THE CONSUMER FINANCIAL PROTECTION BUREAU: FAIR LENDING AT WORK June 2012 THE CONSUMER FINANCIAL PROTECTION BUREAU: FAIR LENDING AT WORK Tim Lambert Senior Counsel, Office of Fair Lending and Equal Opportunity Consumer Financial Protection Bureau Note: This document was used in support of a live discussion. As such, it does not necessarily express the entirety of that discussion nor the relative emphasis of topics. FAIR LENDING AT WORK

THE DODD–FRANK ACT CREATED THE OFFICE OF FAIR LENDING AND EQUAL OPPORTUNITY “fair, equitable, and nondiscriminatory access to credit for consumers.” DFA § 1002(13). Dodd-Frank defines “Fair Lending” as: Provide oversight and enforcement of fair lending laws enforced by the Bureau Coordinate efforts with Federal agencies and State regulators Work with the industry, fair lending, civil rights, consumer and community advocates to promote fair lending compliance and education Report to Congress on the efforts of CFPB to fulfill its fair lending mandate. DFA § 1013(c). Dodd-Frank mandates the creation of an Office of Fair Lending and Equal Opportunity with the following specified functions: FAIR LENDING AT WORK

CFPB’S KEY FAIR LENDING LAWS The ECOA prohibits creditors from discriminating in any aspect of a credit transaction against any applicant on the basis of race, color, religion, national origin, sex, marital status, age, receipt of income from any public assistance program, or exercising in good faith a right under the Consumer Credit Protection Act. EQUAL CREDIT OPPORTUNITY ACT HMDA requires lenders to report individual mortgage loan data, including data on race, ethnicity, and sex. HOME MORTGAGE DISCLOSURE ACT FAIR LENDING AT WORK

CFPB ADOPTS THE DISPARATE IMPACT DOCTRINE WAYS TO PROVE DISCRIMINATION UNDER ECOA OVERT DISCRIMINATION DISPARATE TREATMENT DISPARATE IMPACT FAIR LE NDING AT WORK

OFFICE OF FAIR LENDING FUNCTIONS HORIZONTALLY WITHIN CFPB Consumer Response Discrimination Complaint Processing Procedures Discrimination Complaint Analysis Consumer Education & Engagement Consumer Education Special Populations Work Research, Markets & Regulations Rulemaking The Markets Teams Research Supervision Fair Lending Scoping Fair Lending Exams Enforcement Fair Lending Investigations Fair Lending Litigation External Affairs Industry Outreach Civil Rights, Consumer, and Community Group Outreach OFFICE OF FAIR LENDING AND EQUAL OPPORTUNITY FAIR LENDING AT WORK

CONSUMER RESPONSE – DISCRIMINATION COMPLAINTS CFPB is receiving complaints regarding these products: Visit www.consumerfinance.gov/complaint/ to submit a complaint Or call 1-855-411-CFPB FAIR LENDING AT WORK

Financial Empowerment CONSUMER EDUCATION AND ENGAGEMENT Financial Education Provide targeted educational content Example: “Credit Discrimination is Illegal” Brochure Financial Empowerment Enhance access to and knowledge of financial products and services among lower-income consumers Engaging consumers and empowering them to take control of their financial lives are top priorities for the CFPB. The Bureau aims to provide consumers with the information they need when they need it, so that they can achieve their own financial goals. OLDER AMERICANS SERVICEMEMBERS STUDENTS FAIR LENDING AT WORK

KNOW BEFORE YOU OWE FAIR LENDING AT WORK

FAIR LENDING RESEARCH RESEARCH TEAM MARKETS TEAMS MORTGAGE & HOME EQUITY MARKETS CARD AND PAYMENTS MARKETS INSTALLMENT & LIQUIDITY LENDING DEPOSITS, COLLECTIONS & CREDIT INFORMATION RESEARCH TEAM Create methodologies and provide analytical support for supervisory exams and enforcement actions Provide research support for studies such as the §1077 Student Lending Report FAIR LENDING AT WORK

FAIR LENDING REGULATIONS Amend ECOA – Reg B Small Business Data Collection Amend HMDA – Reg C Revisions to Reg C Amend TILA – Reg Z abusive or unfair lending practices that promote disparities among consumers of equal credit worthiness but of different race, ethnicity, gender, or age FAIR LENDING AT WORK

NONBANK BANK FAIR LENDING SUPERVISION CONSUMER FINANCE MARKET Banks Payday, mortgage and private student loans “Larger Participants” in nonbank markets Covered persons that pose risks to consumers Banks Thrifts Credit Unions BANK CONSUMER FINANCE MARKET FAIR LENDING AT WORK SENSITIVE AND PRE-DECISIONAL FOR INTERNAL USE ONLY

Risk FAIR LENDING RISK FACTORS Incentives Reliance on Third Parties Unusual Criteria Discretion Incentives Reliance on Third Parties Weak Compliance Management System FAIR LENDING AT WORK

KEY AREAS FOR FAIR LENDING EXAMINATIONS Fair Lending Supervision & Enforcement Mortgage Origination Mortgage Servicing Auto Loans Student Loans Credit Cards Small Business Loans FAIR LENDING AT WORK

FAIR LENDING ENFORCEMENT Independent litigation authority and referral obligation under ECOA Coordination with the other federal enforcement agencies and state regulators DOJ, FTC, HUD and State AGs Civil Investigative Demands and Administrative Hearing Authority FAIR LENDING AT WORK

PROMOTING FAIR LENDING COMPLIANCE AND EDUCATION AMONG: FAIR LENDING OUTREACH PROMOTING FAIR LENDING COMPLIANCE AND EDUCATION AMONG: PRIVATE INDUSTRY CONSUMER ADVOCATES COMMUNITY ADVOCATES CIVIL RIGHTS GROUPS FAIR LENDING GROUPS FAIR LENDING AT WORK

CFPB AND THE OFFICE OF FAIR LENDING Tell your Story Submit a complaint Ask CFPB Notice and Comment Blog WORKING FOR YOU WORKING WITH YOU www.consumerfinance.gov WE WANT TO HEAR FROM YOU! FAIR LENDING AT WORK