HUD v. Facebook
Written by David Park, NAFCU, Regulatory Compliance Counsel
Last week I watched a webinar (additional cost) that is available on the NAFCU Online Training Center titled Red Flags for Fair Lending. The webinar was presented live in March of this year on the same day that the United States Department of Housing and Urban Development (HUD) charged Facebook with violating the Fair Housing Act. Despite the brief warning, the presenters did a great job of explaining what was at issue in the charge against Facebook and what that might mean for credit unions and other financial institutions attempting to comply with the Fair Housing Act's requirements. The Fair Housing Act prohibits discriminating against any person with respect to the terms and conditions of the sale or rental of a dwelling or in providing any services in conjunction with a sale or rental on the basis of race, color, religion, sex, familial status, national origin, or disability. When a dwelling is involved, NCUA's nondiscrimination in lending rule prohibits discrimination against any person in the lending context on similar bases.
Facebook unlawfully discriminates by enabling advertisers to restrict which Facebook users receive housing-related ads based on race, color, religion, sex, familial status, national origin and disability. Facebook mines extensive user data and classifies its users based on protected characteristics. Facebook's ad targeting tools then invite advertisers to express unlawful preferences by suggesting discriminatory options, and Facebook effectuates the delivery of housing-related ads to certain users and not others based on those users' actual or imputed protected traits.
Both the Housing Discrimination Complaint and Charge of Discrimination contained specific allegations about how Facebook's advertising platform worked. As alleged in the Charge of Discrimination, Facebook determined which users would ultimately end up seeing an advertisement based on a two-part process.
Part one of the Facebook advertising process involved advertisers selecting "attributes that the users who will be shown the ad must have and attributes that users who will be shown the ad must not have." This first part of the process also enabled advertisers to include or exclude specific individuals identified by the advertisers as well as users who might share commonalities with the specifically identified individuals. With respect to the latter group - those Facebook users who might share commonalities with the specifically identified individuals - that group would be identified by Facebook by considering "sex and close proxies for the other protected classes."
In the second part of the process, Facebook determined which of its users would actually see an advertisement based "in large part on the inferences and predictions it draws about each user's likelihood to respond to an ad based on the data it has about that user, the data it has about other users whom it considers to resemble that user, and the data it has about 'friends' and other associates of that user."
The risk to credit unions pointed out by the NAFCU webinar presenters is that the ability to target members and other customers based on their address, age, gender, or other interests may raise the risk of excluding members or potential members that are part of a protected class. Thus, the challenge is to develop a holistic marketing plan in light of the risk of exclusion.
The March 2019 webinar also covered more issues related to inclusion and exclusion, pricing practices, underwriting practices, and fair lending programs. If you are looking for more guidance about fair lending issues, NAFCU is also running a Fair Lending 101 webinar (additional cost) on June 4th.
Programming Note. NAFCU's offices will close at noon on Friday, May 24th in observance of Memorial Day. We will resume business as usual on Tuesday May 28th.