CFPB Updates Exam Manual Expanding Definition of "Unfairness" to Include Discrimination

The CFPB updated its supervisory operations and examinations manual to better pursue "discrimination in all consumer finance markets, including credit, servicing, collections, consumer reporting, payments, remittances, and deposits."

The guidance concerns supervisory operations related to "unfair, deceptive, or abusive acts or practices," and would enhance monitoring for, and enable discrimination-related enforcement actions, by interpreting the term "unfairness" to include discrimination. The CFPB stated that it will "closely examine financial institutions’ decision-making in advertising, pricing, and other areas to ensure that companies are appropriately testing for and eliminating illegal discrimination."

The CFPB noted that while it enforces several laws that specifically outlaw discriminatory practices - including the Equal Credit Opportunity Act and the Consumer Financial Protection Act (the "CFPA") - discrimination can also occur in instances that are not subject to these statutes. Accordingly, the CFPB stated that the term "unfair" under the CFPA would also generally include discrimination.

The CFPB also published the amended examination manual ("Unfair, Deceptive, or Abusive Acts or Practices"), for evaluating discriminatory acts that may constitute unfair acts for purpose of the CFPA. CFPB examiners will be requiring all supervised companies to disclose their processes for assessing discriminatory outcomes, including the impact of their fees and products on different communities. The CFPB will then examine those practices and determine whether its decision-making processes for unfair discrimination are effective in preventing such discrimination.