The Consumer Financial Protection Bureau (CFPB) released its 2022 Fair Lending Annual Report to Congress last week, which illustrates how it took aim last year at redlining and appraisal discrimination in pursuit of its enforcement and supervision, guidance and rulemaking, interagency coordination, and outreach and education missions.
The CFPB in 2022 focused heavily on redlining; potential discrimination in the underwriting process; whether lenders are “illegally steering applicants on a prohibited basis;” and the integrity and validation of Home Mortgage Disclosure Act (HMDA) data on a standalone basis and in preparation for subsequent Equal Credit Opportunity Act (ECOA) exams.
The report recaps last year’s enforcement actions related to fair lending, including an action against Trident Mortgage Company for alleged unlawful discrimination on the basis of race, color or national origin.
The CFPB also referred five matters to the U.S. Department of Justice related to discrimination as defined by the Equal Credit Opportunity Act (ECOA). This included four matters related to redlining and one matter related to allegedly discriminatory underwriting.
The report also highlighted the CFPB’s rulemaking activities during 2022.
“During 2022, the CFPB continued to make progress on the small business lending data collection rulemaking required by Congress under Section 1071 of the Dodd-Frank Act and participated in an interagency rulemaking to implement quality control standards for automated valuation models (AVMs),” the report states. “Under HMDA (Regulation C), the CFPB also issued a final rule amending the official commentary regarding the asset-size exemption threshold and a technical amendment regarding the coverage threshold for closed-end mortgage loans.”
The CFPB also issued guidance on subjects that include the use of algorithms in credit decisions; an advisory opinion affirming that ECOA bars lenders from discriminating against applicants after they have received a loan and not just during the application process; and its “Supervisory Highlights” report, which includes a special section devoted to student loan servicing.
In addition, the report outline’s the CFPB’s efforts in stakeholder engagement; requests for information including streamlining the mortgage refinancing process; and various reports and interagency activities undertaken by the Bureau in 2022.
In the report’s section on the future of fair lending, the CFPB states that it will remain “especially” focused on the increasing prevalence of technology in the consumer financial services marketplace.
“The CFPB is keenly focused on the risks that these technologies present to individual consumers, small businesses, communities, and the market as a whole,” the report states. “Big tech platforms, with their vast consumer surveillance and data harvesting infrastructure, have the potential to undermine fairness and competition. Some of these platforms are collecting and monetizing highly sensitive consumer data, including the types of data that are not appropriate to use in the context of a credit decision.”
As a result, the CFPB states it will “remain vigilant” in observing the emerging risks and will encourage “innovation that follows the law, promotes competitive markets, and delivers long-term benefits to consumers and small businesses in the form of sustainable financial products and services.”