Last week, Acting CFPB Director David Uejio signed off on the agency’s annual fair lending report. The report explains that due to the ongoing effects of the pandemic, many people are facing greater financial hardship than ever before, especially communities of color. The strain on the economy has exposed and exacerbated existing inequalities, which the bureau has noted is currently an area of focus. Specifically, the bureau’s report describes fair lending supervision and enforcement, recent rulemaking efforts, the bureau’s Tech Sprint program, and other items of concern related to developments in fair lending. Let’s focus on a few items that may be of interest to credit union compliance teams.
Fair Lending Supervision. The bureau will continue to use a risk-based prioritization process to determine areas of focus for supervision. These areas are identified by developments and trends in the financial services market, along with input from whistleblowers, advocacy groups, and government agencies. In 2020, the bureau focused on mortgage origination, small business lending, and student loan origination. The CFPB rescheduled many of its planned examinations in order to conduct prioritized assessments to track industry responses to the pandemic and ensure consumers received much needed relief. As a part of these efforts, the CFPB initiated 13 fair lending examinations, numerous prioritized assessments, and issued several fair lending Matters Requiring Attention to entities required to take corrective action.
Fair Lending Enforcement. In 2020, the bureau reported on two major enforcement actions against financial institutions for fair lending violations. The first action was against Townstone Financial Inc, a nonbank mortgage creditor. The CFPB alleged that Townstone violated the Equal Credit Opportunity Act (ECOA) and Regulation B by refusing to take mortgage applications for properties in minority neighborhoods, and made statements discouraging minority borrowers from applying for mortgage loans. The bureau is seeking injunctive relief, damages, and civil money penalties. The bureau also brought action against Washington Federal, a national bank, for inaccurate HMDA reporting. It was found that significant HMDA errors were caused by a lack of staffing and training, and inadequate quality control. In a settlement agreement, Washington Federal agreed to pay $200,000 in civil money penalties and develop a compliance management program to prevent further violations.
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