[Federal Register Volume 84, Number 27 (Friday, February 8, 2019)]
[Notices]
[Pages 2824-2833]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-01568]


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BUREAU OF CONSUMER FINANCIAL PROTECTION


Fair Lending Report of the Bureau of Consumer Financial 
Protection, December 2018

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Fair Lending Report of the Bureau of Consumer Financial 
Protection.

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SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is 
issuing its sixth Fair Lending Report of the Bureau of Consumer 
Financial Protection (Fair Lending Report) to Congress. The Bureau is 
committed to ensuring fair access to credit and eliminating 
discriminatory lending practices. This report describes the Bureau's 
fair lending activities in prioritization, supervision, enforcement, 
rulemaking, interagency coordination, and outreach for calendar year 
2017.

DATES: The Bureau released the December 2018 Fair Lending Report on its 
website on December 4, 2018.

FOR FURTHER INFORMATION CONTACT: Anita Visser, Senior Policy Advisor to 
the Director of Fair Lending, Office of Fair Lending and Equal 
Opportunity, at 1-855-411-2372. If you require this document in an 
alternative electronic format, please contact 
[email protected].

SUPPLEMENTARY INFORMATION: 

1. Fair Lending Report of the Bureau of Consumer Financial Protection, 
December 2018

Message from Mick Mulvaney, Acting Director

    This Fair Lending Report of the Bureau of Consumer Financial 
Protection describes the Bureau's fair lending activities for 2017, 
consistent with its statutory mandate to ensure that consumers are 
protected from discrimination (12 U.S.C. 5511(b)(2)). These efforts 
included:
     Providing oversight and enforcement of Federal laws 
intended to ensure the fair, equitable, and nondiscriminatory access to 
credit for both individuals and communities that are enforced by the 
Bureau, including the Equal Credit Opportunity Act (ECOA) \1\ and the 
Home Mortgage Disclosure Act (HMDA); \2\
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    \1\ 15 U.S.C. 1691 et seq.
    \2\ 12 U.S.C. 2801 et seq.
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     Coordinating fair lending efforts of the Bureau with other 
Federal agencies and State regulators, as appropriate, to promote 
consistent, efficient, and effective enforcement of Federal fair 
lending laws; and
     Working with private industry, fair lending, civil rights, 
consumer and community advocates on the promotion of fair lending 
compliance and education.
    This report fulfills the Bureau's statutory responsibility to, 
among other things, report annually to Congress on public enforcement 
actions taken by other agencies with administrative enforcement 
responsibilities under ECOA, and assessments of the extent to which 
compliance with ECOA has been achieved (15 U.S.C. 1691f). It also 
fulfills the statutory requirement that the Bureau, in consultation 
with HUD, report annually on the utility of HMDA's requirement that 
covered lenders itemize certain mortgage loan data (12 U.S.C. 2807).

Sincerely,

Mick Mulvaney,
Message from Patrice Alexander Ficklin
Director, Office of Fair Lending and Equal Opportunity.

    In 2017, the Office of Fair Lending and Equal Opportunity completed 
its sixth full year of stewardship over the Bureau's efforts to fulfill 
its fair lending mandate. 2017 was distinguished as a year in which the 
Office continued to focus on promoting fair, equitable and 
nondiscriminatory access to credit in mortgage lending, deepened its 
supervisory work in servicing and small business lending, and embarked 
on new efforts to encourage innovation in expanding credit access.
    Mortgage lending remained a priority for the Bureau's fair lending 
supervisory and enforcement activity, focusing on redlining, 
underwriting, pricing, steering, servicing and HMDA data integrity. The 
Bureau announced a significant HMDA enforcement action in 2017, 
reinforcing the importance of the legal requirement that covered 
mortgage lenders must report accurate data about mortgage transactions. 
HMDA data is a critical component of the effective enforcement of fair 
lending laws.
    Beyond mortgages, we know that other lending markets play a vital 
role in allowing consumers to fully participate as stakeholders in our 
economy, strengthening our communities, and expanding opportunities to 
build wealth for businesses and consumers alike. In 2017, the Bureau 
announced an enforcement action addressing discrimination in the terms 
and conditions of credit cards, and conducted significant fair lending 
supervisory activity in student loan servicing and small business 
lending.
    The Office continued to partner with colleagues across the Bureau 
in outreach to support innovation that promotes ``fair, equitable, and 
nondiscriminatory access to credit for both individuals and 
communities,'' culminating in the Bureau's issuance of its first no-
action letter (NAL) to Upstart Network, Inc., a company that uses 
alternative data in making credit and pricing decisions. I led the 
Bureau's engagement with Upstart, in furtherance of our interest in 
exploring methods of achieving fair lending compliance in conjunction 
with the use of alternative data and the potential benefits of such 
data in expanding credit access.
    As 2017 drew to a close, the Office welcomed Acting Director Mick 
Mulvaney, and began work to implement his commitment to enforce the 
fair lending laws under the Bureau's jurisdiction.
    I am proud of the Office's work not only in 2017, but also 
throughout its history in fulfilling its Dodd-Frank mandate to protect 
America's consumers from lending discrimination and promote credit 
access. To that end, I am excited to share our progress with this, our 
sixth, Fair Lending Report.\3\
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    \3\ See Dodd-Frank Act section 1013(c)(2)(D) (codified at 12 
U.S.C. 5493(c)(2)(D)).

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Sincerely,

Patrice Alexander Ficklin

Executive Summary

    The Dodd-Frank Wall Street Reform and Consumer Protection Act 
(Dodd-Frank or Dodd-Frank Act) \4\ established the Office of Fair 
Lending and Equal Opportunity (the Office of Fair Lending) within the 
Bureau, and vested it with such powers and duties as the Bureau's 
Director may delegate to it, including:
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    \4\ Public Law 111-203, 124 Stat. 1376 (2010).
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    (A) Providing oversight and enforcement of Federal laws intended to 
ensure the fair, equitable, and nondiscriminatory access to credit for 
both individuals and communities that are enforced by the Bureau, 
including the Equal Credit Opportunity Act and the Home Mortgage 
Disclosure Act;
    (B) Coordinating fair lending efforts of the Bureau with other 
Federal agencies and State regulators, as appropriate, to promote 
consistent, efficient, and

[[Page 2825]]

effective enforcement of Federal fair lending laws;
    (C) Working with private industry, fair lending, civil rights, 
consumer and community advocates on the promotion of fair lending 
compliance and education; and
    (D) Providing annual reports to Congress on the efforts of the 
Bureau to fulfill its fair lending mandate.\5\
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    \5\ Dodd-Frank Act section 1013(c)(2)(A), (B) and (C) (codified 
at 12 U.S.C. 5493(c)(2)(A), (B), and (C)).
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    The law also requires the Bureau to file an annual report to 
Congress describing the administration of its functions under the Equal 
Credit Opportunity Act (ECOA), summarizing public enforcement actions 
taken by other agencies with administrative enforcement 
responsibilities under ECOA, and providing an assessment of the extent 
to which compliance with ECOA has been achieved.\6\ In addition, the 
law requires the Bureau, in consultation with U.S. Department of 
Housing and Urban Development (HUD), to report annually on the utility 
of the Home Mortgage Disclosure Act's (HMDA) requirement that covered 
lenders itemize certain mortgage loan data.\7\ This report to Congress 
from the Office of Fair Lending is intended to fulfill those 
requirements and report on the Bureau's efforts to fulfill its fair 
lending mandate during calendar year 2017.\8\
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    \6\ 15 U.S.C. 1691f.
    \7\ 12 U.S.C. 2807.
    \8\ See Dodd-Frank Act section 1013(c)(2)(D), Public Law 111-
203, 124 Stat. 1376 (2010) (codified at 12 U.S.C. 5493(c)(2)(D)).
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1. Interagency Reporting on ECOA and HMDA

