82_FR_25354 82 FR 25250 - Fair Lending Report of the Consumer Financial Protection Bureau, April 2017

82 FR 25250 - Fair Lending Report of the Consumer Financial Protection Bureau, April 2017

BUREAU OF CONSUMER FINANCIAL PROTECTION

Federal Register Volume 82, Issue 104 (June 1, 2017)

Page Range25250-25266
FR Document2017-11318

The Bureau of Consumer Financial Protection (CFPB or Bureau) is issuing its fifth Fair Lending Report of the Consumer Financial Protection Bureau (Fair Lending Report) to Congress. We are committed to ensuring fair access to credit and eliminating discriminatory lending practices. This report describes our fair lending activities in prioritization, supervision, enforcement, rulemaking, interagency coordination, and outreach for calendar year 2016.

Federal Register, Volume 82 Issue 104 (Thursday, June 1, 2017)
[Federal Register Volume 82, Number 104 (Thursday, June 1, 2017)]
[Notices]
[Pages 25250-25266]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-11318]


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BUREAU OF CONSUMER FINANCIAL PROTECTION


Fair Lending Report of the Consumer Financial Protection Bureau, 
April 2017

AGENCY: Bureau of Consumer Financial Protection.

[[Page 25251]]


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

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SUMMARY: The Bureau of Consumer Financial Protection (CFPB or Bureau) 
is issuing its fifth Fair Lending Report of the Consumer Financial 
Protection Bureau (Fair Lending Report) to Congress. We are committed 
to ensuring fair access to credit and eliminating discriminatory 
lending practices. This report describes our fair lending activities in 
prioritization, supervision, enforcement, rulemaking, interagency 
coordination, and outreach for calendar year 2016.

DATES: The Bureau released the April 2017 Fair Lending Report on its 
Web site on April 14, 2017.

FOR FURTHER INFORMATION CONTACT: Anita Visser, Senior Policy Advisor to 
the Director of Fair Lending, Office of Fair Lending and Equal 
Opportunity, Consumer Financial Protection Bureau, 1-855-411-2372.

SUPPLEMENTARY INFORMATION: 

1. Fair Lending Report of the Consumer Financial Protection Bureau, 
April 2017

Message From Richard Cordray, Director of the CFPB

    For over five years, the Consumer Financial Protection Bureau has 
pursued its statutory mandate to provide ``oversight and enforcement'' 
of the fair lending laws under our jurisdiction. I am proud of all we 
have accomplished in ensuring that creditworthy consumers are not 
denied credit or charged more because of their race or ethnicity or any 
other prohibited basis.
    Our fair lending guidance, supervisory activity, and enforcement 
actions have three goals: To strengthen industry compliance programs, 
root out illegal activity, and ensure that harmed consumers are 
remediated. Over these past five years, we have engaged in robust fair 
lending dialogue with industry and this dialogue has served to 
significantly strengthen industry compliance programs. Members of our 
Fair Lending Office have logged over 300 outreach meetings and events, 
not to mention preparing responses to the many calls and emails 
received from compliance officials. We have invested significant 
efforts toward strengthening industry compliance management systems 
because they are critical first-line measures to protect consumers from 
discriminatory lending policies and practices. As a result, our 
examiners now often find that lenders have already implemented sound 
policies and procedures to identify and address potential fair lending 
violations, based on our prior guidance.
    We also have achieved remarkable success in our fair lending 
enforcement activities during this time period, reaching historic 
resolution of the largest redlining, auto finance, and credit card fair 
lending cases, and instituting relief that has halted illegal 
practices. Our fair lending supervision and enforcement activities have 
resulted in over $400 million in remediation to harmed consumers.
    In the coming years, we will increase our focus on markets or 
products where we see significant or emerging fair lending risk to 
consumers, including redlining, mortgage loan servicing, student loan 
servicing, and small business lending. Discrimination on prohibited 
grounds in the financial marketplace, though squarely against the law, 
is by no means a thing of the past. The Consumer Bureau will continue 
to enforce existing fair lending laws at a steady and vigorous pace, 
taking care to ensure broad-based industry engagement and consistent 
oversight.
    I am proud to present our 2016 Fair Lending Report.

