CFPB eyes ‘disparate impact’ at PNC
Aug. 16, 2013 – The CFPB’s focus on “disparate impact” issues in consumer financial protection is in the news with reports of an investigation of PNC Financial Services’ mortgage lending practices.
The bank has disclosed that it is being investigated by the CFPB and Justice Department over its mortgage pricing, the American Banker reported. This disclosure “marked the first time the CFPB has publicly pursued a bank using the controversial legal theory, which is used to cite a bank for discrimination – even if it is unintentional . . . ,” the report says.
The CFPB has discussed disparate impact before through its policymaking, recently through a bulletin issued this spring on liability under the Equal Credit Opportunity Act regarding indirect auto lending arrangements. And while the CFPB’s oversight authorities over depository institutions apply to the largest – those with more than $10 billion in assets – the Justice Department can initiate an investigation regardless of an institution’s asset size.
The story on PNC says large banks are concerned that more disparate impact issues will arise under the CFPB’s qualified mortgage regulation, which takes effect next January. It says lenders are concerned that in attempting to meet the QM standard, “they could inadvertently discriminate against minorities or women who do not qualify for such loans.”
The CFPB’s ability-to-repay/QM rule requires lenders to assess and verify a borrower’s ability to repay a mortgage loan using specific underwriting standards. Loans that meet the regulatory QM definition are afforded protection, and institutions defined as small creditors (less than $2 billion in assets and making 500 or fewer mortgages) have more flexibility. The rules are also flexible for the next seven years for loans that meet standards set by the government-sponsored enterprises.
For more on the ability-to-repay/QM rule, read “Understanding the Qualified Mortgage Quagmire” in NAFCU’s July Compliance Monitor (login required).
American Banker article, 8/13
"CFPB notes ECOA liability for indirect lenders," 3/22
July Compliance Monitor (login required)