Federal bureau has offered little protection for consumers
More than 50 years ago, this nation enacted legal guarantees that fair housing would be available to all Americans. Despite this federal assurance, however, a disturbing and ongoing stream of reports and lawsuits remind us that we are still on an aspirational journey. Aggressive enforcement of fair housing and other anti-discriminatory laws are supposed to bring punishments for violators, and restitution for those harmed.
But as with so many justice issues — either financial or criminal — what really happens in life seems a world away from the African American experience.
Since its inception, the Consumer Financial Protection Bureau’s mandate was to protect consumers from discriminatory lending as well as to ensure fair access to credit. In addition to violations of the Fair Housing Act, CFPB also has the authority to refer potential violations of the Equal Credit Opportunity Act (ECOA) to the Justice Department.
Despite these and other enforcement options, CFPB’s most recent fair lending report to Congress acknowledged a full year without any fair lending enforcement actions.
“In 2018, the Bureau did not refer any ECOA violations to the Justice Department … In 2018, the Bureau opened and continued a number of fair-lending-related investigations, however, it did not bring fair lending-related enforcement actions,” reads CFPB’s June 2019 report.
While CFPB turned away from fair lending, several 2018 lawsuits were filed, mostly by private and nonprofit advocates. Their collective actions realized large settlements, fair lending reports and continued documentation of illegal breaches.
For example, nearly a year ago, New York’s Suffolk County Federal Credit Union signed a $1 billion settlement rather than go to trial on discriminatory charges. The settlement resolved a case filed two years earlier, in 2016, that alleged black and Latino consumers were denied mortgage approvals at a higher rate than that of the credit union’s white customers.
Later that same year, in a regulatory examination of Citigroup, the Office of the Comptroller of the Currency (OCC) found that consumers of color were not receiving the same mortgage rate discounts reserved for its large-deposit customers. That case was referred to the Justice Department.
Another 2018 discriminatory case involved lawsuits with several major banks on behalf of consumers in two Maryland counties, Montgomery and Prince George. The case alleged that as early as the mid-2000s, consumers of color were steered into higher-cost, non-prime mortgages — a violation of the Fair Housing Act.
Some might contend that this sample summary might not be fair to CFPB and its mission.
To such questioning minds, I would add that this past June, a coalition of 158 state and national advocates filed written comments against another recent deregulatory move planned by the CFPB. This deregulation would exempt hundreds of lenders from providing vital data that tracks the market and consumer access to credit.
Every year, the Home Mortgage Disclosure Act (HMDA) report makes public details of the past year’s mortgage market. It is the only national report that includes the race and ethnicity of mortgage applicants and types of loan approvals as well as denials.
If the CFPB goes forward with exempting so many lenders, the highly anticipated report would lose valuable clarity and irrefutable data.
Among the 158 organizations signing these comments were the NAACP, The Leadership Conference for Civil and Human Rights, the National Fair Housing Alliance and the Center for Responsible Lending.
“A large loss of HMDA reporting will create a distorted view of lending trends in these underserved areas and will make it more difficult for stakeholders to determine if revitalization efforts are succeeding,” wrote the housing advocates. “The overall impact of raising the threshold will be to frustrate HMDA’s purposes of determining whether credit needs are being met and whether public investment has succeeded in rejuvenating the housing and lending markets in struggling neighborhoods.”
The coalition comments also include a litany of CFPB actions that have occurred since 2017, all with anti-consumer effects:
- Failed to issue any violations of the Equal Credit Opportunity Act
- Declared its intent to ignore the Disparate Impact standard, a longstanding legal test that holds that the effects of discrimination, not the intent, are legal violations
- Publicly praised the repeal of anti-discrimination auto lending guidance
- Sided with payday lenders in their challenge of the Bureau’s payday rule promulgated under the previous director
- Stripped the Bureau’s fair lending office of its supervisory and enforcement powers
- Relegated the development of regulation on fair lending for minority and women-owned businesses to a low-level concern
In many ways, the Consumer Financial Protection Bureau has failed to live up to its name and reneged on its mission.
“This lack of enforcement demonstrates our journey towards fair lending still has miles to travel,” said Melissa Stegman, a CRL Senior Policy Counsel. “CFPB was created to protect consumers without exception.”
Charlene Crowell is the deputy communications director with the Center for Responsible Lending.