents/cfpb_rule-executive-summary_hmda-2020.pdf">https://files.consumerfinance.gov/f/documents/cfpb_rule-executive-summary_hmda-2020.pdf</a>; <a href="https://www.consumerfinance.gov/about-us/blog/changes-to-hmda-closed-end-loan-reporting-threshold/">https://www.consumerfinance.gov/about-us/blog/changes-to-hmda-closed-end-loan-reporting-threshold/</a>. Summaries
for different reporting years are available at: <a href="https://www.consumerfinance.gov/compliance/compliance-resources/mortgage-resources/hmda-reporting-requirements/">https://www.consumerfinance.gov/compliance/compliance-resources/mortgage-resources/hmda-reporting-requirements/</a>.
\95\ CFPB, Home Mortgage Disclosure (Regulation C) Small Entity
Compliance Guide (Feb. 2023), <a href="https://files.consumerfinance.gov/f/documents/cfpb_hmda_small-entity-compliance-guide_2023-02.pdf">https://files.consumerfinance.gov/f/documents/cfpb_hmda_small-entity-compliance-guide_2023-02.pdf</a>.
\96\ CFPB, HMDA Institutional Coverage Chart, <a href="https://files.consumerfinance.gov/f/documents/cfpb_hmda-institutional-coverage_2023.pdf">https://files.consumerfinance.gov/f/documents/cfpb_hmda-institutional-coverage_2023.pdf</a>; CFPB, HMDA Transactional Coverage Chart, <a href="https://files.consumerfinance.gov/f/documents/cfpb_hmda-transactional-coverage_2023.pdf">https://files.consumerfinance.gov/f/documents/cfpb_hmda-transactional-coverage_2023.pdf</a>.
\97\ CFPB, Reportable HMDA Data: A Regulatory and Reporting
Overview Reference Chart for HMDA Data Collected in 2023 (Feb. 9,
2023), <a href="https://files.consumerfinance.gov/f/documents/cfpb_reportable-hmda-data_regulatory-and-reporting-overview-reference-chart_2023-02.pdf">https://files.consumerfinance.gov/f/documents/cfpb_reportable-hmda-data_regulatory-and-reporting-overview-reference-chart_2023-02.pdf</a>.
\98\ CFPB, Sample Data Collection Form, <a href="https://files.consumerfinance.gov/f/documents/201708_cfpb_hmda-sample-data-collection-form.pdf">https://files.consumerfinance.gov/f/documents/201708_cfpb_hmda-sample-data-collection-form.pdf</a>.
\99\ CFPB, Home Mortgage Disclosure Act FAQs, <a href="https://www.consumerfinance.gov/compliance/compliance-resources/mortgage-resources/hmda-reporting-requirements/home-mortgage-disclosure-act-faqs/">https://www.consumerfinance.gov/compliance/compliance-resources/mortgage-resources/hmda-reporting-requirements/home-mortgage-disclosure-act-faqs/</a>.
\100\ CFPB, A Beginner's Guide to Accessing and Using Home
Mortgage Disclosure Act Data (June 13, 2022), <a href="https://files.consumerfinance.gov/f/documents/cfpb_beginners-guide-accessing-using-hmda-data_guide_2022-06.pdf">https://files.consumerfinance.gov/f/documents/cfpb_beginners-guide-accessing-using-hmda-data_guide_2022-06.pdf</a>.
\101\ CFPB, HMDA Webinars, <a href="https://www.consumerfinance.gov/compliance/compliance-resources/mortgage-resources/hmda-reporting-requirements/webinars/">https://www.consumerfinance.gov/compliance/compliance-resources/mortgage-resources/hmda-reporting-requirements/webinars/</a>.
\102\ CFPB, Summary of 2022 Data on Mortgage Lending (June 29,
2023), <a href="https://www.consumerfinance.gov/data-research/hmda/summary-of-2022-data-on-mortgage-lending/">https://www.consumerfinance.gov/data-research/hmda/summary-of-2022-data-on-mortgage-lending/</a>.
\103\ Interactive Bureau Regulations, Regulation C, <a href="https://www.consumerfinance.gov/rules-policy/regulations/1003/">https://www.consumerfinance.gov/rules-policy/regulations/1003/</a>.
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Together with the Federal Financial Institutions Examination
Council
[[Page 54799]]
(FFIEC),\104\ the CFPB also routinely updates its HMDA resources
throughout the year to ensure HMDA reporters have the most up-to-date
information. For example, in November 2023, the CFPB released the 2024
Filing Instructions Guide,\105\ an online interactive Filing
Instructions Guide,\106\ and the 2023 Supplemental Guide for Quarterly
Filers.\107\ Together with the FFIEC, in March of 2023, the CFPB also
published the 2023 edition of the HMDA Getting it Right Guide.\108\ The
CFPB also works with the FFIEC to publish data submission resources for
HMDA filers and vendors on its Resources for HMDA Filers website,
<a href="https://ffiec.cfpb.gov">https://ffiec.cfpb.gov</a>.
