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  • CFPB’s Latest Fair Lending Report Focuses on Credit Discrimination

    Lending

    On April 14, the CFPB issued its fifth fair lending report to Congress, which outlines the Bureau’s efforts in 2016 as well as its plans for 2017. According to the report, in 2016, the CFPB (i) engaged in significant outreach to both consumers and lenders to better understand fair lending compliance and access to credit issues; (ii) worked with government regulators and agencies to protect and obtain reimbursement for harmed consumers; and (iii) assisted consumers with limited proficiency in English. For 2017, the report indicates that the Bureau intends to (i) evaluate whether lenders have “intentionally discouraged” potential applicants in minority neighborhoods from applying for credit; (ii) investigate whether mortgage or student loan borrowers who fall behind on payments face more difficulty in working out new payment plans because of their race, ethnicity, age, or gender; and (iii) further explore fair access to credit for woman- and minority-owned firms—all areas the Bureau characterizes as presenting “substantial risk of credit discrimination for consumers.”

    Additional information on fair lending reports issued by the Bureau can also be found in BuckleySandler’s CFPB Resource Center.

    Lending Fair Lending CFPB

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  • FDIC Releases Third Volume in its Affordable Mortgage Lending Guide

    Agency Rule-Making & Guidance

    On April 6, the FDIC released the third volume of its Affordable Mortgage Lending Guide (Guide). The Guide is designed to help community bankers understand and compare various affordable mortgage-related programs, as well as their Community Reinvestment implications. This third installment of the Guide provides an overview of Federal Home Loan Bank programs designed to support single-family home purchases, such as down payment and closing cost assistance—many of which can be used in conjunction with other federal and state housing finance agency and government-sponsored enterprise programs. The Guide also provides alternatives for selling mortgages on the secondary market. As previously reported in InfoBytes, the first and second volumes in the series were published last year.

    Agency Rulemaking & Guidance FDIC Mortgages Affordable Housing Fair Lending Lending

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  • CFPB Director Speaks at National Community Reinvestment Coalition Conference; Discusses Regulatory Review at Chamber of Commerce 11th Annual Capital Markets Summit

    Consumer Finance

    On March 29, CFPB Director Richard Cordray spoke at the National Community Reinvestment Coalition Conference in Washington, D.C. to discuss, among other things, the Equal Credit Opportunity Act and the difficulties faced by individuals who cannot obtain mainstream credit. As previously covered in InfoBytes, the CFPB is exploring the risks and benefits of using “alternative data” to assist consumers whose limited credit histories prevent them from accessing many lending opportunities. Cordray stated that one of the CFPB’s priorities “is [to increase] the availability of responsible financial products and services, especially for those who have been underserved or shut out.”

    The next day, on March 30, Cordray spoke at the U.S. Chamber of Commerce’s 11th Annual Capital Markets Summit in Washington, D.C. In prepared remarks, Cordray discussed the regulatory compliance challenges and burdens that financial organizations face, as well as the CFPB’s efforts to assist with regulatory implementation, the development of clearer guidance, and methods to streamline and modernize regulations based on effectiveness. Cordray noted the CFPB’s efforts to improve and adapt regulations based on the needs of the industry. “We learn from the comments we receive and our final rules are helpfully informed by that input on a consistent basis,” Cordray stated. “But even after we issue a final rule, if the data shows over time that any of our substantive calls need to be reconsidered, we can and will face the issue frankly and address it. We will not let pride of authorship interfere with the serious task of policymaking in the interests of consumers and the American public.” As mandated by Congress, the CFPB must review any significant rules after five years have passed. The CFPB plans to review remittance rules followed by a review of the mortgage rules. Cordray also noted efforts to address ambiguities and conflicts in other areas such as debt collection and payday lending.

    Consumer Finance CFPB ECOA Discrimination Fair Lending Compliance regulator enforcement

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  • Illinois-Based Lender, HUD Resolve Fair Housing Act Matter

    Lending

    On March 10, HUD released a Conciliation Agreement with an Illinois-based lender alleged to have discriminated against African-American and Hispanic borrowers seeking mortgage loans. The complaint, brought by HOPE Fair Housing Center (HOPE), claims the lack of bank branches in majority African-American and Hispanic communities resulted in fewer financial services being offered to applicants based on their race and national origin in violation of the Fair Housing Act. HOPE’s complaint also claims that African-American and Hispanic applicants were more likely to receive less favorable mortgage terms than other races. As part of the settlement, the lender will establish a $1 million loan program to “increase mortgage lending to residents in majority African-American and Hispanic areas” and will pay $75,000 to HOPE. Among other things, the agreement also states the lender will offer consumer education outreach in minority areas and provide fair lending training for its staff.

    Lending Mortgage Lenders Fair Housing HUD Fair Lending

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  • FTC Issues Summary of ECOA Enforcement and Educational Activity to CFPB as Bureau Prepares Annual Report

    FinTech

    On February 3, the FTC provided the CFPB with an overview of its work on ECOA-related policy issues, focusing specifically on the Commission’s activities with respect to Regulation B. The letter discusses, among other items, the Commission’s fair lending research, policy development and educational initiatives such as (i) surveying consumers about their experiences in buying and financing automobiles; (ii) providing a report to businesses to help them avoid exclusionary or discriminatory outcomes when using big data analytics; (iii) creating a FinTech forum series that explores emerging financial technology and its implications for consumers; (iv) issuing a report to Congress on Commission efforts in African American and Latino communities related to fraud prevention; (v) hosting a workshop to examine marketplace changes based on population changes and diversity trends; and (vi) attending Interagency Task Force on Fair Lending meetings to share information on lending discrimination, predatory lending enforcement, and policy issues. The letter also discusses the Commission’s business and consumer education efforts on fair lending issues.