    The law requires the Bureau to file a report to Congress annually 
describing the administration of its functions under ECOA, summarizing 
public enforcement actions taken by other agencies with administrative 
enforcement responsibilities under ECOA, and providing an assessment of 
the extent to which compliance with ECOA has been achieved.\9\ In 
addition, the Bureau's annual HMDA reporting requirement calls for the 
Bureau, in consultation with HUD, to report annually on the utility of 
HMDA's requirement that covered lenders itemize certain mortgage loan 
data.\10\
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    \9\ 15 U.S.C. 1691f.
    \10\ 12 U.S.C. 2807.
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1.1 ECOA Enforcement

    The enforcement efforts and compliance assessments made by all the 
agencies assigned enforcement authority under section 704 of ECOA are 
discussed in this section.
1.1.1 Public Enforcement Actions
    In addition to the Bureau, the agencies charged with administrative 
enforcement of ECOA under section 704 include: The Federal Deposit 
Insurance Corporation (FDIC), the Federal Reserve Board (FRB), the 
National Credit Union Administration (NCUA), and the Office of the 
Comptroller of the Currency (OCC), (collectively, the Federal Financial 
Institutions Examination Council (FFIEC) agencies); \11\ Agricultural 
Marketing Service (AMS) of the U.S. Department of Agriculture 
(USDA),\12\ the Department of Transportation (DOT), the Farm Credit 
Administration (FCA), the Federal Trade Commission (FTC), the 
Securities and Exchange Commission (SEC), and the Small Business 
Administration (SBA).\13\
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    \11\ The FFIEC is a ``formal interagency body empowered to 
prescribe uniform principles, standards, and report forms for the 
Federal examination of financial institutions'' by the member 
agencies listed above and the State Liaison Committee ``and to make 
recommendations to promote uniformity in the supervision of 
financial institutions.'' Federal Financial Institutions Examination 
Council, http://www.ffiec.gov (last visited April 5, 2018). The 
FFIEC member agencies are the Board of Governors of the Federal 
Reserve System (FRB), the Federal Deposit Insurance Corporation 
(FDIC), the National Credit Union Administration (NCUA), the Office 
of the Comptroller of the Currency (OCC), and the Bureau of Consumer 
Financial Protection (Bureau). The State Liaison Committee was added 
to FFIEC in 2006 as a voting member.
    \12\ The Grain Inspection, Packers and Stockyards Administration 
(GIPSA) was eliminated as a stand-alone agency within USDA in 2017. 
The functions previously performed by GIPSA have been incorporated 
into the Agricultural Marketing Service (AMS), and ECOA reporting 
now comes from the Packers and Stockyards Division, Fair Trade 
Practices Program, AMS.
    \13\ 15 U.S.C. 1691c.
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    In 2017, the Bureau brought one public enforcement action for 
violations of ECOA, and the other agencies reported that they brought 
no public enforcement actions related to ECOA in 2017.
1.1.2 Violations Cited During ECOA Examinations
    Among institutions examined for compliance with ECOA and Regulation 
B, the FFIEC agencies reported that the most frequently-cited 
violations were:

     Table 1--Regulation B Violations Cited by FFIEC Agencies: 2017
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                                                        Regulation B
             FFIEC Agencies reporting                 violations: 2017
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The Bureau, FDIC, FRB, NCUA, OCC..................  12 CFR 1002.4(a):
                                                     Discrimination on a
                                                     prohibited basis in
                                                     a credit
                                                     transaction.
                                                    12 CFR 1002.5(b):
                                                     Improperly
                                                     inquiring about the
                                                     race, color,
                                                     religion, national
                                                     origin, or sex of
                                                     an applicant or any
                                                     other person in
                                                     connection with a
                                                     credit transaction.
                                                    12 CFR 1002.7(d)(1),
                                                     (d)(6): Improperly
                                                     requiring the
                                                     signature of an
                                                     applicant's spouse
                                                     or other person if
                                                     the applicant
                                                     qualifies under the
                                                     creditor's
                                                     standards of
                                                     creditworthiness
                                                     for the amount and
                                                     terms of the credit
                                                     requested;
                                                     improperly imposing
                                                     requirements upon
                                                     an additional party
                                                     that the creditor
                                                     is prohibited from
                                                     imposing upon an
                                                     applicant.
                                                    12 CFR 1002.9(a)(1),
                                                     (a)(1)(i), (a)(2),
                                                     (b), (b)(2),
                                                     (c)(1)(i): Failure
                                                     to provide notice
                                                     to the applicant 30
                                                     days after
                                                     receiving a
                                                     completed
                                                     application
                                                     concerning the
                                                     creditor's approval
                                                     of, counteroffer or
                                                     adverse action on
                                                     the application;
                                                     failure to provide
                                                     appropriate notice
                                                     to the applicant 30
                                                     days after taking
                                                     adverse action on
                                                     an incomplete
                                                     application;
                                                     failure to provide
                                                     sufficient
                                                     information in an
                                                     adverse action
                                                     notification,
                                                     including the
                                                     specific reasons
                                                     for the action
                                                     taken.
                                                    12 CFR
                                                     1002.12(b)(1):
                                                     Failure to preserve
                                                     records of actions
                                                     taken on an
                                                     application or of
                                                     incompleteness.
                                                    12 CFR
                                                     1002.13(a)(1)(i),
                                                     (b): Failure to
                                                     request information
                                                     on an application
                                                     regarding an
                                                     applicant's
                                                     ethnicity, race,
                                                     sex, marital
                                                     status, and age, or
                                                     note, to the extent
                                                     possible, the
                                                     ethnicity, race,
                                                     and sex of an
                                                     applicant on the
                                                     basis of visual
                                                     observation or
                                                     surname if not
                                                     provided by the
                                                     applicant.
                                                    12 CFR 1002.14(a),
                                                     (a)(2): Failure to
                                                     routinely provide
                                                     an applicant with a
                                                     copy of all
                                                     appraisals and
                                                     other written
                                                     valuations
                                                     developed in
                                                     connection with an
                                                     application for
                                                     credit that is to
                                                     be secured by a
                                                     first lien on a
                                                     dwelling, and/or
                                                     failure to provide
                                                     an applicant with a
                                                     copy of an
                                                     appraisal report
                                                     upon an applicant's
                                                     written request.
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[[Page 2826]]


   Table 2--Regulation B Violations Cited by Other ECOA Agencies: 2017
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                                                        Regulation B
                Other ECOA agencies                   violations: 2017
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FCA...............................................  12 CFR
                                                     1002.9(a)(1)(i):
                                                     Failure to provide
                                                     notice to the
                                                     applicant 30 days
                                                     after receiving a
                                                     completed
                                                     application
                                                     concerning the
                                                     creditor's approval
                                                     of, counteroffer or
                                                     adverse action on
                                                     the application.
                                                    12 CFR 1002.13:
                                                     Failure to request
                                                     and collect
                                                     information for
                                                     monitoring
                                                     purposes.
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    The AMS, the SEC, and the SBA reported that they received no 
complaints based on ECOA or Regulation B in 2017. In 2017, the DOT 
reported that it received a ``small number of consumer inquiries or 
complaints concerning credit matters possibly covered by ECOA,'' which 
it ``processed informally.'' The FTC is an enforcement agency and does 
not conduct compliance examinations.

1.2 Referrals to the Department of Justice

    In 2017, the FFIEC agencies including the Bureau, referred a total 
of 11 ECOA matters involving discrimination in violation of ECOA to the 
Department of Justice (DOJ or Justice Department). The FDIC referred 
four matters to the DOJ involving discrimination in credit transactions 
on the prohibited bases of age, marital status, sex, and national 
origin. The FRB referred three matters to the DOJ involving 
discrimination in credit transactions on the prohibited basis of 
marital status. The NCUA referred two matters to the DOJ involving 
discrimination in credit transactions on the prohibited bases of 
marital status, receipt of public assistance income, and sex. The 
Bureau referred two matters to the DOJ involving discrimination in 
mortgage servicing on the prohibited basis of the receipt of public 
assistance income, and discrimination in credit card account 
management, installment lending, and mortgage servicing on the 
prohibited bases of national origin and race.

