CFPB Issues 2021 Fair Lending Report
On May 6, 2022, the Consumer Financial Protection Bureau (CFPB) issued its annual Fair Lending Report to Congress, which outlines the work the bureau undertook around fair lending in 2021.
The 43-page report covers myriad fair lending topics, including fair lending enforcement and supervision, rulemaking and guidance, stakeholder engagement, the amicus program and other litigation, and interagency reporting on ECOA and HMDA. The report begins with a message from Fair Lending Director Patrice Alexander Ficklin, who outlines some of the highlights from 2021, such as the Trustmark National Bank enforcement action for redlining, and actions taken to combat appraisal bias after public reports of racist practices were published.
Section 1 of the report outlines the fair lending enforcement and supervision activities that occurred in 2021. The bureau opens this section with a statement of its risk-based prioritization process, which allows it to “focus on areas that present substantial risk of credit discrimination to consumers.” The process includes the identification of emerging developments and trends in key consumer financial markets, as well as tips and leads from whistleblowers, advocacy groups, and government agencies; historical data on supervision and enforcement; complaints from consumers; and HMDA and other data analysis. In 2021, the prioritization process resulted in the CFPB focusing on racial and economic equity, as well as “promoting economic recovery related to the COVID-19 pandemic,” in addition to some other priorities, such as mortgage origination and pricing, small business lending, and use of artificial intelligence (AI) and machine learning models.
As a result of the CFPB’s fair lending enforcement activities in 2021, the bureau announced four enforcement actions, brought under ECOA and other federal consumer financial protection laws. The enforcement actions included Trustmark National Bank, LendUp Loans, LLC, JPay, and Nexus Services. In addition to the four enforcement actions, the bureau referred two discrimination matters to the Department of Justice, regarding mortgage origination and pricing discrimination pursuant to section 706(g) of ECOA.
As part of the bureau’s supervision activities, the CFPB identified and issued various fair lending-related Matters Requiring Attention (MRAs), and especially focused on small business lenders’ risks associated with the Paycheck Protection Program (PPP). The bureau also focused its supervision efforts on mortgage origination.
Section 2 discusses the rulemaking and guidance efforts undertaken by the bureau in 2021, and reports that “the CFPB was active in rulemaking activities which are particularly critical for communities and individuals of color, women, and those who struggled to pay their mortgages or access small business loans as a result of the impacts of the COVID-19 pandemic.”
One such rulemaking was the CFPB’s data collection and proposed rule which seeks to amend Regulation B to fulfill changes to ECOA which were made by section 1071 of the Dodd-Frank Act. Visit this webpage for more information on this effort.
The CFPB reports that it is also working with other agencies (including NCUA) on regulations to implement amendments to the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), regarding automated valuation models, specifically concerning quality control standards for AVMs.
Lastly, the supervision section details the CFPB’s mortgage servicing final rule which amended certain sections in Regulation X to help protect borrowers from foreclosure upon exiting forbearance, and to create “smooth and orderly” transitions into a post-pandemic era. The rule’s provisions, which expired at the beginning of 2022, provided safeguards to ensure that members were evaluated for all options before filing for foreclosure. Additional protections, such as offering streamlined COVID-19 loan modifications pursuant to the evaluation of incomplete applications, continue to be in effect.
The report continues to outline the guidance that the bureau issued to its stakeholders in 2021. Some examples of published guidance include an interpretive rule regarding sexual orientation and gender identity; a notice regarding the provision of financial products and services to consumer with limited English proficiency; a bulletin on supervision and enforcement priorities regarding housing insecurity; and three issues of the bureau’s Supervisory Highlights.
The CFPB also outlines the various guidance and resources it maintains regarding HMDA and Regulation C reporting requirements, including the Executive Summary of HMDA rule changes, the Small Entity Compliance Guide, Key Dates Timeline, Institutional and Transactional Coverage Charts, Reportable HMDA Data Chart, and more.
This report is chock full of great information on what the CFPB focused on last year, that can be helpful to strategizing fair lending compliance programs this year, and into the future. With the big focus on AI and machine learning, and technology quickly changing, credit unions may want to review the full report to get an idea of what to look out for in the fair lending space.
About the Author
Rebecca Tetreau joined NAFCU as regulatory compliance counsel in February 2021 and was promoted to senior regulatory compliance counsel in August 2022. In this role, Rebecca helps credit unions with a variety of federal regulatory compliance issues.