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The Consumer Financial Protection Bureau plans to expand anti-discrimination efforts beyond fair lending laws and look at other lending practices that could be considered abusive or deceptive.
The CFPB said in a statement last week that it would update its supervisory operations to include situations where fair lending laws might not apply, citing its efforts to better protect families and communities from illegal discrimination.
When examining whether banks and other companies are complying with consumer protection rules, the CFPB said it would also scrutinize discriminatory conduct that violates the federal prohibition against unfair practices, including decision-making in advertising, pricing and other areas. The CFPB said it wanted to ensure that companies test for and eliminate illegal discrimination.
“When a person is denied access to a bank account because of their religion or race, this is unambiguously unfair,” CFPB Director Rohit Chopra said in a statement. “We will be expanding our anti-discrimination efforts to combat discriminatory practices across the board in consumer finance.”
The CFPB said it enforces several laws targeting discriminatory practices, most often looking at fair lending covered by the Equal Credit Opportunity Act. Other discriminatory practices could trigger liability under the Consumer Financial Protection Act, the CFPB said, which prohibits unfair, deceptive and abusive acts and practices.
In an updated exam manual published last week, the CFPB said discrimination could meet the criteria for unfairness “by causing substantial harm to consumers that they cannot reasonably avoid, where that harm is not outweighed by countervailing benefits to consumers or competition.”
“Consumers can be harmed by discrimination regardless of whether it is intentional,” the CFPB said. “Discrimination can be unfair in cases where the conduct may also be covered by ECOA, as well as in instances where ECOA does not apply. For example, denying access to a checking account because the individual is of a particular race could be an unfair practice even in those instances where ECOA may not apply.”
The updated examination practices will apply to all consumer finance markets, including credit, servicing, collections, consumer reporting, payments, remittances and deposits.
Under the new guidelines, companies will need to show their processes for assessing risks and discriminatory outcomes, including documenting customer demographics and collecting information on how products and fees affect different demographic groups. The CFPB said it would also examine how companies test and monitor their decision-making processes for unfair discrimination.
