The focus was on fair lending this week as the Consumer Financial Protection Bureau (CFPB) submitted a report to Congress on its maiden year work in the area and signed a Memo of understanding with the Department of Justice (DOJ) to Work Together to Protect Consumers from Credit Discrimination. The Fair Lending Report details what the agency has done under its mandate to enforce several consumer financial laws including the Equal Credit Opportunity Act (ECOA) and the Home Mortgage Disclosure Act (HMDA). The memorandum (MOU) creates a framework for the two agencies to work together to strengthen coordination on fair lending enforcement and avoid duplication of their respective federal law enforcement efforts.
Both the CFPB and the Justice Department have authority to protect against discriminatory lending under the ECOA which makes it illegal for creditors to discriminate against applicants in credit transactions because of race, color, religion, national origin, sex, marital status, age, income coming from a public assistance program, or an applicant's exercise of certain consumer protection rights. The MOU, released by DOJ details the way the two agencies will manage their respective responsibilities in three areas, sharing information and preserving its confidentiality; collaboration in investigations and coordination of joint investigations; and referrals and notifications between the agencies. In the latter area, CFPB agrees to refer matters of apparent lending discrimination to DOJ while retaining its own authority to pursue supervisory or enforcement actions.
"The Department of Justice welcomes the new tools and resources the CFPB can bring to the fight against lending discrimination," said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. "Cooperation between our two agencies promotes strong and effective civil rights enforcement, and today's agreement will further our ongoing collaborative efforts."
"Discrimination undermines equal access to credit," said Richard Cordray, Director of the CFPB. "Today's agreement is a critical step to better protecting consumers from illegal and discriminatory lending practices. We look forward to continuing our partnership with the Justice Department under this new framework."
In its initial report to Congress on the subject CFPB provides an overview of its fair lending program and details work in that area from July 21, 2011 through July 20, 2012, its first year of operation. Among the accomplishments the agency notes are:
- Establishing and staffing its Office of Fair Lending and Equal Opportunity;
- Initiation of the agencies fair lending supervision program and completion of initial reviews at dozens of banks and non-banks offering a variety of lending products;
- Commencement of the fair lending enforcement program and fair lending investigations;
- Ongoing work on amendments to the regulations that implement HMDA and planning for amendments to regulations that implement ECOA and the Truth in Lending Act (TILA);
- Completion of an empirical study and report to Congress on the use of cohort default rates in private education lending;
- Ongoing collaboration and coordination with federal and state partners and outreach to private industry, fair lending, civil rights, and consumer and community advocates.
CFPB said that moving forward it will continue to supervise lenders to ensure fair lending compliance and, in line with its commitment to transparency, will share its expectations about fair lending with those institutions and work with them to ensure that exams are carried out efficiently and effectively. The agency said it will also continue to talk to consumers because when they are informed they become the first line of defense against discriminatory practices.