1.3 Reporting on the Home Mortgage Disclosure Act

    The Bureau's annual HMDA reporting requirement calls for the 
Bureau, in consultation with HUD, to report annually on the utility of 
HMDA's requirement that covered lenders itemize loan data in order to 
disclose the number and dollar amount of certain mortgage loans and 
applications, grouped according to various characteristics.\14\ The 
Bureau, in consultation with HUD, finds that itemization and tabulation 
of these data further the purposes of HMDA. For more information on 
HMDA and its implementing regulation, Regulation C with regard to 
guidance and rulemaking, please see the Rulemaking section of this 
report (Section 5).\15\
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    \14\ See 12 U.S.C. 2807.
    \15\ For more information on recent developments in HMDA and 
Regulation C, see: https://www.consumerfinance.gov/about-us/newsroom/bureau-consumer-financial-protection-issues-statement-implementation-economic-growth-regulatory-relief-and-consumer-protection-act-amendments-home-mortgage-disclosure-act/.
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2. The Bureau's Fair Lending Prioritization

2.1 Risk-Based Prioritization

    Because Congress charged the Bureau with responsibility for 
overseeing many lenders and products, the Office uses a risk-based 
approach to prioritize supervisory examinations and enforcement 
activity, to help ensure focus on areas that present substantial risk 
of credit discrimination for consumers.
    As part of the prioritization process, the Bureau identifies 
emerging developments and trends by monitoring key consumer financial 
markets. If this market intelligence identifies fair lending risks in a 
particular market that require further attention, that information is 
incorporated into the prioritization process to determine the type and 
extent of attention required to address those risks. For instance, our 
monitoring highlighted potential steering risks in student loan 
servicing, which resulted in the prioritization of this market in our 
supervisory work in 2017.
    The fair lending prioritization process incorporates a number of 
additional factors as well, including: Consumer complaints; tips and 
leads from advocacy groups, whistleblowers, and government agencies; 
supervisory and enforcement history; and results from analysis of HMDA 
and other data.
    Once Fair Lending has evaluated these inputs to prioritize 
institutions, products, and markets based on an assessment of fair 
lending risk posed to consumers, it considers how best to address those 
risks as part of its annual strategic planning process. Potential 
actions include scheduling an institution for a supervisory review, 
opening an enforcement investigation where appropriate, conducting 
further research, policy development, or outreach. Once this strategic 
planning process is complete, we regularly coordinate with other 
regulators so we can inform each other's work, complement each other's 
efforts where appropriate, and reduce burden on subject institutions.
    Risk-based prioritization is an ongoing process, and the Bureau 
continues to receive and evaluate relevant information even after 
priorities are identified. Such information may include new tips and 
leads about specific institutions, consumer complaints, additional 
risks identified in current supervisory and enforcement activities, and 
compliance issues self-identified by institutions. In determining how 
best to address this additional information, Fair Lending considers 
several factors, including (1) the nature and extent of the fair 
lending risk, (2) the degree of consumer harm, and (3) whether the risk 
was self-identified and/or self-reported to the Bureau. It also takes 
account of well-developed fair lending compliance management systems 
\16\ and other responsible conduct as set forth in CFPB Bulletin 2013-
06, Responsible Business Conduct: Self-Policing, Self-Reporting, 
Remediation, and Cooperation.\17\
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    \16\ The Bureau previously has identified common features of a 
well-developed fair lending compliance management system: Consumer 
Financial Protection Bureau, Fair Lending Report of the Consumer 
Financial Protection Bureau at 13-14 (Apr. 2014), http://files.consumerfinance.gov/f/201404_cfpb_report_fair-lending.pdf.
    \17\ Consumer Financial Protection Bureau, Responsible Business 
Conduct: Self-Policing, Self-Reporting, Remediation, and 
Cooperation, CFPB Bulletin 2013-06 (June 25, 2013), http://files.consumerfinance.gov/f/201306_cfpb_bulletin_responsible-conduct.pdf.
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2.2 Fair Lending Priorities

    As a result of its annual risk-based prioritization analyses, in 
2017 the Bureau focused on: \18\
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    \18\ Patrice Ficklin, Fair Lending priorities in the new year, 
Consumer Financial Protection Bureau (Dec. 16, 2016), http://www.consumerfinance.gov/about-us/blog/fair-lending-priorities-new-year/.
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     Redlining: Whether lenders intentionally discouraged 
prospective applicants in minority neighborhoods from applying for 
credit.
     Mortgage and Student Loan Servicing: Whether some 
borrowers who were behind on their mortgage or student loan payments 
may have been negatively impacted in their ability to

[[Page 2827]]

work out a new solution with the servicer because of their race, 
ethnicity, sex, or age.
     Small Business Lending: Whether institutions are complying 
with the Congressional mandate to not discriminate on a prohibited 
basis in small business lending. Focus in this area includes improving 
Bureau understanding of: Small business lending credit processes; 
existing data collection processes; and the nature, extent, and 
management of fair lending risk in small business lending. Congress 
required the Bureau to promulgate a regulation governing small business 
loan data collection in order to ``facilitate enforcement of fair 
lending laws and enable communities, governmental entities, and 
creditors to identify business and community development needs and 
opportunities of women-owned, minority-owned, and small businesses.'' 
\19\ Small business lending supervisory activity has helped expand and 
enhance the Bureau's knowledge in this area, including the credit 
process; existing data collection processes; and the nature, extent, 
and management of fair lending risk.
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    \19\ See Dodd-Frank Act, Public Law 111-203, sec. 1071, 704B(a).
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     The Bureau remains committed to ensuring that consumers 
are protected from discrimination in all credit markets under its legal 
authority.

3. Fair Lending Supervision

    The Bureau's Fair Lending Supervision program assesses compliance 
with ECOA and HMDA at banks and nonbanks over which the Bureau has 
supervisory authority. Supervision activities in 2017 ranged from 
assessments of institutions' fair lending compliance management systems 
to in-depth reviews of products or activities that may pose heightened 
fair lending risks to consumers. As part of its Fair Lending 
Supervision program, the Bureau conducted three types of fair lending 
reviews: ECOA baseline reviews, ECOA targeted reviews, and HMDA data 
integrity reviews.
    As a general matter, if such a review finds that an institution's 
fair lending compliance is inadequate, the Bureau communicates its 
supervisory expectations to the institution to help the institution 
establish fair lending compliance programs commensurate with the size 
and complexity of the institution and its lines of business.\20\ 
Institutions may provide remediation and restitution to consumers in 
response to violations of fair lending laws identified in the review, 
and the Bureau may pursue other appropriate relief. The Bureau also 
refers matters to the Justice Department when it has reason to believe 
that a creditor has engaged in a pattern or practice of lending 
discrimination in violation of ECOA.\21\ The Bureau also may refer 
other potential ECOA violations to the Justice Department.\22\
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    \20\ For recent updates to the types of supervisory 
communications, see https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/bcfp_bulletin-2018-01_changes-to-supervisory-communications.pdf.
    \21\ 15 U.S.C. 1691e(g).
    \22\ Id.
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3.1 Fair Lending Supervisory Observations