Sincerely,

Richard Cordray

Message From Patrice Alexander Ficklin, Director, Office of Fair 
Lending and Equal Opportunity

    When I left private practice to join the CFPB in 2011, I carried 
with me my experiences as industry counsel, advising bank and nonbank 
clients on fair lending compliance. I knew from my work that many 
lenders are interested in building and maintaining robust fair lending 
self-monitoring systems that reflect best practices in consumer 
protection. I advised my clients on their efforts to evaluate and 
address fair lending risk not only in mortgage origination, but also in 
mortgage servicing, credit cards, and other areas that had not been a 
traditional fair lending focus. Together we enhanced the existing 
methods of proxying for race and ethnicity; an essential step to allow 
my clients to fully implement the mandate contained in the Equal Credit 
Opportunity Act (ECOA), which prohibits discrimination in all manner of 
consumer credit, not simply mortgages.
    Shortly after arriving at the CFPB in 2011, I led a handful of 
other public servants in founding the CFPB's Fair Lending Office, which 
the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-
Frank Act) charged with ``oversight and enforcement'' of ECOA. We drew 
from our experiences and dialogue with industry, the information 
transferred to us from our sister prudential regulators, civil rights 
and consumer advocate groups' perspectives, and the expertise of the 
Bureau's markets teams to establish our first three fair lending 
priorities: mortgage origination, auto finance, and credit cards. We 
have accomplished much in these markets over these past five years, not 
the least of which are the $400 million in remediation to harmed 
consumers and the remarkable and robust dialogue we enjoy with many 
financial services providers in support of their efforts to treat all 
of their customers in a fair and responsible manner.
    As outlined in my December 2016 blog post,\1\ my team has again 
looked to our statutory mandate and relevant data to refresh the 
Bureau's fair lending priorities. In 2017 we will increase our focus in 
the areas of redlining and mortgage and student loan servicing to 
ensure that creditworthy consumers have access to mortgage loans and to 
the full array of appropriate options when they have trouble paying 
their mortgages or student loans, regardless of their race or 
ethnicity. In addition, we will focus more fully on pursuing our 
statutory mandate to promote fair credit access for minority- and 
women-owned businesses. We know that these businesses play an important 
role in job creation for communities of color, while also strengthening 
our economy.
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    \1\ 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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    The Dodd-Frank Act mandated the creation of the CFPB's Office of 
Fair Lending and Equal Opportunity and charged it with ensuring fair, 
equitable, and nondiscriminatory access to credit to consumers; 
coordinating our fair lending efforts with Federal and State agencies 
and regulators; working with private industry, fair lending, civil 
rights, consumer and community advocates to promote fair lending 
compliance and education; and annually reporting to Congress on our 
efforts.
    I am proud to say that the Office continues to fulfill our Dodd-
Frank mandate and looks forward to continuing to work together with all 
stakeholders in protecting America's consumers. To that end, I am 
excited to share our progress in this, our fifth, Fair Lending 
Report.\2\
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    \2\ 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)).


[[Page 25252]]


