On March 16, 2022, the CFPB announced that it would expand the scope of its discrimination enforcement activities beyond the specific areas covered by the ECOA, by applying the UDAAP Unfair Practices Standard to discriminatory practices in all consumer financial segments. The CFPB announcement stated that “[t]The CFPB will examine discrimination in all consumer credit markets, including credit, services, collections, consumer reporting, payments, remittances and deposits. A copy of the ad is available here.
As part of the CFPB announcement, Director Rohit Capra said: “When someone is denied access to a bank account because of their religion or race, it is clearly unfair. We will expand our anti-discrimination efforts to address discriminatory practices at all levels in the area of consumer credit. »
Along with this announcement, the CFPB released an updated review manual outlining how the office will apply the unfairness standard to the review of discrimination. He noted that:
- discrimination may meet the criteria of “unfairness” by causing substantial harm to consumers that they cannot reasonably avoid, where that harm is not outweighed by compensating benefits to consumers or competition.
- Consumers can be harmed by discrimination, whether intentional or not.
- Discrimination can be unfair in cases where the conduct may also be covered by the ECOA, as well as in cases where the ECOA does not apply. For example, denying access to a checking account because the individual is of a particular race could be an unfair practice even in cases where ECOA may not apply.
So, in areas of consumer finance where companies have not yet done detailed fair lending-type analysis, testing, and monitoring, CFPB examiners will likely require companies being monitored to show their auditing processes. Assessing and testing discriminatory risks and outcomes, including documenting customer demographics and the impact of products and fees on different demographic groups. This expanded scope will require companies that have little experience in such reviews and monitoring to implement strict discrimination/fair loan date reviews, testing and monitoring.
Even for companies that already perform such monitoring for some products, this activity will likely need to be extended to other products. This will be particularly difficult and new in non-credit consumer financial areas, such as those mentioned above.