    The Bureau published results of certain 2017 supervisory exams in 
Supervisory Highlights. Those findings are also summarized below.
3.1.1 Update to Proxy Methodology
    The Spring 2017 edition of Supervisory Highlights,\23\ published in 
April 2017, discussed updates to the Bayesian Improved Surname 
Geocoding (BISG) proxy methodology for race and ethnicity,\24\ which 
relies in part on publically available information from the Census. In 
December 2016, the U.S. Census Bureau released a list of the most 
frequently-occurring surnames based on the most recent census, which 
includes values for total counts and race and ethnicity shares 
associated with each surname. In total, the list provides information 
on the 162,253 surnames that appear at least 100 times in the most 
recent census, covering approximately 90% of the population.\25\ In 
April 2017, examination teams began relying on an updated proxy 
methodology that reflected the newly available surname data from the 
Census Bureau.\26\
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    \23\ Consumer Financial Protection Bureau, Supervisory 
Highlights Spring 2017 at 14-15 (April 26, 2017), https://www.consumerfinance.gov/documents/4608/201704_cfpb_Supervisory-Highlights_Issue-15.pdf.
    \24\ For more information on the Bureau's use of BISG in 2017 
and previously, see Consumer Financial Protection Bureau, 
Supervisory Highlights Summer 2014 at 10-13 (September 17, 2014), 
http://files.consumerfinance.gov/f/201409_cfpb_supervisory-highlights_auto-lending_summer-2014.pdf.
    \25\ The surname data are available on the Census Bureau's 
website, see Frequently Occurring Surnames from the 2010 Census 
(last revised December 27, 2016), https://www.census.gov/topics/population/genealogy/data/2010_surnames.html.
    \26\ The new surname list; statistical software code, written in 
Stata; and other publicly available data used to build the BISG 
proxy are available at: https://github.com/cfpb/proxy-methodology.
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3.1.2 Mortgage Servicing
    The Summer 2017 edition of Supervisory Highlights \27\ reported on 
the Bureau's fair lending work in mortgage servicing. As part of its 
fair lending work, the Bureau seeks to ensure that creditors do not 
discriminate on any prohibited bases. Mortgage servicing, and 
specifically default servicing, may introduce fair lending risks 
because of the complexity of certain processes, the range of default 
servicing options, and the discretion that can sometimes exist in 
evaluating and selecting among available default servicing options.
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    \27\ Consumer Financial Protection Bureau, Supervisory 
Highlights Summer 2017 at 32-33 (September 12, 2017), https://www.consumerfinance.gov/documents/5386/201709_cfpb_Supervisory-Highlights_Issue-16.pdf.
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    In mortgage servicing, the Bureau's supervisory work has included 
use of the Mortgage Servicing Exam Procedures and the ECOA Baseline 
Modules, both of which are part of the Bureau's publically-available 
Supervision and Examination Manual. Bureau examination teams use these 
procedures to conduct ECOA Baseline Reviews, which evaluate 
institutions' compliance management systems (CMS), or ECOA Targeted 
Reviews, which are more in-depth reviews of activities that may pose 
heightened fair lending risks to consumers. These exam procedures 
contain questions about, among other things, the fair lending training 
of servicing staff, fair lending monitoring of servicing, and servicing 
of consumers with limited English proficiency.
    In one or more ECOA targeted reviews of mortgage servicers, Bureau 
examiners found weaknesses in fair lending CMS. In general, examiners 
found deficiencies in oversight by board and senior management, 
monitoring and corrective action processes, compliance audits, and 
oversight of third-party service providers.
    In one or more examinations, data quality issues, which were 
related to a lack of complete and accurate loan servicing records, made 
certain fair lending analyses difficult or impossible to perform. 
Examiners attributed these data quality issues to significant 
weaknesses in CMS-related policies, procedures, and service provider 
oversight.
    Separately, fair lending analysis at one or more mortgage servicers 
was affected by a lack of readily-accessible information concerning a 
borrower's ethnicity, race, and sex information that had been collected 
pursuant to Regulation C and transferred to the

[[Page 2828]]

servicer. One or more mortgage servicers acknowledged the importance of 
retaining in readily-accessible format--for the express purpose of 
performing future fair lending analyses--ethnicity, race, and sex data 
that it had received in the borrower's origination file.

4. Fair Lending Enforcement

    The Bureau conducts investigations of potential violations of HMDA 
and ECOA, and if it believes a violation has occurred, can file a 
complaint either through its administrative enforcement process or in 
Federal court. Like the other Federal bank regulators, the Bureau 
refers matters to the DOJ when it has reason to believe that a creditor 
has engaged in a pattern or practice of lending discrimination.\28\ 
However, when the Bureau makes a referral to the DOJ, the Bureau can 
still take its own independent action to address a violation. In 2016, 
the Bureau announced two fair lending enforcement actions in mortgage 
origination and indirect auto lending. The Bureau also has a number of 
ongoing fair lending investigations and has authority to settle or sue 
in a number of matters. In addition, the Bureau issued warning letters 
to mortgage lenders and mortgage brokers that may be in violation of 
HMDA requirements to report on housing-related lending activity.
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    \28\ 15 U.S.C. 1691e(g).
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4.1 Fair Lending Public Enforcement Actions

4.1.1 Mortgage
Nationstar Mortgage LLC
    On March 15, 2017, the Bureau resolved an enforcement action 
against Nationstar Mortgage LLC (Nationstar) for violating HMDA by 
submitting mortgage loan data for 2012 through 2014 containing 
substantial errors. HMDA requires many mortgage lenders to collect and 
report data about their mortgage lending to appropriate Federal 
agencies and make it available to the public. The consent order 
requires Nationstar to pay a $1.75 million penalty to the Bureau's 
Civil Penalty Fund. The Nationstar action is the largest HMDA civil 
penalty imposed to date by the Bureau, which stems from Nationstar's 
market size, the substantial magnitude of its errors, and its history 
of previous violations.
    In addition to paying the civil penalty, Nationstar must take the 
necessary steps to improve its compliance management and prevent future 
violations.\29\ Nationstar also must review, correct, and make 
available its corrected HMDA data from 2012-14. Since the Bureau's 
examination, Nationstar has been taking steps to improve its HMDA 
compliance management system and increase the accuracy of its HMDA 
reporting.
---------------------------------------------------------------------------

    \29\ Consent Order, In the Matter of Nationstar Mortgage LLC, 
File No. 2017-CFPB-0011 (Mar. 15, 2017), http://files.consumerfinance.gov/f/documents/201703_cfpb_Nationstar-Mortgage-consent-order.pdf.
---------------------------------------------------------------------------

    Nationstar, a nationwide nonbank mortgage lender headquartered in 
Coppell, Texas (now doing business as Mr. Cooper), is a wholly-owned 
subsidiary of Nationstar Mortgage Holdings Inc. With nearly 3 million 
customers, Nationstar Mortgage Holdings is a major participant in the 
mortgage servicing and origination markets. According to 2014 data, 
Nationstar was the ninth-largest HMDA reporter by total mortgage 
originations, the sixth largest by applications received, and the 
thirteenth largest by money lent. From 2010 to 2014, Nationstar's 
number of HMDA mortgage loans increased by nearly 900 percent.
    In its supervision process, the Bureau found that Nationstar's HMDA 
compliance systems were deficient, and not reasonably adapted to avoid 
the identified errors. Specifically, Nationstar failed to maintain 
detailed HMDA data collection and validation procedures, and failed to 
implement adequate compliance procedures, even after it knew was 
required to improve its HMDA compliance. It also produced HMDA data 
discrepancies by failing to consistently define data among its various 
lines of business. Nationstar has a history of HMDA non-compliance. In 
2011, the Commonwealth of Massachusetts Division of Banks reached a 
settlement with Nationstar to address HMDA compliance deficiencies. The 
samples reviewed by the Bureau showed substantial error rates in three 
consecutive reporting years, even after the Massachusetts settlement 
was reached. In the samples reviewed, the Bureau found error rates of 
13 percent in 2012, 33 percent in 2013, and 21 percent in 2014.
4.1.2 Credit Cards
American Express Centurion Bank and American Express Bank, FSB
    On August 23, 2017, the Bureau took action against American Express 
Centurion Bank and American Express Bank, FSB (collectively referred to 
as American Express), for violating ECOA by discriminating against 
consumers in Puerto Rico, the U.S. Virgin Islands, and other U.S. 
territories by providing them with credit and charge card terms that 
were inferior in many respects to those available in the 50 U.S. 
states. American Express also discriminated against certain consumers 
with Spanish-language preferences by not providing them certain charge 
card collection offers that were provided to similarly-situated 
consumers without Spanish-language preferences. Over the course of at 
least ten years, more than 200,000 of these consumers were harmed by 
American Express's discriminatory practices. American Express has paid 
approximately $95 million in consumer redress during the course of the 
Bureau's review and American Express's review, and the Bureau Order 
requires it to pay at least another $1 million to fully compensate 
harmed consumers.\30\
---------------------------------------------------------------------------