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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) \3\ established the Bureau as the 
Nation's first Federal agency with a mission focused solely on consumer 
financial protection and making consumer financial markets work for all 
Americans. Dodd-Frank established the Office of Fair Lending and Equal 
Opportunity (the Office of Fair Lending) within the CFPB, and charged 
it with ``providing oversight and enforcement of Federal laws intended 
to ensure the fair, equitable, and nondiscriminatory access to credit 
for both individuals and communities.'' \4\
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    \3\ Public Law 111-203, 124 Stat. 1376 (2010).
    \4\ Dodd-Frank Act section 1013(c)(2)(A) (codified at 12 U.S.C. 
5493(c)(2)(A)).
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     Prioritization. The Bureau's risk-based prioritization 
process allows the Office of Fair Lending to focus our supervisory and 
enforcement efforts on the markets, products, and institutions that 
represent the greatest fair lending risk for consumers. Based on the 
risks we identified, our market-level focus for the past five years has 
been on ensuring that consumers are not excluded from or made to pay 
more for mortgages, indirect auto loans, and credit cards because of 
their race, ethnicity, sex, or age.
    Going forward, because of emerging fair lending risks in other 
areas, we are increasing our focus on redlining, mortgage and student 
loan servicing, and small business lending. We remain committed to 
assessing and evaluating fair lending risk in all credit markets under 
the Bureau's jurisdiction. See Section 1 for more information.
     Supervision and enforcement activity. In 2016, our fair 
lending supervisory and public enforcement actions resulted in 
approximately $46 million in remediation to harmed consumers.\5\ 
Mortgage lending continues to be a key priority for the Office of Fair 
Lending for both supervision and enforcement. We have focused in 
particular on redlining risk, evaluating whether lenders have 
intentionally discouraged prospective applicants in minority 
neighborhoods from applying for credit. Although statistics play an 
important role in this work, we never look at numbers alone or in a 
vacuum, but rather consider multiple factors, including potentially 
nondiscriminatory explanations for differential lending patterns. See 
Sections 2.1.6 and 3.1.1 for more information. Through 2016, our 
mortgage origination work has covered institutions responsible for 
close to half of the transactions reported pursuant to the Home 
Mortgage Disclosure Act (HMDA), and more than 60% of the transactions 
reported by institutions subject to the CFPB's supervision and 
enforcement authority.\6\
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    \5\ Figures represent estimates of monetary relief for consumers 
ordered or required by the Bureau or a court as a result of 
supervisory or enforcement actions on fair lending matters in 2016, 
as well as other monetary payments such as loan subsidies, increased 
consumer financial education, and civil money penalties.
    \6\ CFPB analysis of HMDA data for 2015.
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    In 2016, the Bureau continued its work in overseeing and enforcing 
compliance with ECOA in indirect auto lending through both supervisory 
and enforcement activity, including monitoring compliance with our 
previous supervisory and enforcement actions. Our indirect auto lending 
work has covered institutions responsible for approximately 60% of the 
auto loan market share by volume.\7\
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    \7\ CFPB analysis of 2015 AutoCount data from Experian 
Automotive.
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    The Bureau also continued fair lending supervisory and enforcement 
work in the credit card market. We have focused in particular on the 
quality of fair lending compliance management systems (CMS) and on fair 
lending risks in underwriting, line assignment, and servicing. Our work 
in this highly-concentrated market has covered institutions responsible 
for more than 85% of outstanding credit card balances in the United 
States.\8\
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    \8\ CFPB analysis of 3Q 2016 call reports.
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    The Bureau has conducted supervision and enforcement work in other 
markets as well. For example, this year we continued targeted ECOA 
reviews of small-business lending, focusing in particular on the 
quality of fair lending compliance management systems and on fair 
lending risks in underwriting, pricing, and redlining. Our supervisory 
work to date in small business lending has covered institutions 
responsible for approximately 10% of the non-agricultural small 
business market share. See Sections 2 and 3 for more information.
     Rulemaking. In January 2016, in response to ongoing 
conversations with industry about compliance with Regulation C, HMDA's 
implementing Regulation, the Bureau issued a Request for Information 
(RFI) on the Bureau's HMDA data resubmission guidelines, and is 
considering whether to adjust its existing HMDA resubmission guidelines 
and if so, how.\9\ On September 23, 2016, the Bureau published a Bureau 
Official Approval pursuant to section 706(e) of the ECOA concerning the 
new Uniform Residential Loan Application and the collection of expanded 
HMDA information about ethnicity and race in 2017. On March 24, 2017, 
the Bureau published a proposed rule concerning amendments to 
Regulation B's ethnicity and race information collection 
provisions.\10\ See Section 4 for more information.
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    \9\ Consumer Financial Protection Bureau, Request for 
Information Regarding Home Mortgage Disclosure Act Resubmission 
Guidelines 2015-0058 (Jan. 7, 2016), http://files.consumerfinance.gov/f/201601_cfpb_request-for-information-regarding-home-mortgage-disclosure-act-resubmission.pdf.
    \10\ Consumer Financial Protection Bureau, Amendments to Equal 
Credit Opportunity Act (Regulation B) Ethnicity and Race Information 
Collection 2017-0009 (March 24, 2017), http://files.consumerfinance.gov/f/documents/201703_cfpb_NPRM-to-amend-Regulation-B.pdf.
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     Interagency coordination and collaboration. The Bureau 
continues to coordinate with the Federal Financial Institutions 
Examination Council (FFIEC) agencies,\11\ as well as the Department of 
Justice (DOJ), the Federal Trade Commission (FTC), and the Department 
of Housing and Urban Development (HUD), as we each play a role in 
ensuring compliance with and enforcing our nation's fair lending laws 
and regulations. See Section 5 for more information on our interagency 
coordination and collaboration in 2016.
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    \11\ 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 
Consumer Financial Protection Bureau (CFPB). The State Liaison 
Committee was added to FFIEC in 2006 as a voting member.
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     Outreach to industry, advocates, consumers, and other 
stakeholders. The Bureau continues to initiate and encourage industry 
and consumer engagement opportunities to discuss fair lending 
compliance and access to credit issues, including through speeches, 
presentations, blog posts, webinars, rulemaking, and public comments. 
See Section 6 for more information on our outreach activities in 2016.
    This report generally covers the Bureau's fair lending work during 
calendar year 2016.

