Unfair Discrimination In Consumer Finance Targeted


The Consumer Financial Protection Bureau is targeting discrimination and officials there plan to closely examine financial institutions’ decision-making practices to ensure companies are appropriately testing for and eliminating potential harm to customers.

On Wednesday, an updated exam manual was published for evaluating unfair, deceptive, and abusive acts or practices. Officials said in a press release that discrimination can occur in cases where the conduct may be covered by the Equal Credit Opportunity Act – a fair lending law that covers extensions of credit – as well as instances where it does not.

The example of being denied a checking account due to race was used as an example of a discriminatory practice.

“When a person is denied access to a bank account because of their religion or race, this is unambiguously unfair,” said CFPB Director Rohit Chopra. “We will be expanding our anti-discrimination efforts to combat discriminatory practices across the board in consumer finance.”

According to the press release the CFPB will:

-Examine for discrimination in all consumer finance markets, including credit, servicing, collections, consumer reporting, payments, remittances, and deposits.

-Require supervised companies to show their processes for assessing risks and discriminatory outcomes, including documentation of customer demographics and the impact of products and fees on different demographic groups.

-Look at how companies test and monitor their decision-making processes for unfair discrimination, as well as discrimination under the Equal Credit Opportunity Act.

In a blog post, Eric Halperin and Lorelei Salas of the Consumer Financial Protection Bureau said discrimination has a long and ugly history in the United States.

“New manifestations of discrimination, embedded within systems and technologies, harm communities even where such acts are not visible,” they said.

According to Mayer Brown’s website, the decision to extend ECOA-like antidiscrimination provisions broadly to all consumer finance activity is extraordinary.

Authors Ori Lev, Stephanie C. Robinson, and Tori K. Shinohara wrote that with this change, the CFPB will be broadening its racial equity focus to cover every aspect of the consumer financial services sector.

“Going forward, it appears that every exam for unfair, deceptive or abusive acts or practices (“UDAAP”) is likely to include an assessment of a company’s anti-discrimination programs as applied to all aspects of all consumer financial products or services, regardless of whether that company extends any credit or would otherwise be subject to the Equal Credit Opportunity Act (ECOA). In recent months, the Bureau has been laser-focused on issues of fair lending and racial equity in the consumer credit market, including redlining, pricing, and algorithmic bias,” they wrote.

The issue of discrimination in lending has been a hot topic.

The Neighborhood Assistance Corporation of America (NACA) announced a lending program for minority-owned businesses this month it calls “Economic Justice Loans.”

The program has the stated goal of helping historically underserved populations build generational wealth.

Email story ideas to Editor Kimberley Haas: [email protected]