Consumer Financial Protection Bureau to pursue discriminatory lenders
The Consumer Financial Protection Bureau (CFPB) announced that it will use all available legal avenues, including disparate impact, to pursue lenders whose practices discriminate against consumers.
The Bureau stated in a press release that it is reaffirming its commitment to enforcing the ECOA, by recognizing the disparate impact doctrine. Disparate impact occurs when a lender’s practices or policies are facially neutral but have discriminatory effects. The bureau said institutions whose lending policies have a “disparate impact”, meaning they put certain groups of borrowers at a disadvantage even if that was not the clear intention, should be on notice in addition to those that outwardly discriminate.
In 1994, the Department of Justice and several other federal agencies issued the Interagency Policy Statement on Discrimination in Lending. The agencies agreed that when lenders’ policies or practices are shown to have a disparate impact on segments of the population, the lenders may be in violation of fair lending laws.
The law applies to all institutions under the Bureau’s jurisdiction and applies to credit products including mortgages, credit cards, student loans, and auto loans.
To read the press release click here.
To read the Bulletin Announcement, click here.