1. Fair Lending Prioritization

1.1 Risk-Based Prioritization: A Data-Driven Approach to Prioritizing 
Areas of Potential Fair Lending Harm to Consumers
    To use the CFPB's fair lending resources most effectively, the 
Office of Fair Lending, working with other offices in the Bureau, has 
developed and

[[Page 25253]]

refined a risk-based prioritization approach that determines how best 
to address areas of potential fair-lending-related consumer harm in the 
entities, products, and markets under our jurisdiction.
    One critical piece of information that we consider in the fair 
lending prioritization process is the quality of an institution's 
compliance management system, which the Bureau typically ascertains 
through its supervisory work. The Bureau has previously identified 
common features of a well-developed fair lending compliance management 
system,\12\ though we recognize that the appropriate scope of an 
institution's fair lending compliance management system will vary based 
on its size, complexity, and risk profile. In our experience, the 
higher the quality of an institution's fair lending compliance 
management system, the lower the institution's fair lending risk to 
consumers, other things being equal.
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    \12\ See 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.
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    As part of the prioritization process the Office of Fair Lending 
also works closely with the Bureau's special population offices, 
including the Office for Students and Young Consumers, the Office of 
Older Americans, and the Bureau's Markets offices, which identify 
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, we incorporate that 
information into our prioritization process to determine the type and 
extent of attention required to address those risks. For instance, Fair 
Lending's work with the Office of Consumer Lending, Reporting, and 
Collections Markets and the Office for Students and Young Consumers 
highlighted potential steering risks in student loan servicing, which 
resulted in the prioritization of this market in our supervisory work.
    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 the Bureau has evaluated these inputs to prioritize 
institutions, products, and markets based on an assessment of fair 
lending risk posed to consumers, the Office of Fair Lending considers 
how best to address those risks as part of its strategic planning 
process. For example, we can schedule an institution for a supervisory 
review or, where appropriate, open an enforcement investigation. We can 
also commit to further research, policy development, and/or outreach, 
especially for new issues or risks. 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, and 
reduce any burden on subject institutions.
    Risk-based prioritization is an ongoing process, and we continue to 
receive and evaluate relevant information even after priorities are 
identified. At an institution level, such information may include new 
tips and leads, consumer complaints, additional risks identified in 
current supervisory and enforcement activities, and compliance issues 
identified and brought to our attention by institutions themselves. In 
determining how best to address this additional information, the Office 
of 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. Fair Lending takes account of responsible conduct as set forth 
in CFPB Bulletin 2013-06, Responsible Business Conduct: Self-Policing, 
Self-Reporting, Remediation, and Cooperation.\13\
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    \13\ 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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1.2 Fair Lending Priorities
    Because the CFPB is responsible for overseeing so many products and 
so many lenders, we re-prioritize our work from time to time to make 
sure that we are focused on the areas of greatest risk to consumers. In 
the coming year, we will increase our focus on the markets or products 
listed below, which present substantial risk of credit discrimination 
for consumers.
    Redlining. We will continue to evaluate whether lenders have 
intentionally discouraged prospective applicants in minority 
neighborhoods from applying for credit.
    Mortgage and Student Loan Servicing. We will evaluate whether some 
borrowers who are behind on their mortgage or student loan payments may 
have more difficulty working out a new solution with the servicer 
because of their race, ethnicity, sex, or age.
    Small Business Lending. Congress expressed concern that women-owned 
and minority-owned businesses may experience discrimination when they 
apply for credit, and has required the CFPB to take steps to ensure 
their fair access to credit. Small business lending supervisory 
activity will also help 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. 
The Bureau remains committed to ensuring that consumers are protected 
from discrimination in all credit markets under its authority.

