As the CFPB continues to ramp up its fair lending investigations and enforcement highlighted by Acting Director David Uejio, a recent GAO report has flagged areas for improvement in the Bureau's fair lending practices and organization structures. The GAO's criticisms stem from the 2018 reorganization of the CFPB's fair lending activities, and the GAO notes that decisions related to the reorganization "(i) restricted the ability of the agency to evaluate its progress in these areas and (ii) reduced the agency's transparency to Congress and the public with respect to its fair lending efforts." In response to the report, the GAO noted that the CFPB agreed to evaluate the impact of its 2018 reorganization.
Last month, the Bureau issued its annual Fair Lending Report to Congress. The report highlights several initiatives undertaken by the Bureau in 2020 to further its mission to "ensure fair, equitable, and nondiscriminatory access to credit for both individuals and communities." The report covers the Bureau's accomplishments in the area of fair lending, including fair lending supervision and enforcement; interagency reporting on the Equal Credit Opportunity Act (ECOA) and the Home Mortgage Disclosure Act (HMDA); and new guidance and rulemaking efforts.
The report announced that under the Bureau's risk-based prioritization approach, the Bureau focused its fair lending supervision efforts in 2020 on mortgage origination, small business lending, and student loan origination. As in previous years, the Bureau prioritized efforts to monitor discrimination in underwriting, origination, and pricing practices.
The report states that the Bureau initiated 13 fair lending-related examinations and targeted reviews and two public enforcement actions. In July of 2020, the Bureau filed suit against an Illinois mortgage company in the Northern District of Illinois, alleging that the company had violated ECOA and Regulation B by illegally redlining (discouraging applicants living in predominantly African American neighborhoods from seeking credit). And in October of 2020, the Bureau settled with a national bank in connection with the Bureau's allegations that the bank had reported inaccurate HMDA data for its mortgage transactions in 2016 and 2017.
The Bureau issued one final rule in April 2020 raising reporting thresholds under Regulation C of the HMDA for collecting, recording, and reporting data about closed-end mortgage loans. The new rule increases the threshold from 25 loans to 100 loans and goes into effect on January 1, 2022.
While the report focused on the Bureau's initiatives and accomplishments in 2020, it also provided some insight into its priorities moving forward, especially given the change in presidential administrations and the ongoing COVID-19 pandemic. Regulated entities should expect the Bureau to take an increased focus on fair lending issues and racial equity in the coming year under the new administration. As Acting Director Uejio explained: "[M]y top priorities for this agency are to take bold and swift action to address issues of pervasive racial injustice and the long-term economic impacts of the COVID-19 pandemic on consumers."