Search results for: ECOA

In a significant policy shift under the Trump administration, the new Federal Housing Finance Agency (FHFA) Director Bill Pulte issued an order on March 25, 2025 terminating special purpose credit programs (SPCPs) supported by the government sponsored enterprises, Fannie Mae and Freddie Mac (together, the GSEs). This directive, effective immediately, will significantly impact banks with mortgage-based SPCPs.

Continue Reading FHFA Director Pulte Terminates Mortgage-Related Special Purpose Credit Programs for GSEs

Last week, the Consumer Financial Protection Bureau (CFPB or Bureau) released its latest Supervisory Highlights report, focusing on the use of advanced technologies in credit scoring models. This edition of Supervisory Highlights concerns select examinations of institutions that use credit scoring models, including models built with advanced technology commonly marketed as AI/ML technology, when making credit decisions. The report repeated the CFPB’s previous statements that there is “no ‘advanced technology’ exception” to federal consumer protection laws (which, to our knowledge, no industry participant has suggested to exist) and asserted that financial institutions will need to improve their practices to ensure compliance with the Equal Credit Opportunity Act (ECOA) and Regulation B. This includes actively searching for less discriminatory alternatives, critically evaluating the use of alternative data, and rigorously testing and validating adverse action reasons.

Continue Reading CFPB Highlights Fair Lending Risks in Advanced Credit Scoring Models

On November 13, the Consumer Financial Protection Bureau (CFPB or Bureau) released a pilot study titled “Matched-Pair Testing in Small Business Lending Markets” highlighting what the CFPB believes were two statistically significant disparities in the treatment of Black and white small business owners seeking loans. First, the secret shopping study indicated that Black entrepreneurs were less encouraged by small business lenders to apply for loans. Specifically, such lenders expressed interest in obtaining loan applications from 40% of white participants, but only 23% of Black participants. Second, the study found that Black participants were more frequently steered toward alternative financing products — such as business credit cards or real estate-secured loans — compared to their white counterparts with similar or weaker business credit profiles. Specifically, non-requested or alternative credit products were discussed with 59% of Black participants, compared to 39% of white participants.

Continue Reading CFPB Releases Study on Differential Treatment of Black and White Small Business Owners Seeking Loans

To keep you informed of recent activities, below are several of the most significant federal and state events that have influenced the Consumer Financial Services industry over the past week:

Federal Activities

State Activities

Continue Reading Troutman Pepper Weekly Consumer Financial Services Newsletter – November 12, 2024

In a significant development, the Consumer Financial Protection Bureau (CFPB or Bureau) has finally reached a settlement with Townstone Financial, Inc. (Townstone) in the first redlining case brought against a nonbank mortgage lender and broker. This settlement follows the Seventh Circuit Court of Appeals’ pivotal decision in favor of the CFPB that expanded the Equal Credit Opportunity Act (ECOA) to include protections for prospective applicants who may be discouraged from applying for credit. The settlement marks a resolution of protracted litigation that began in 2020 when the CFPB sued Townstone by accusing the company of redlining practices.

Continue Reading CFPB Reaches Settlement with Townstone Financial, Inc.

To keep you informed of recent activities, below are several of the most significant federal and state events that have influenced the Consumer Financial Services industry over the past week:

Federal Activities

State Activities

Continue Reading Troutman Pepper Weekly Consumer Financial Services Newsletter – September 25, 2024

As discussed here, in a recent letter, the Chairman of the National Credit Union Administration (NCUA) outlined the agency’s supervisory priorities for 2024. In this post, we delve deeper into the area of consumer protection oversight.

Continue Reading A Closer Look at NCUA’s Consumer Financial Protection and Compliance Expectations

Late last month, the Revenue Based Finance Coalition (RBFC), a trade group of sales-based financing providers, filed a complaint in the U.S. District Court for the Southern District of Florida challenging the Consumer Financial Protection Bureau’s (CFPB or Bureau) final rule under § 1071 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Final Rule). As discussed here, § 1071 amended the Equal Credit Opportunity Act (ECOA) to impose significant data collection and reporting requirements on small business creditors. Specifically, RBFC objects to the CFPB’s characterization of sales-based financing as a form of credit subject to the Final Rule’s collection and reporting requirements.

Continue Reading Sales-Based Financing Trade Group Files Suit Challenging CFPB’s Section 1071 Rule

On December 20, the Consumer Financial Protection Bureau (CFPB) and U.S. Department of Justice (DOJ) filed a complaint in a Texas federal court against Colony Ridge Development, LLC (Colony Ridge), its affiliates, and Loan Originator Services, a Texas mortgage company, for allegedly operating an illegal land sales scheme and targeting tens of thousands of Hispanic borrowers with false statements and predatory loans. Specifically, the complaint alleges Colony Ridge sells flood-prone land without water, sewer, or electrical infrastructure, and that the company sets borrowers up with loans they cannot afford. The complaint alleges that defendants engaged in unlawful discrimination by targeting Hispanics in violation of the Equal Credit Opportunity Act (ECOA) and the Fair Housing Act (FHA). In addition, the complaint alleges violation of the Dodd-Frank Act’s prohibition on unfair, deceptive or abusive acts or practices (UDAAP), and a variety of violations of the Interstate Land Sales Full Disclosure Act.

Continue Reading CFPB and DOJ File Lawsuit Against Housing Developer/Lender Over Targeting Hispanic Borrowers with Alleged False Statements and Predatory Loans

On October 24, the Federal Trade Commission (FTC) and the Wisconsin Department of Justice announced a settlement with Wisconsin auto dealer group Rhinelander Auto Center, Inc. (Rhinelander), its current and former owners, and general manager. The lawsuit was brought under the FTC Act, the Equal Credit Opportunity Act (ECOA), the Wisconsin Deceptive Trade Practices Act, and the Wisconsin Consumer Act.

Continue Reading FTC and Wisconsin DOJ Settle with Auto Group over Alleged Illegal Add-Ons and Discrimination Against American Indian Consumers