    FinTech Consumer Finance CFPB ECOA Fair Lending FTC

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  • CFPB Outlines Fair Lending Priorities for 2017

    Federal Issues

    On December 16, the Director of the Office of Fair Lending and Equal Opportunity at the CFPB announced the Bureau’s fair lending priorities for 2017. According to Ms. Ficklin’s blog post, the CFPB will increase its efforts to prevent credit discrimination and improve credit access by focusing on redlining, mortgage and student loan servicing, and small business lending. Specifically, the Bureau will increase its focus on evaluating: (i) whether lenders are intentionally avoiding lending in minority neighborhoods; (ii) if delinquent borrowers face more difficulty in working out payment arrangements with mortgage or student loan servicers because of their race or ethnicity; and (iii) whether women-owned and minority-owned small businesses experience discrimination when applying for credit.

    Federal Issues Mortgages Consumer Finance CFPB Student Lending Fair Lending Mortgage Lenders

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  • State AGs Urge the CFPB to Ensure that States Maintain the Right to Set Usury Caps on High Cost Loans

    State Issues

    In October, New York AG Eric T. Schneiderman, along with seven other state AGs (Connecticut, Maryland, Massachusetts, New Hampshire, Pennsylvania, Vermont and the District of Columbia), submitted a letter to the CFPB in response to the agency’s proposed rule addressing payday loans, vehicle title loans, and certain high-cost installment loans. While commending the CFPB for introducing additional consumer protections, the letter urges the CFPB to integrate the following language from the preamble of the proposed rule into the body of the final rule: “The protections imposed by this proposal would operate as a floor across the country, while leaving State and local jurisdictions to adopt additional regulatory requirements (whether a usury limit or another form of protection) above that floor as they judge appropriate to protect consumers in their respective jurisdictions.” The letter explains that because the CFPB does not have the authority to set interest rates – or usury caps – for loans, it is “crucial” that states maintain their right to do so.

    State Issues Consumer Finance CFPB State AG Fair Lending Rule-Making

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  • OCC Comptroller Curry Addresses Regulatory Concern Related to Fintech Industry; Outlines Possible Fintech Charter

    Consumer Finance

    On September 13, OCC Comptroller Curry delivered remarks at the Marketplace Lending Policy Summit, an inaugural event during which policy implications and regulatory concerns prevalent in the marketplace lending industry were discussed. Similar to past reports and remarks about marketplace lending, Curry expressed concern that the underwriting and business models used by the industry have yet to go through a complete credit cycle: “A less favorable credit cycle will test this business in ways it hasn’t yet experienced, and how sources of funding will hold up under stress remains to be seen.” In addition, drawing attention to the “long-term performance” issues related to marketplace lending, Curry posed the following inquiries: (i) whether new credit underwriting technologies and algorithms comply with existing laws and regulations, such as the Equal Credit Opportunity Act; (ii) whether existing laws, such as the Community Reinvestment Act, should be “amended radically” to ensure that consumers are sufficiently protected against nonbank lenders; (iii) whether an entirely new regulation or law is needed to “protect the public’s interest or prevent risk to the broader financial system”; and (iv) whether innovation itself should be regulated, and, if so, by which primary regulator(s). Notably, Comptroller Curry revealed that the OCC is in the process of developing a potential federal “fintech charter,” a framework that is expected to be released this fall. Comptroller Curry emphasized that, if the OCC grants limited-purpose fintech charters, institutions receiving the charters “will be held to the same strict standards of safety, soundness, and fairness that other federally chartered institutions must meet.”

    OCC Fair Lending ECOA Consumer Lending FinTech Marketplace Lending

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  • CFPB Announces Staff Changes

    Consumer Finance

    On July 20, the CFPB announced various senior leadership changes. Chris D’Angelo will now serve as Associate Director for Supervision, Enforcement and Fair Lending. D’Angelo joined the CFPB in June 2011 from the U.S. Treasury Department and has held a number of roles at the CFPB, the most recent of which was senior advisor to Director Cordray. Additional leadership changes include Richard Lepley serving as the CFPB’s Principal Deputy General Counsel in the Office of the General Counsel in the Legal Division, and Nellisha Ramdass serving as the Deputy Chief Operating Officer.

    CFPB Fair Lending Enforcement

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  • NCRC Releases Fair Lending Report

    Lending

    On July 18, the National Community Reinvestment Coalition (NCRC) released a report analyzing data related to mortgage lending in St. Louis, Milwaukee, Minneapolis, and surrounding areas. According to the report, low- and moderate-income neighborhoods and predominantly minority neighborhoods lack access to mortgage credit. The report makes various key findings, including that: (i) the racial composition of neighborhoods in St. Louis and Milwaukee is a predictor of mortgage activity, with lending allegedly greater in predominantly white populated neighborhoods than in predominantly African American neighborhoods; (ii) 70 percent of the Milwaukee Metropolitan statistical area population is white and receives 81 percent of the loans, while African Americans make up 16 percent of the population and receive four percent of the loans; and (iii) median family income of a neighborhood is the variable that best predicts home loan activity in Minneapolis. The report follows a similar analysis of alleged racial disparities in mortgage lending in Baltimore, Maryland released by NCRC last year.

    Fair Lending

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