2. Fair Lending Supervision

    The CFPB's Fair Lending Supervision program assesses compliance 
with ECOA and HMDA at banks and nonbanks over which the Bureau has 
supervisory authority. Supervision activities range 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 continues to conduct three types of fair lending reviews at 
Bureau-supervised institutions: ECOA baseline reviews, ECOA targeted 
reviews, and HMDA data integrity reviews.
    When the CFPB identifies situations in which fair lending 
compliance is inadequate, it directs institutions to establish fair 
lending compliance programs commensurate with the size and complexity 
of the institution and its lines of business. When fair lending 
violations are identified, the CFPB may direct institutions to provide 
remediation and restitution to consumers, and may pursue other 
appropriate relief. The CFPB also refers a matter 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.\14\ The CFPB may also refer other potential ECOA violations to 
the Justice Department.
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    \14\ 15 U.S.C. 1691e(g).
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2.1 Fair Lending Supervisory Observations
    Although the Bureau's supervisory process is confidential, the 
Bureau publishes regular reports called Supervisory Highlights, which 
provide information on supervisory trends the Bureau observes without 
identifying specific entities. The Bureau may also draw on its 
supervisory experience to publish compliance bulletins in order to 
remind the institutions that we supervise of their legal obligations.

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Industry participants can use this information to inform and assist in 
complying with ECOA and HMDA.
2.1.1 Evaluating Mortgage Servicing Compliance Programs
    Our supervisory work has included use of the ECOA Baseline Modules, 
which are part of the CFPB Supervision and Examination Manual. 
Examination teams use these modules to conduct ECOA Baseline Reviews, 
which evaluate how well institutions' compliance management systems 
identify and manage fair lending risks. The Mortgage Servicing Special 
Edition of Supervisory Highlights,\15\ published in June 2016, reminded 
institutions that Module 4 of the ECOA baseline review modules, ``Fair 
Lending Risks Related to Servicing,'' is used by Bureau examiners to 
evaluate compliance management systems under ECOA. Among other things, 
Module 4 contains questions regarding fair lending training of 
servicing staff, fair lending monitoring of servicing, and servicing of 
consumers with limited English proficiency.
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    \15\ Consumer Financial Protection Bureau, Supervisory 
Highlights Mortgage Servicing Special Edition 2016 at 5 (June 22, 
2016), http://files.consumerfinance.gov/f/documents/Mortgage_Servicing_Supervisory_Highlights_11_Final_web_.pdf.
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2.1.2 Reporting Actions Taken for Conditionally-Approved Applications 
With Unmet Underwriting Conditions
    The Summer 2016 edition of Supervisory Highlights,\16\ published in 
June 2016, highlighted findings from examinations where institutions 
improperly coded actions taken in reported HMDA data. Among other 
things, Regulation C requires covered depository and non-depository 
institutions to submit to the appropriate Federal agency data they 
collect and record pursuant to Regulation C, including the type of 
action taken on reportable transactions.\17\ As reported in Supervisory 
Highlights, examiners found that after issuing a conditional approval 
subject to underwriting conditions, the institutions did not accurately 
report the action taken on the loans or applications. As a result, 
Supervision directed one or more institutions to enhance their policies 
and procedures regarding their HMDA reporting of the actions taken on 
loans and applications and, where necessary, provide adverse action 
notices. Supervision also required one or more institutions to resubmit 
their HMDA Loan Application Register (LAR) where the number of errors 
exceeded the CFPB's HMDA resubmission thresholds.
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    \16\ Consumer Financial Protection Bureau, Supervisory 
Highlights Summer 2016 at 13-16 (June 30, 2016), http://files.consumerfinance.gov/f/documents/Supervisory_Highlights_Issue_12.pdf.
    \17\ 12 CFR 1003.4(a), (a)(8); 12 CFR 1003.5(a)(1).
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2.1.3 Expanding Credit Through the Use of Special Purpose Credit 
Programs
     The Summer 2016 edition of Supervisory Highlights \18\ 