    \30\ Consent Order, In the Matter of American Express Centurion 
Bank and American Express Bank, FSB, File No. 2017-CFPB-0016 (Aug. 
23, 2017), https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/201708_cfpb_american-express_content-order.pdf.
---------------------------------------------------------------------------

    Beginning in 2013, American Express self-reported to the Bureau 
differences between terms associated with its Puerto Rico and U.S. 
Virgin Islands cards (collectively, Puerto Rico cards) and its cards 
offered in the 50 U.S. states (U.S. cards), as well as differences with 
respect to certain consumers with a Spanish-language preference. 
Through the course of a supervisory review, the Bureau concluded that, 
from at least 2005 to 2015, American Express's Puerto Rico cards had 
different, and often worse, pricing, rebates, promotional offers, 
underwriting, customer and account management services, and collections 
practices than its U.S. cards. These differences spanned the product 
lifecycle and included: Charging higher fees and interest rates and 
offering less advantageous pricing on promotional offers; imposing more 
stringent credit score cutoffs and lower credit limits; applying 
certain inferior servicing policies; and requiring more money to settle 
debt. The Bureau's review found that these differences constituted 
discrimination on the prohibited bases of race and national origin in 
violation of ECOA.
    Under the terms of the Bureau Order, American Express must develop 
and implement a comprehensive compliance plan to ensure that it 
provides credit and charge cards in a non-discriminatory manner to 
consumers in Puerto Rico, the U.S. territories, and customers in 
collection who prefer Spanish-language communications. The compliance 
plan must include any

[[Page 2829]]

necessary additional improvements to its compliance management system; 
compliance audit program; credit and charge card business structure, 
policies, and procedures; employee training procedures; and complaints 
procedures.
    During the Bureau's review, American Express provided monetary and 
non-monetary relief to harmed consumers, resulting in approximately $95 
million of remediation. The Bureau did not assess penalties based on a 
number of factors, including that American Express self-reported the 
violations to the Bureau, self-initiated remediation for the harm done 
to affected consumers, and fully cooperated with the Bureau's review 
and investigation.

4.2 Implementing Enforcement Orders

    When an enforcement action is resolved through a public enforcement 
order, the Bureau (together with the Justice Department, when relevant) 
takes steps to ensure that the respondent or defendant complies with 
the requirements of the order. As appropriate to the specific 
requirements of individual public enforcement orders, the Bureau may 
take steps to ensure that borrowers who are eligible for compensation 
receive remuneration and that the defendant has complied with the 
injunctive provisions of the order, including implementing a 
comprehensive fair lending compliance management system. Throughout 
2017, the Bureau worked to implement and oversee compliance with the 
pending public enforcement orders that were entered by Federal courts 
or issued by the Bureau's Director in prior years.
4.2.1 Settlement Administration
Settlement Administration
Toyota Motor Credit Corporation
    On December 29, 2017, participation materials were mailed to 
potentially eligible African-American and Asian and Pacific Islander 
borrowers whom Toyota Motor Credit overcharged for their auto loans 
notifying them how to participate in the settlement, resulting from a 
2016 enforcement action brought by the Bureau and Justice Department 
against Toyota for alleged discrimination in auto lending.\31\
---------------------------------------------------------------------------

    \31\ Consent Order, In re Toyota Motor Credit Corp., CFPB No. 
2016-CFPB-0002 (Feb. 2, 2016), http://files.consumerfinance.gov/f/201602_cfpb_consent-order-toyota-motor-credit-corporation.pdf.
---------------------------------------------------------------------------

Provident Funding Associates
    On November 2, 2017, the Bureau announced the mailing of 
remuneration checks to consumers, totaling $9 million, plus accrued 
interest, to eligible borrowers resulting from a 2015 enforcement 
action brought by the Bureau and Justice Department against Provident 
for alleged discrimination in mortgage lending.\32\
---------------------------------------------------------------------------

    \32\ Patrice Alexander Ficklin, African-American and Hispanic 
borrowers harmed by Provident will receive $9 million in 
compensation, Consumer Financial Protection Bureau (Nov. 2, 2017), 
https://www.consumerfinance.gov/about-us/blog/african-american-and-hispanic-borrowers-harmed-provident-will-receive-9-million-compensation/.
---------------------------------------------------------------------------

American Honda Finance Corporation
    On October 2, 2017, participating African-American, Hispanic, and 
Asian and/or Pacific Islander borrowers, whom Honda Finance overcharged 
for their auto loans, were mailed checks totaling $24 million, plus 
accrued interest, resulting from a 2015 enforcement action brought by 
the Bureau and Justice Department against Honda for alleged 
discrimination in auto lending.\33\
---------------------------------------------------------------------------

    \33\ Consent Order, In re American Honda Finance Corp., CFPB No. 
2015-CFPB-0014 (July 14, 2015), http://files.consumerfinance.gov/f/201507_cfpb_consent-order_honda.pdf.
---------------------------------------------------------------------------

Ally Financial Inc. and Ally Bank
    In 2017, Ally Financial Inc. and Ally Bank completed their payments 
totaling $48.8 million to consumers whom Ally determined were both 
eligible and overcharged on auto loans booked during 2016 pursuant to 
the December 2013 enforcement actions and consent orders with the 
Justice Department and the Bureau.

4.3 ECOA Referrals to the Department of Justice

    The Bureau must refer to the Justice Department a matter when it 
has reason to believe that a creditor has engaged in a pattern or 
practice of lending discrimination in violation of ECOA.\34\ The Bureau 
also may refer other potential ECOA violations to the DOJ.\35\ In 2017, 
the Bureau referred two matters with ECOA violations to the Justice 
Department. In both of the matters, the DOJ deferred to the Bureau's 
handling of the matters and declined to open its own investigation. The 
Bureau's referrals to the DOJ in 2017 involved discrimination in 
mortgage servicing on the basis of the receipt of public assistance 
income, and discrimination in credit card account management, 
installment lending, and mortgage servicing on the bases of national 
origin and race.
---------------------------------------------------------------------------

    \34\ 15 U.S.C. 1691e(g).
    \35\ Id.
---------------------------------------------------------------------------

4.4 Pending Fair Lending Investigations

    In 2017, the Bureau had a number of ongoing fair lending 
investigations of a number of institutions involving a variety of 
consumer financial products. Consistent with the Bureau's risk-based 
priorities, one key area on which the Bureau focused its fair lending 
enforcement efforts was addressing potential discrimination in mortgage 
lending, including the unlawful practice of redlining. Redlining occurs 
when a lender provides unequal access to credit, or unequal terms of 
credit, because of the racial or ethnic composition of a neighborhood. 
At the end of 2017, the Bureau had a number of pending investigations 
in this and other areas.

