CFPB Highlights Agency Efforts on Fair Lending in 2023
In its 2023 Fair Lending Report, the CFPB reviewed agency efforts to enforce and supervise fair lending laws. The Report covers supervisory examinations, enforcement actions, rulemakings, guidance, stakeholder engagement and interagency collaboration undertaken in 2023.
The CFPB reported on enforcement actions against mortgage lenders, banks and real-estate developers that either falsified disclosures required by the Home Mortgage Disclosure Act or engaged in unlawful discrimination during appraisals, loan applications and credit card applications. The CFPB also described the CFPB's final rule concerning "small business lending data collection" (see related coverage) and the agency's proposed rule addressing automated valuation models (see related coverage.) The CFPB highlighted steps taken to engage with stakeholders through blogs, speeches and press releases and through various forms of guidance, including through advisory opinions, interpretive rules, statements, bulletins and publications.
In the Report, the CFPB said that "looking forward" the agency intends to increase its focus on digital discrimination, particularly on how data used in "advanced technological methods" is selected and procured. The CFPB said it is seeking to prevent data collectors from "engag[ing] in discriminatory targeting, steering, redlining, [or other discrimination]."
Commentary
The 2023 Fair Lending Report underscores the CFPB's consistent message that the same consumer protection laws and regulations apply to all technologies, "regardless of the complexity or novelty of the technology deployed by institutions, including when it comes to combatting unlawful discrimination or explaining how certain credit decisions are made."
In the Report, the CFPB highlighted a number of priorities going forward. The CFPB said it will be scrutinizing actions that financial institutions take in connection with "the selection and procurement of data for use in advanced technological methods," including the purchase of personal data and sensitive information about consumers from data brokers, as well as the use of fraud screens "and associated policies and procedures as an excuse to violate or circumvent fair lending laws." The CFPB also reminded financial institutions that it will continue to prioritize its reviews of fair lending testing systems, stating that "[r]obust fair lending testing of models should include regular testing for disparate treatment and disparate impact, including searches for and implementation of less discriminatory alternatives using manual or automated techniques." The agency said that exam teams "will continue to explore the use of open-source automated debiasing methodologies to produce potential alternative models to the institutions' credit scoring models." These warnings reflect the agency's ambition to be a leader in the federal government's efforts to address, respond to, and regulate these types of technologies.