discussed supervisory observations of special purpose credit programs, 
which are established and administered to extend credit to a class of 
persons who otherwise probably would not receive such credit or would 
receive it on less favorable terms. ECOA \19\ and Regulation B \20\ 
permit a creditor to extend special purpose credit to applicants who 
meet eligibility requirements for certain types of credit programs.\21\ 
Regulation B specifically confers special purpose credit program status 
upon:
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    \18\ Consumer Financial Protection Bureau, Supervisory 
Highlights Summer 2016 at 16-18 (June 30, 2016), http://files.consumerfinance.gov/f/documents/Supervisory_Highlights_Issue_12.pdf.
    \19\ 15 U.S.C. 1691 et seq.
    \20\ 12 CFR part 1002.
    \21\ 15 U.S.C. 1691(c)(3) (providing that ECOA's prohibitions 
against discrimination are not violated when a creditor refuses to 
extend credit offered pursuant to certain special purpose credit 
programs satisfying Regulation B-prescribed standards); 12 CFR 
1002.8 (special purpose credit program standards).
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    Any special purpose credit program offered by a for-profit 
organization, or in which such an organization participates to meet 
special social needs, if:
    (i) The program is established and administered pursuant to a 
written plan that identifies the class of persons that the program is 
designed to benefit and sets forth the procedures and standards for 
extending credit pursuant to the program; and
    (ii) The program is established and administered to extend credit 
to a class of persons who, under the organization's customary standards 
of creditworthiness, probably would not receive such credit or would 
receive it on less favorable terms than are ordinarily available to 
other applicants applying to the organization for a similar type and 
amount of credit.\22\
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    \22\ 12 CFR 1002.8(a)(3).
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    The commentary to Regulation B clarifies that, in order to satisfy 
these requirements, ``a for-profit organization must determine that the 
program will benefit a class of people who would otherwise be denied 
credit or would receive it on less favorable terms. This determination 
can be based on a broad analysis using the organization's own research 
or data from outside sources, including governmental reports and 
studies.'' \23\
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    \23\ 12 CFR part 1002, Suppl. I, 1002.8, comment 8(a) at 5.
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    As Supervisory Highlights noted, during the course of the Bureau's 
supervisory activity, examination teams have observed credit decisions 
made pursuant to the terms of programs that for-profit institutions 
have described as special purpose credit programs. Examination teams 
have reviewed the terms of the programs, including the written plan 
required by Regulation B, and the institution's determination that the 
program would benefit a class of people who would otherwise be denied 
credit or would receive it on less favorable terms.
    In every case, special purpose credit program status depends upon 
adherence to the ECOA and Regulation B requirements for special purpose 
credit programs. A program, for example, offering more favorable 
pricing or products exclusively to a particular class of persons 
without evidence that such individuals would otherwise be denied credit 
or would receive it on less favorable terms would not satisfy the ECOA 
and Regulation B requirements for a special purpose credit program. 
With that in mind, however, the Bureau generally takes a favorable view 
of conscientious efforts that institutions may undertake to develop 
special purpose credit programs to promote extensions of credit to any 
class of persons who would otherwise be denied credit or would receive 
it on less favorable terms.
2.1.4 Offering Language Services to Limited English Proficient (LEP) 
Consumers
    The Fall 2016 edition of Supervisory Highlights,\24\ published in 
October 2016, discussed supervisory observations about the provision of 
language services to consumers with limited English proficiency (LEP). 
The Dodd-Frank Act, ECOA,\25\ and Regulation B \26\ mandate that the 
Office of Fair Lending ``ensure the fair, equitable, and 
nondiscriminatory access to credit'' \27\ and ``promote the 
availability of credit.'' \28\ Consistent with that mandate, the CFPB, 
including through its Office of Fair Lending, continues to encourage 
lenders to provide assistance to LEP consumers.\29\ Financial 
institutions may