5. Guidance and Rulemaking

5.1 HMDA and Regulation C

    Consistent with the Bureau's obligation to work with private 
industry to ``promot[e] fair lending . . . compliance,'' in 2017 the 
Bureau published several regulatory and guidance documents related to 
HMDA and Regulation C, as reported below.\36\
---------------------------------------------------------------------------

    \36\ See Dodd-Frank Act section 1013(c)(2)(C), Public Law 111-
203, 124 Stat. 1376 (2010) (codified at 12 U.S.C. 5493(c)(2)(C)).
---------------------------------------------------------------------------

    On August 22, 2017, the Bureau, together with the other member 
agencies of the FFIEC, announced new FFIEC HMDA Examiner Transaction 
Testing Guidelines (Guidelines) for all financial institutions that 
report HMDA data.\37\ The Guidelines will apply to the examination of 
HMDA data collected beginning in 2018, and reported beginning in 2019.
---------------------------------------------------------------------------

    \37\ FFIEC HMDA Examiner Transaction Testing Guidelines, https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/201708_cfpb_ffiec-hmda-examiner-transaction-testing-guidelines.pdf.
---------------------------------------------------------------------------

    The Bureau issued a proposed rule in April 2017 \38\ seeking 
comment on amendments to certain provisions of the 2015 HMDA Final Rule 
to make technical corrections and to clarify certain requirements under 
Regulation C, and issued a second proposal in July 2017 \39\ to 
increase temporarily the institutional and transactional coverage 
thresholds for open-end lines of credit. On August 24, 2017, after 
reviewing the

[[Page 2830]]

comments received, the Bureau issued a final rule amending Regulation 
C.\40\
---------------------------------------------------------------------------

    \38\ Technical Corrections and Clarifying Amendments to the Home 
Mortgage Disclosure (Regulation C) October 2015 Final Rule, https://www.consumerfinance.gov/policy-compliance/rulemaking/rules-under-development/technical-corrections-and-clarifying-amendments-home-mortgage-disclosure-october-2015-final-rule/.
    \39\ Home Mortgage Disclosure (Regulation C), Temporary Increase 
in Institutional and Transactional Coverage Thresholds for Open-End 
Lines of Credit, https://www.consumerfinance.gov/policy-compliance/rulemaking/rules-under-development/home-mortgage-disclosure-regulation-c-temporary-increase-institutional-and-transactional-coverage-thresholds-open-end-lines-credit/.
    \40\ Consumer Financial Protection Bureau, Home Mortgage 
Disclosure (Regulation C) Final Rule, https://www.consumerfinance.gov/policy-compliance/rulemaking/final-rules/regulation-c-home-mortgage-disclosure-act/.
---------------------------------------------------------------------------

    On September 20, 2017, the Bureau issued proposed policy guidance 
regarding the data the Bureau may make available to the public 
beginning in 2019 from the HMDA data collected by financial 
institutions in or after 2018. The proposal described the modifications 
that the Bureau intends to apply to the loan-level HMDA data to protect 
applicant and borrower privacy, and it sought comment on those 
proposals.\41\
---------------------------------------------------------------------------

    \41\ Disclosure of Loan-Level HMDA Data, http://files.consumerfinance.gov/f/documents/201709_cfpb_hmda-disclosure-policy-guidance.pdf.
---------------------------------------------------------------------------

    In December 2017, the FFIEC agencies issued public statements on 
HMDA implementation announcing that the Bureau does not intend to 
require data resubmission unless data errors are material or assess 
penalties with respect to errors in data collected in 2018 and reported 
in 2019 under HMDA. The Bureau's statement also announced that the 
Bureau intends to engage in a rulemaking to reconsider various aspects 
of the 2015 HMDA Rule such as the institutional and transactional 
coverage tests and the rule's discretionary data points.\42\
---------------------------------------------------------------------------

    \42\ Consumer Financial Protection Bureau, CFPB Issues Public 
Statement On Home Mortgage Disclosure Act Compliance, (December 21, 
2017), https://www.consumerfinance.gov/about-us/newsroom/cfpb-issues-public-statement-home-mortgage-disclosure-act-compliance/.
---------------------------------------------------------------------------

5.1.1 HMDA Announcement
    On December 21, 2017, the Bureau issued the following public 
statement regarding HMDA implementation:
    Recognizing the impending January 1, 2018 effective date of the 
Bureau's amendments to Regulation C and the significant systems and 
operational challenges needed to adjust to the revised regulation, for 
HMDA data collected in 2018 and reported in 2019 the Bureau does not 
intend to require data resubmission unless data errors are material. 
Furthermore, the Bureau does not intend to assess penalties with 
respect to errors in data collected in 2018 and reported in 2019. 
Collection and submission of the 2018 HMDA data will provide financial 
institutions an opportunity to identify any gaps in their 
implementation of amended Regulation C and make improvements in their 
HMDA compliance management systems for future years. Any examinations 
of 2018 HMDA data will be diagnostic to help institutions identify 
compliance weaknesses and will credit good faith compliance efforts. 
The Bureau intends to engage in a rulemaking to reconsider various 
aspects of the 2015 HMDA Rule such as the institutional and 
transactional coverage tests and the rule's discretionary data points.
    For data collected in 2017, financial institutions will submit 
their reports in 2018 in accordance with the current Regulation C using 
the Bureau's HMDA Platform.\43\
---------------------------------------------------------------------------

    \43\ CFPB Issues Public Statement On Home Mortgage Disclosure 
Act Compliance (December 21, 2017), https://www.consumerfinance.gov/about-us/newsroom/cfpb-issues-public-statement-home-mortgage-disclosure-act-compliance/.
---------------------------------------------------------------------------

5.2 ECOA and Regulation B

    On March 24, 2017, the Bureau issued a proposed rule seeking 
comment on amendments to Regulation B providing creditors additional 
flexibility in complying with Regulation B in order to facilitate 
compliance with Regulation C, adding certain model forms and removing 
others from Regulation B, and making various other amendments to 
Regulation B and its commentary to facilitate the collection and 
retention of information about the ethnicity, sex, and race of certain 
mortgage applicants.\44\ After considering the comments received, the 
Bureau issued a final rule on September 20, 2017, amending Regulation 
B.\45\
---------------------------------------------------------------------------

    \44\ Proposed Amendments to Equal Credit Opportunity Act 
(Regulation B) Ethnicity and Race Information Collection, https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/201703_cfpb_NPRM-to-amend-Regulation-B.pdf.
    \45\ Amendments to Equal Credit Opportunity Act (Regulation B) 
Ethnicity and Race Information Collection, https://www.consumerfinance.gov/policy-compliance/rulemaking/final-rules/amendments-equal-credit-opportunity-act-regulation-b-ethnicity-and-race-information-collection/.
---------------------------------------------------------------------------

    On November 20, 2017, the Bureau issued an official approval 
pursuant to section 706(e) of ECOA of the final redesigned Uniform 
Residential Loan Application that included a question asking applicant 
language preference.\46\ Bureau staff determined that the final 
redesigned URLA is in compliance with Regulation B Sec.  1002.5(b) 
through (d), which provide rules regarding requests for 
information.\47\
---------------------------------------------------------------------------

    \46\ Consumer Financial Protection Bureau, Final Redesigned 
Uniform Residential Loan Application Status under Regulation B, 
(Nov. 20, 2017), https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/cfpb_urla-language-preference-question_bureau-official-approval_112017.pdf.
    \47\ Regulation B Sec.  1002.5(b) provides rules concerning 
requests for information about race, color, religion, national 
origin, or sex. Section 1002.5(c) provides rules concerning requests 
for information about a spouse or former spouse. Section 1002.5(d) 
provides rules concerning requests for information regarding marital 
status; income from alimony, child support, or separate maintenance; 
and childbearing or childrearing.
---------------------------------------------------------------------------

5.3 Small Business Data Collection

    Section 1071 of the Dodd-Frank Act amends ECOA to require financial 
institutions to collect, report, and make public certain information 
concerning credit applications made by women-owned, minority-owned, and 
small businesses. The amendments to ECOA made by the Dodd-Frank Act 
require that specific data be collected, maintained, and reported, 
including but not limited to the type of loan applied for, the amount 
of credit applied for, the type of action taken with regard to each 
application, the census tract of the principal place of business of the 
loan applicant, and the race, sex, and ethnicity of the principal 
owners of the business. The Dodd-Frank Act also provides authority for 
the Bureau to require any additional data that the Bureau determines 
would aid in fulfilling the purposes of section 1071. The Bureau issued 
a Request for Information in 2017 seeking public comment on, among 
other things, the types of credit products offered and the types of 
data currently collected by small business lenders and the potential 
complexity, cost of, and privacy issues related to, small business 
lending data collection. The information received will help the Bureau 
determine how to implement efficiently the Dodd-Frank Act's mandate 
regarding small business lending data reporting, while minimizing 
burdens on lenders.

