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CFPB to Target Credit Discrimination

May 1, 2012

In its bulletin 2012-04, the Consumer Financial Protection Bureau (CFPB) announced that it will "combat unlawful, discriminatory practices—including those that have an illegal disparate impact on protected borrowers," and examine mortgage lending, student lending, auto lending, and credit card practices for evidence of lending discrimination.

The CFPB said it would continue to adhere to the fair lending principles outlined in Regulation B, which implements the Equal Credit Opportunity Act (ECOA). ECOA bans creditors from discriminating against credit applicants based on their race, color, religion, national origin, sex, marital status, and other select factors.

According to the CFPB, lending policies that seem evenhanded but have a disproportionate negative effect on a group that is protected under ECOA are said to have a "disparate impact," and "are unlawful unless they meet a legitimate business need that can't be met by an alternative that has a less disparate impact."

The Washington State Department of Financial Institutions (DFI), the Oregon Department of Consumer and Business Services (DCBS) and the National Credit Union Administration (NCUA) have all also stated that lending discrimination—particularly around loan modifications—will be a focus area on this year’s exams.

Questions? Contact the Compliance Hotline: 1.800.546.4465, compliance@nwcua.org.

Posted on 05/01/2012