On May 6, the Consumer Financial Protection Bureau (CFPB or Bureau) released its Fair Lending Report for 2021. As in 2020’s report, published last year, the CFPB shows that its focus remains on what it characterizes as “financial inclusion, racial and economic equity, and fair competition”:

“As part of the prioritization process, the CFPB identifies emerging developments and trends by monitoring key consumer financial markets. If this field and market intelligence identifies fair lending risks in a particular market, that information is used to determine the type and extent of attention required to address those risks.”

The 2021 report makes several prominent mentions of the use of artificial intelligence (AI) and machine learning — a practice that Fair Lending Director Patrice Ficklin says that she is skeptical of, especially as a “cure-all for bias in credit underwriting and pricing.” The report reaffirms that the CFPB will be expanding its evaluation of AI and machine learning models as used by institutions, including in evaluating applicants for credit.

But while the focus on machine learning and AI is not new, there is something very interesting about the report. In it, the CFPB seems to be reframing and expanding the scope of what it considers “fair lending.” It does this by framing its actions against a prison financial services company and a nonbank immigration services provider as fair lending cases, rather than as garden-variety UDAAP (unfair, deceptive, and abusive acts and practices) cases, even though the allegations in both cases did not involve discrimination. We had previously understood that the CFPB would prioritize UDAAP and other nondiscrimination cases when it felt that the injured consumers were members of protected classes, and the inclusion of these cases in the report underscores that point. But if those cases were brought today, would there be allegations of “unfair” discrimination, consistent with the CFPB’s March 2022 updates to its UDAAP exam manual? We will have to wait and see.

Also interesting for their inclusion in the report are the October 2021 orders to large tech companies to provide information to the CFPB on their business practices. Specifically, the orders sought information on data harvesting and monetization, access restriction and user choice, and other consumer protections. It is unclear why these orders are included in the Fair Lending Report; the short narrative that mentions them says nothing about discrimination.

The CFPB’s 2021 Fair Lending Report confirms much of the messaging we have been hearing over the last year, especially the Bureau’s continued suspicion of machine learning and AI technologies. But it leaves unanswered the outstanding questions about the Bureau’s intentions with respect to the “discrimination as UDAAP” announcement made in March this year. We’ll continue to watch and report on those developments here.

Print:
Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Chris Willis Chris Willis

Chris is the co-leader of the Consumer Financial Services Regulatory practice at the firm. He advises financial services institutions facing state and federal government investigations and examinations, counseling them on compliance issues including UDAP/UDAAP, credit reporting, debt collection, and fair lending, and defending…

Chris is the co-leader of the Consumer Financial Services Regulatory practice at the firm. He advises financial services institutions facing state and federal government investigations and examinations, counseling them on compliance issues including UDAP/UDAAP, credit reporting, debt collection, and fair lending, and defending them in individual and class action lawsuits brought by consumers and enforcement actions brought by government agencies.

Chris also leverages insights from his litigation and enforcement experience to help clients design new products and processes, including machine learning marketing, fraud prevention and underwriting models, product structure, advertising, online application flows, underwriting, and collection and loss mitigation strategies.

Chris brings a highly practical focus to his legal advice, informed by balancing a deep understanding of the business of consumer finance and the practical priorities of federal and state regulatory agencies.

Chris speaks frequently at conferences across the country on consumer financial services law and has been featured in numerous articles in publications such as the Wall Street Journal, the New York Times, the Washington PostAmerican BankerNational Law JournalBNA Bloomberg, and Bank Safety and Soundness Advisor.

Photo of Mark Furletti Mark Furletti

Mark is the co-leader of the Consumer Financial Services Regulatory practice at the firm. He focuses on federal and state consumer and small business lending and payments laws, including those that apply to payment cards, buy-now-pay-later transactions, vehicle-secured loans, lines of credit, unsecured…

Mark is the co-leader of the Consumer Financial Services Regulatory practice at the firm. He focuses on federal and state consumer and small business lending and payments laws, including those that apply to payment cards, buy-now-pay-later transactions, vehicle-secured loans, lines of credit, unsecured loans, and deposit products. He counsels providers of consumer and small business financial services, including banks, on regulatory compliance, and defends them in class action litigation and government supervisory and enforcement matters. He also counsels purchasers of merchant receivables, companies that specialize in online small business lending, and companies that interact with their customers electronically or that set up recurring billing arrangements with their customers.

Mark regularly provides guidance on electronic payments and payment network rules, electronic contracting and mobile commerce, online banking, retail installment sales, preparing for examinations by the Consumer Financial Protection Bureau (CFPB), responding to CFPB supervisory requests (including so-called PARR letters), Article 9 of the Uniform Commercial Code, lease-purchase transactions and consumer protection laws, such as the Telephone Consumer Protection Act (TCPA), Truth in Lending Act (TILA), Fair Credit Reporting Act (FCRA), Equal Credit Opportunity Act (ECOA), Electronic Funds Transfer Act (EFTA), Electronic Signatures in Global and National Commerce Act (E-SIGN), and statutes prohibiting unfair, deceptive, and abusive acts and practices.

He is the co-chair of the American Bar Association’s (ABA’s) National Institute on Consumer Financial Services Basics. He previously served as co-chair of the Electronic Financial Services Subcommittee of the ABA’s Consumer Financial Services Committee.

Previously, Mark worked for the Federal Reserve Bank of Philadelphia for several years, during which he wrote more than 15 articles on consumer credit and payments topics and advised those crafting regulations on consumer credit and consumer payments issues. One article, “The Debate Over the National Bank Act and the Preemption of State Efforts to Regulate Credit Cards,” 77 Temple L. Rev. 425 (2004), was named best student article by the American College of Consumer Financial Services Lawyers. Other published articles include “Credit Card Pricing Developments and Their Disclosure,” 13 J. of Fin. Transformation 5 (2005).

Mark also worked as a business consultant, assisting the nation’s largest retail banks and credit card lenders with customer strategy issues, and as a manager at one of the largest credit card issuers in the United States.

Photo of Stefanie Jackman Stefanie Jackman

Stefanie devotes her practice to assisting financial services institutions facing state and federal government investigations and examinations, counseling them on complex compliance issues, as well as defending them in individual and class action lawsuits. Stefanie represents clients across the financial services industry, including…

Stefanie devotes her practice to assisting financial services institutions facing state and federal government investigations and examinations, counseling them on complex compliance issues, as well as defending them in individual and class action lawsuits. Stefanie represents clients across the financial services industry, including banks and nonbanks, mortgage banking lenders and servicers, debt collectors and buyers, third-party service providers, health care and medical revenue cycle service providers, credit and prepaid card companies, auto lenders, and fintechs. She regularly advises her clients on issues arising under an array of federal and state consumer financial laws, including UDAP/UDAAP statutes, the FDCPA, FCRA, TCPA, EFTA, SCRA, and TILA.

In addition to her litigation and government investigations work, Stefanie focuses a significant portion of her practice on providing compliance-related advice to her clients. She regularly counsels clients on conducting compliance assessments relating to their debt collection, credit reporting and dispute resolution processes, fair lending and underwriting, and vendor oversight, as well as the functionality of their overall compliance management system. Stefanie also brings her litigation and enforcement experience to bear in assisting clients in designing new products and processes, including product structuring, advertising, online application flows, underwriting, and servicing-related strategies.