In its fifth annual fair lending report, the Consumer Financial Protection Bureau highlighted redlining, mortgage and student loan servicing, and small business lending as areas of focus for 2017. CFPB Director Richard Cordray specifically noted these areas for enhanced enforcement actions, describing them as “significant or emerging fair lending risk to consumers.”
“In 2017 we will increase our focus in the areas of redlining and mortgage and student loan servicing to ensure that creditworthy consumers have access to mortgage loans and to the full array of appropriate options when they have trouble paying their mortgages or student loans, regardless of their race or ethnicity,” wrote Patrice Alexander Ficklin, Director of the Office of Fair Lending and Equal Opportunity. “In addition, we will focus more fully on pursuing our statutory mandate to promote fair credit access for minority- and women-owned businesses.”
According to the Bureau, agency priorities are determined through a risk-based model, incorporating the quality of an institution’s compliance management system, market intelligence, consumer complaints, tips from advocacy groups and government agencies, supervisory and enforcement history, and results from Home and Mortgage Disclosure Act analysis. After reevaluating these indices of consumer risk, the CFPB has outlined specific points to address in the coming year:
- Redlining. The Bureau will continue to evaluate whether lenders have intentionally discouraged prospective applicants in minority neighborhoods from applying for credit.
- Mortgage and Student Loan Servicing. The CFPB indicates that it will evaluate whether certain borrowers who are behind on loan payments have greater difficulty reaching a resolution with servicers due to their race, ethnicity, gender, or age.
- Small Business Lending. With a Congressional mandate to ensure fair access to credit for women- and minority-owned businesses, the Bureau will take action in the area of small business lending. The CFPB maintains that action in this area will also enhance the Bureau’s institutional knowledge of credit processes and existing data collection processes, as well as the nature, extent, and management of fair lending risks.
As we have reported, state regulators are also active in these areas. Over the last 15 years, state attorneys general have grown adept at collectively utilizing their resources to bring major multistate investigations. We anticipate increased state enforcement actions aimed at industries such as debt buying and collecting, auto finance, service-member lending, payment processing, credit reporting, cybersecurity, information governance, and privacy.