5.4 Amicus Program

    The Bureau's Amicus Program files amicus, or friend-of-the-court, 
briefs in court cases concerning the Federal consumer financial 
protection laws that the Bureau is charged with implementing, including 
ECOA. These amicus briefs provide the courts with Bureau views on 
significant consumer financial protection issues and help ensure that 
consumer financial protection statutes and regulations are correctly 
and consistently interpreted by the courts.
    On September 13, 2017, the Bureau filed an amicus brief in Regions 
Bank v. Legal Outsource PA, in the United States Court of Appeals for 
the Eleventh Circuit.\48\ This case involves claims under ECOA against 
a bank that allegedly required a business owner's spouse to guarantee a 
loan to the business because of the fact that the business owner was 
married. The

[[Page 2831]]

Bureau filed an amicus brief arguing that the district court erred in 
rejecting claims by the business and various guarantors of the loan. 
First, the brief argued that a business entity can state a claim for 
ECOA discrimination based on its owner's marital status. Second, the 
brief argued that regulations issued pursuant to ECOA reasonably 
interpret the term ``applicant'' to encompass guarantors such that non-
borrowers who are required to guarantee their spouse's loans can state 
claims for marital-status discrimination.
---------------------------------------------------------------------------

    \48\ A copy of the Bureau's amicus brief is available on its 
amicus web page, https://www.consumerfinance.gov/policy-compliance/amicus/briefs/regions-bank-v-legal-outsource-pa/.
---------------------------------------------------------------------------

5.5 No-Action Letter

    In 2017, the Bureau maintained a ``No Action Letter'' policy \49\ 
that allowed companies to apply for a statement from Bureau staff 
regarding an innovative product or service that offers the potential 
for significant consumer benefit where there is substantial uncertainty 
about whether or how specific provisions of law would be applied. A no-
action letter issued pursuant to that policy would advise a recipient 
that staff has no present intention to recommend initiation of an 
enforcement or supervisory action with respect to the specific matter.
---------------------------------------------------------------------------

    \49\ See proposed policy at: https://www.consumerfinance.gov/policy-compliance/notice-opportunities-comment/archive-closed/proposed-policy-on-no-action-letters/.
---------------------------------------------------------------------------

    On September 14, 2017, Bureau staff issued its first no-action 
letter to Upstart Network, Inc., a company that uses alternative data 
in making credit and pricing decisions.\50\ The Bureau's no-action 
letter stated that Bureau staff had no present intention to recommend 
initiation of an enforcement or supervisory action against Upstart with 
regard to application of ECOA and Regulation B. The letter applies to 
Upstart's automated model for underwriting applicants for unsecured 
non-revolving credit, as that model is described in the company's 
application materials. The letter is specific to the facts and 
circumstances of Upstart and does not serve as an endorsement of the 
use of any particular variables or modeling techniques in credit 
underwriting.
---------------------------------------------------------------------------

    \50\ CFPB Announces First No-Action Letter to Upstart Network, 
Consumer Financial Protection Bureau (Sept. 14, 2017), https://www.consumerfinance.gov/about-us/newsroom/cfpb-announces-first-no-action-letter-upstart-network/.
---------------------------------------------------------------------------

    Upstart Network, Inc. is based in San Carlos, California, and 
provides an online lending platform for consumers to apply for personal 
loans, including credit card refinancing, student loans, and debt 
consolidation. Upstart evaluates consumer loan applications using 
traditional factors such as credit score and income, as well as 
incorporating non-traditional sources of data such as education and 
employment history.
    Under the terms of the no-action letter, Upstart will share certain 
information with the Bureau regarding the loan applications it 
receives, how it decides which loans to approve, and how it will 
mitigate risk to consumers, as well as information on how its model 
expands access to credit for traditionally-underserved populations. The 
Bureau expects that this information will further its understanding of 
the use of alternative data in credit decision-making.
    The Upstart no-action letter was part of the Bureau's continued 
exploration in 2017 of innovation through the use of alternative data 
to help expand responsible and fair credit access for consumers who are 
credit invisible or lack sufficient credit history to provide them 
traditional access to credit markets.

6. Interagency Coordination

6.1 Interagency Coordination and Engagement

    The Office of Fair Lending regularly coordinates the Bureau's fair 
lending regulatory, supervisory, and enforcement activities with those 
of other Federal agencies and State regulators to promote consistent, 
efficient, and effective enforcement of Federal fair lending laws.\51\ 
Through our interagency engagement, we work to address current and 
emerging fair lending risks.
---------------------------------------------------------------------------

    \51\ Dodd-Frank Act section 1013(c)(2)(B) (codified at 12 U.S.C. 
5493(c)(2)(B)).
---------------------------------------------------------------------------

    On August 22, 2017, the FFIEC agencies announced new HMDA Examiner 
Transaction Testing Guidelines (Guidelines).\52\ The new Guidelines 
were accompanied by the release of a blog post by the Bureau.\53\ The 
Guidelines represent a joint effort led by the Bureau, together with 
the FDIC, the FRB, the NCUA, and the OCC to provide--for the first 
time--uniform guidelines across all Federal HMDA supervisory agencies. 
This collaboration began with the Bureau issuing a Request for 
Information \54\ and holding outreach meetings in which the other 
supervisory agencies participated. The agencies then worked together to 
develop the Guidelines.
---------------------------------------------------------------------------

    \52\ FFIEC HMDA Examiner Transaction Testing Guidelines, https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/201708_cfpb_ffiec-hmda-examiner-transaction-testing-guidelines.pdf.
    \53\ Tim Lambert & Eric Wang, Here's what you need to know about 
the new FFIEC HMDA Examiner Transaction Testing Guidelines, Consumer 
Financial Protection Bureau (Aug. 22, 2017), https://www.consumerfinance.gov/about-us/blog/heres-what-you-need-know-about-new-ffiec-hmda-examiner-transaction-testing-guidelines/.
    \54\ Request for Info. Regarding Home Mortgage Disclosure Act 
Resubmission Guidelines, 81 FR 1,405 (Jan. 12, 2016), https://www.gpo.gov/fdsys/pkg/FR-2016-01-12/pdf/2016-00442.pdf.
---------------------------------------------------------------------------

    The Bureau, along with the FTC, DOJ, HUD, FDIC, FRB, NCUA, OCC, and 
the Federal Housing Finance Agency, comprise the Interagency Task Force 
on Fair Lending. The Task Force meets regularly to discuss fair lending 
enforcement efforts, share current methods of conducting supervisory 
and enforcement fair lending activities, and coordinate fair lending 
policies.
    The Bureau belongs to a standing working group of Federal 
agencies--with the DOJ, HUD, and FTC--that meets regularly to discuss 
issues relating to fair lending enforcement. These agencies constitute 
the Interagency Working Group on Fair Lending Enforcement. The agencies 
use these meetings to discuss fair lending developments and trends, 
methodologies for evaluating fair lending risks and violations, and 
coordination of fair lending enforcement efforts. In addition to these 
interagency working groups, we meet periodically and on an ad hoc basis 
with the Justice Department and prudential regulators to coordinate our 
fair lending work.
    In 2017, the Bureau chaired the FFIEC HMDA/Community Reinvestment 
Act Data Collection Subcommittee, a subcommittee of the FFIEC Task 
Force on Consumer Compliance (Task Force), that oversees FFIEC projects 
and programs involving HMDA data collection and dissemination, the 
preparation of the annual FFIEC budget for processing services, and the 
development and implementation of other related HMDA processing 
projects as directed by the Task Force.

