Andrew Bigart, Michael Bresnick, Len Gordon, Alex Megaris, and Jonathan Pompan were featured in the March/April issue of Reverse Mortgage Magazine, discussing trends in federal and state loan regulations. According to the article, the Consumer Financial Protection Bureau (CFPB) has been coordinating with other federal agencies, such as the Federal Trade Commission (FTC) and the Department of Justice (DOJ), as well as state attorneys general, to ensure broad enforcement of the various laws, especially fair lending.
“I think a common theme in enforcement and regulatory agency announcements is coordination,” says Bresnick, adding that anti-redlining initiatives are an example. The various agencies will continue working under one large task force, rather than each agency having its own investigation, he says. Those efforts signal where the agencies are putting their priorities. Gordon says that the level of cooperation between the FTC and CFPB has been unprecedented, and that the cross-pollination is particularly targeting big tech companies.
The Biden administration believes that enforcement of fair lending rules and redlining concerns have not been adequately addressed in the past four years, says Pompan. A broad mandate exists across enforcement agencies to learn about internet-based discriminatory practices, particularly marketing platforms that use artificial intelligence (AI). Pompan explains that companies might have purchased a product that was developed with a proprietary algorithm that might be predictive of the credit model or the participant they want to target, but the fair lending implications haven’t been thought through. “The bureau is viewing that very skeptically,” Pompan says. “And we expect that those models will receive a whole lot more attention.”
“The problem is that the developers don’t understand in some cases that the inputs they are using can be proxies for protective-class status and the outcomes can become skewed,” says Bigart. Lenders using the tools must analyze their loan data to ensure there is no disparate impact on protected classes, he adds.
When a company does face an enforcement action, it is critical to quickly assess exactly what is being alleged and not be reactive, says Megaris. The instinct might be to push back or to quickly meet the critical deadlines of a CFPB Criminal Investigation Demand, she says. But it is more important to clearly understand the end goal that would consider a “spectrum of outcomes,” she adds. Those internal discussions should include what a company wants and what they could accept, as well as everything in between.
Click here to access the article.