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CFPB Guidance Clarifies Consumer Lending Protections Extend Beyond Securing Loans

The CFPB issued an advisory opinion clarifying that consumer lending protections extend after a loan has been advanced. In addition, the CFPB released its 2021 Fair Lending Annual Report to Congress.

In the advisory opinion, the CFPB clarified that - consistent with a recent interagency legal brief - consumer lending protections under the Equal Credit Opportunity Act prohibit lenders from discriminating against consumers at any point during the life of a loan. The CFPB explained that this prohibition bars lenders from discriminating not just during the application process, but also after the customer has received a loan. The CFPB guidance also requires lenders to provide an adverse action notice to the consumer whenever an unfavorable action is taken, which must provide a detailed explanation justifying the lender's actions. Adverse actions include (i) denials of credit, (ii) termination of an existing account and (iii) modification of the account in an unfavorable way to the consumer.

Separately, the CFPB annual report outlined the agency's fair lending progress in 2021 and emphasized racial and economic equity along with COVID-19 recovery efforts. The report summarized (i) supervision and enforcement actions, (ii) research and market monitoring activities, (iii) rulemaking and guidance, (iv) amicus activity and (v) consumer education. Director Rohit Chopra stated that the CFPB will continue its efforts to prevent consumer discrimination with an increased reliance on predictive analytics, algorithms and machine learning to prevent digital redlining and algorithmic bias.

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