7. Outreach: Promoting Fair Lending Compliance and Education

    Pursuant to Dodd-Frank,\55\ the Office of Fair Lending regularly 
engages in outreach with industry, bar associations, consumer 
advocates, civil rights organizations, academia, and other government 
agencies, to help educate and inform our stakeholders about fair 
lending as well as learn about emerging trends or products that pose 
fair lending risk. The Bureau is committed to communicating directly 
with all stakeholders on its policies, compliance expectations, and 
fair lending priorities, and to receiving valuable input on fair

[[Page 2832]]

lending issues. Outreach is accomplished through issuance of Reports to 
Congress, Interagency Statements, Supervisory Highlights, Compliance 
Bulletins, letters, blog posts, speeches and presentations at 
conferences and trainings, and participation in meetings to discuss 
fair lending and access to credit.
---------------------------------------------------------------------------

    \55\ Dodd-Frank Act section 1013(c)(2)(C) (codified at 12 U.S.C. 
5493(c)(2)(C)).
---------------------------------------------------------------------------

7.1 Blog Posts

    The Bureau regularly uses its blog as a tool to communicate 
effectively to consumers and other stakeholders on timely issues, 
emerging areas of concern, Bureau initiatives, and more. In 2017 we 
published five blog posts related to fair lending topics including: 
Providing consumers updated information about a fair lending 
enforcement action,\56\ announcing the Bureau's first no-action 
letter,\57\ announcing new guidelines on HMDA examiner transaction 
testing,\58\ issuing an official approval of the final redesigned 
Uniform Residential Loan Application,\59\ and noting the release of the 
fair lending annual report on 2016 activities.\60\
---------------------------------------------------------------------------

    \56\ Patrice Alexander Ficklin, African-American and Hispanic 
borrowers harmed by Provident will receive $9 million in 
compensation, Consumer Financial Protection Bureau (Nov. 2, 2017), 
https://www.consumerfinance.gov/about-us/blog/african-american-and-hispanic-borrowers-harmed-provident-will-receive-9-million-compensation/.
    \57\ Patrice Alexander Ficklin and Dan Quan, Supporting 
consumer-friendly innovation: Announcing our first no-action letter, 
Consumer Financial Protection Bureau (Sept. 14, 2017), https://www.consumerfinance.gov/about-us/blog/supporting-consumer-friendly-innovation-announcing-our-first-no-action-letter/.
    \58\ Tim Lambert & Eric Wang, Here's what you need to know about 
the new FFIEC HMDA Examiner Transaction Testing Guidelines, Consumer 
Financial Protection Bureau (Aug. 22, 2017), https://www.consumerfinance.gov/about-us/blog/heres-what-you-need-know-about-new-ffiec-hmda-examiner-transaction-testing-guidelines/.
    \59\ J. Frank Vespa-Papaleo, Identification of language 
preference on the Uniform Residential Loan Application, Consumer 
Financial Protection Bureau (Nov. 20, 2017), https://www.consumerfinance.gov/about-us/blog/identification-language-preference-uniform-residential-loan-application/.
    \60\ Patrice Alexander Ficklin, Safeguarding against credit 
discrimination: 2016 Fair Lending Report (April 14, 2017), https://www.consumerfinance.gov/about-us/blog/safeguarding-against-credit-discrimination-2016-fair-lending-report/.
_____________________________________-

    The blog posts may be accessed at www.consumerfinance.gov/blog.

7.2 Supervisory Highlights

    Supervisory Highlights reports anchor the Bureau's efforts to 
communicate about the Bureau's supervisory activity. More information 
about the topics discussed this year in Supervisory Highlights can be 
found in Section 3.1 of this Report. As with all Bureau resources, all 
editions of Supervisory Highlights are available on 
www.consumerfinance.gov/reports.

7.3 Speaking Engagements & Roundtables

    Staff from the Bureau's Office of Fair Lending and Equal 
Opportunity participated in a number of outreach speaking events and 
roundtables throughout 2017 to further the Bureau's mission of 
educating and informing stakeholders about fair lending and receiving 
input from stakeholders. In these events, staff shared information on 
fair lending priorities, emerging issues, and heard feedback from 
stakeholders on Bureau fair-lending work. Some examples of the topics 
covered include fair lending priorities, fair lending modeling and 
governance, redlining, HMDA, small business lending, alternative data, 
and installment lending contracts.

                        Appendix A: Defined Terms
------------------------------------------------------------------------
                       Term                              Definition
------------------------------------------------------------------------
AMS...............................................  Agricultural
                                                     Marketing Service
                                                     of the U.S.
                                                     Department of
                                                     Agriculture.
Bureau............................................  The Bureau of
                                                     Consumer Financial
                                                     Protection.
CMS...............................................  Compliance
                                                     Management System.
CRA...............................................  Community
                                                     Reinvestment Act.
Dodd-Frank Act....................................  The Dodd-Frank Wall
                                                     Street Reform and
                                                     Consumer Protection
                                                     Act.
DOJ...............................................  The U.S. Department
                                                     of Justice.
DOT...............................................  The U.S. Department
                                                     of Transportation.
ECOA..............................................  The Equal Credit
                                                     Opportunity Act.
FCA...............................................  Farm Credit
                                                     Administration.
FDIC..............................................  The U.S. Federal
                                                     Deposit Insurance
                                                     Corporation.
Federal Reserve Board.............................  The U.S. Board of
                                                     Governors of the
                                                     Federal Reserve
                                                     System.
FFIEC.............................................  The U.S. Federal
                                                     Financial
                                                     Institutions
                                                     Examination
                                                     Council--the FFIEC
                                                     member agencies are
                                                     the Board of
                                                     Governors of the
                                                     Federal Reserve
                                                     System (FRB), the
                                                     Federal Deposit
                                                     Insurance
                                                     Corporation (FDIC),
                                                     the National Credit
                                                     Union
                                                     Administration
                                                     (NCUA), the Office
                                                     of the Comptroller
                                                     of the Currency
                                                     (OCC), and the
                                                     Bureau of Consumer
                                                     Financial
                                                     Protection (BCFP).
                                                     The State Liaison
                                                     Committee was added
                                                     to FFIEC in 2006 as
                                                     a voting member.
FRB...............................................  The U.S. Board of
                                                     Governors of the
                                                     Federal Reserve
                                                     System.
FTC...............................................  The U.S. Federal
                                                     Trade Commission.
GIPSA.............................................  Grain Inspection,
                                                     Packers and
                                                     Stockyards
                                                     Administration
                                                     (GIPSA) of the U.S.
                                                     Department of
                                                     Agriculture.
HMDA..............................................  The Home Mortgage
                                                     Disclosure Act.
HUD...............................................  The U.S. Department
                                                     of Housing and
                                                     Urban Development.
NCUA..............................................  The National Credit
                                                     Union
                                                     Administration.
OCC...............................................  The U.S. Office of
                                                     the Comptroller of
                                                     the Currency.
SBA...............................................  Small Business
                                                     Administration.
SEC...............................................  U.S. Securities and
                                                     Exchange
                                                     Commission.
USDA..............................................  U.S. Department of
                                                     Agriculture.
------------------------------------------------------------------------

[2]. Regulatory Requirements

    This Fair Lending Report of the Bureau of Consumer Financial 
Protection summarizes existing requirements under the law, and 
summarizes findings made in the course of exercising the Bureau's 
supervisory and enforcement authority. It is therefore exempt from 
notice and comment rulemaking requirements under the Administrative 
Procedure Act pursuant to 5 U.S.C. 553(b). Because no

[[Page 2833]]

notice of proposed rulemaking is required, the Regulatory Flexibility 
Act does not require an initial or final regulatory flexibility 
analysis. 5 U.S.C. 603(a), 604(a). The Bureau has determined that this 
Fair Lending Report does not impose any new or revise any existing 
recordkeeping, reporting, or disclosure requirements on covered 
entities or members of the public that would be collections of 
information requiring OMB approval under the Paperwork Reduction Act, 
44 U.S.C. 3501, et seq.

    Dated: February 1, 2019.
Kathleen L. Kraninger,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2019-01568 Filed 2-7-19; 8:45 am]
 BILLING CODE 4810-AM-P