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\104\ Collectively, the Board of Governors of the Federal
Reserve System (FRB), the Federal Deposit Insurance Corporation
(FDIC), the National Credit Union Administration (NCUA), the Office
of the Comptroller of the Currency (OCC), and the CFPB comprise the
Federal Financial Institutions Examination Council (FFIEC). The
State Liaison Committee was added to FFIEC in 2006 as a voting
member. Federal Fin. Instit. Examination Council, <a href="http://www.ffiec.gov">http://www.ffiec.gov</a> (last visited June 5, 2024).
\105\ CFPB, Filing instructions guide for HMDA data collected in
2024 (Nov. 2023), <a href="https://s3.amazonaws.com/cfpb-hmda-public/prod/help/2024-hmda-fig.pdf">https://s3.amazonaws.com/cfpb-hmda-public/prod/help/2024-hmda-fig.pdf</a>.
\106\ 2023 FIG (Filing Instructions Guide), <a href="https://ffiec.cfpb.gov/documentation/fig/2023/overview">https://ffiec.cfpb.gov/documentation/fig/2023/overview</a>.
\107\ CFPB, Supplemental Guide for Quarterly Filers for 2024
(Aug. 2023), <a href="https://s3.amazonaws.com/cfpb-hmda-public/prod/help/supplemental-guide-for-quarterly-filers-for-2024.pdf">https://s3.amazonaws.com/cfpb-hmda-public/prod/help/supplemental-guide-for-quarterly-filers-for-2024.pdf</a>.
\108\ Federal Fin. Instit. Examination Council, A Guide to HMDA
Reporting, Getting it Right! (Mar. 23, 2023), <a href="https://www.ffiec.gov/hmda/pdf/2023Guide.pdf">https://www.ffiec.gov/hmda/pdf/2023Guide.pdf</a>.
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In addition, HMDA reporters can ask questions about HMDA and
Regulation C, including how to submit HMDA data, by emailing the CFPB's
HMDA Help at <a href="/cdn-cgi/l/email-protection#440c0900050c21283404272234266a232b32"><span class="__cf_email__" data-cfemail="feb6b3babfb69b928ebe9d988e9cd0999188">[email protected]</span></a>. The CFPB also offers financial
institutions, service providers, and others informal staff guidance on
specific questions about the statutes and rules the CFPB implements,
including ECOA and Regulation B and HMDA and Regulation C, through its
Regulation Inquiries platform at <a href="http://www.reginquiries.consumerfinance.gov">www.reginquiries.consumerfinance.gov</a>.
Appendix B: Defined Terms
------------------------------------------------------------------------
Term Definition
------------------------------------------------------------------------
AMS............................... Agricultural Marketing Service of
the U.S. Department of Agriculture.
ASC............................... FFIEC's Appraisal Subcommittee.
AVM............................... Automated Valuation Models.
CFPA.............................. Consumer Financial Protection Act of
2010.
CFPB.............................. Consumer Financial Protection
Bureau.
CRA............................... Community Reinvestment Act.
Dodd-Frank Act.................... Dodd-Frank Wall Street Reform and
Consumer Protection Act.
DOJ............................... U.S. Department of Justice.
DOT............................... U.S. Department of Transportation.
ECOA.............................. Equal Credit Opportunity Act.
FCA............................... Farm Credit Administration.
FDIC.............................. Federal Deposit Insurance
Corporation.
FHA............................... Fair Housing Act.
FHFA.............................. Federal Housing Finance Agency.
Federal Reserve Board or FRB...... Board of Governors of the Federal
Reserve System.
FFIEC............................. Federal Financial Institutions
Examination Council--the FFIEC
member agencies are the Board of
Governors of the Federal Reserve
System (FRB), the Federal Deposit
Insurance Corporation (FDIC), the
National Credit Union
Administration (NCUA), the Office
of the Comptroller of the Currency
(OCC), and the Consumer Financial
Protection Bureau (CFPB). The State
Liaison Committee was added to
FFIEC in 2006 as a voting member.
FTC............................... Federal Trade Commission.
HMDA.............................. Home Mortgage Disclosure Act.
HUD............................... U.S. Department of Housing and Urban
Development.
ILSA.............................. Interstate Land Sales Full
Disclosure Act.
NCUA.............................. National Credit Union
Administration.
OCC............................... Office of the Comptroller of the
Currency.
ROV............................... Reconsideration of Value.
SBA............................... Small Business Administration.
SEC............................... Securities and Exchange Commission.
SPCP.............................. Special Purpose Credit Program.
UDAAP............................. Unfair, Deceptive, or Abusive Acts
or Practices.
USDA.............................. U.S. Department of Agriculture.
------------------------------------------------------------------------
Signing Authority
The Director of the Bureau, Rohit Chopra, having reviewed and
approved this document, is delegating the authority to electronically
sign this document to Laura Galban, a Bureau Federal Register Liaison,
for purposes of publication in the Federal Register.
Laura Galban,
Federal Register Liaison, Consumer Financial Protection Bureau.
[FR Doc. 2024-14533 Filed 7-1-24; 8:45 am]
BILLING CODE 4810-AM-P
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This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.