[[Page 25255]]

provide access to credit in languages other than English in a manner 
that is beneficial to consumers as well as the institution, while 
taking steps to ensure their actions are compliant with ECOA and other 
applicable laws.
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    \24\ Consumer Financial Protection Bureau, Supervisory 
Highlights Fall 2016 at 20 (Oct. 31, 2016), http://files.consumerfinance.gov/f/documents/Supervisory_Highlights_Issue_13__Final_10.31.16.pdf.
    \25\ 12 U.S.C. 1691 et seq.
    \26\ 12 CFR part 1002 et seq.
    \27\ 12 U.S.C. 5493(c)(2)(A).
    \28\ 12 CFR 1002.1(b).
    \29\ According to recent American Community Survey estimates, 
there are approximately 25 million people in the United States who 
speak English less than ``very well.'' U.S. Census Bureau, Language 
Spoken at Home, 2011-2015 American Community Survey 5-Year 
Estimates, https://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=ACS_15_5YR_S1601&prodType=table.
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    As reported in Supervisory Highlights, in the course of conducting 
supervisory activity, examiners have observed one or more financial 
institutions providing services in languages other than English, 
including to consumers with limited English proficiency,\30\ in a 
manner that did not result in any adverse supervisory or enforcement 
action under the facts and circumstances of the reviews. Specifically, 
examiners observed:
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    \30\ The Bureau recently updated its ECOA baseline review 
modules. See Consumer Financial Protection Bureau, Supervisory 
Highlights: Winter 2016 at 28-29 (Mar. 8, 2016), http://files.consumerfinance.gov/f/201603_cfpb_supervisory-highlights.pdf. 
Among other updates, the modules include new questions related to 
the provision of language services, including to LEP consumers, in 
the context of origination and servicing. See Consumer Financial 
Protection Bureau, CFPB Examination Procedures, ECOA Baseline Review 
Modules 13, 21-22 (Oct. 2015), http://files.consumerfinance.gov/f/201510_cfpb_ecoa-baseline-review-modules.pdf. These modules are used 
by examiners during ECOA baseline reviews to identify and analyze 
risks of ECOA violations, to facilitate the identification of 
certain types of ECOA and Regulation B violations, and to inform 
fair lending prioritization decisions for future CFPB reviews. Id. 
at 1.
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     Marketing and servicing of loans in languages other than 
English;
     Collection of customer language information to facilitate 
communication with LEP consumers in a language other than English;
     Translation of certain financial institution documents 
sent to borrowers, including monthly statements and payment assistance 
forms, into languages other than English;
     Use of bilingual and/or multilingual customer service 
agents, including single points of contact,\31\ and other forms of oral 
customer assistance in languages other than English; and
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    \31\ See 12 CFR 1024.40(a)(1) & (2) (requiring mortgage 
servicers to assign personnel to a delinquent borrower within a 
certain time after delinquency and make assigned personnel available 
by phone in order to respond to borrower inquiries and assist with 
loss mitigation options, as applicable).
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     Quality assurance testing and monitoring of customer 
assistance provided in languages other than English.
    Examiners have observed a number of factors that financial 
institutions consider in determining whether to provide services in 
languages other than English and the extent of those services, some of 
which include: Census Bureau data on the demographics or prevalence of 
non-English languages within the financial institution's footprint; 
communications and activities that most significantly impact consumers 
(e.g., loss mitigation and/or default servicing); and compliance with 
Federal, State, and other regulatory provisions that address 
obligations pertaining to languages other than English.\32\ Factors 
relevant in the compliance context may vary depending on the 
institution and circumstances.
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    \32\ See, e.g., 12 CFR 1005.31(g)(1)(i) (requiring disclosures 
in languages other than English in certain circumstances involving 
remittance transfers); 12 CFR 1026.24(i)(7) (addressing obligations 
relating to advertising and disclosures in languages other than 
English for closed-end credit); 12 CFR 1002.4(e) (providing that 
disclosures made in languages other than English must be available 
in English upon request); Cal. Civ. Code Sec.1632(b) (requiring that 
certain agreements ``primarily'' negotiated in Spanish, Chinese, 
Tagalog, Vietnamese, or Korean must be translated to the language of 
the negotiation under certain circumstances); Or. Rev. Stat. Sec.  
86A.198 (requiring a mortgage banker, broker, or originator to 
provide translations of certain notices related to the mortgage 
transaction if the banker, broker, or originator advertises and 
negotiates in a language other than English under certain 
circumstances); Tex. Fin. Code Ann. Sec. 341.502(a-1) (providing 
that for certain loan contracts negotiated in Spanish, a summary of 
the loan terms must be made available to the debtor in Spanish in a 
form identical to required TILA disclosures for closed-end credit).
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    Examiners also have observed situations in which financial 
institutions' treatment of LEP and non-English-speaking consumers posed 
fair lending risk. For example, examiners observed one or more 
institutions marketing only some of their available credit card 
products to Spanish-speaking consumers, while marketing several 
additional credit card products to English-speaking consumers. One or 
more such institutions also lacked documentation describing how they 
decided to exclude those products from Spanish language marketing, 
raising questions about the adequacy of their compliance management 
systems related to fair lending. To mitigate any compliance risks 
related to these practices, one or more financial institutions revised 
their marketing materials to notify consumers in Spanish of the 
availability of other credit card products and included clear and 
timely disclosures to prospective consumers describing the extent and 
limits of any language services provided throughout the product 
lifecycle. Institutions were not required to provide Spanish language 
services to address this risk beyond the Spanish language services they 
were already providing.
    As reported in Supervisory Highlights, the Bureau's supervisory 
activity resulted in public enforcement actions related to the 
treatment of LEP and non-English-speaking consumers, including actions 
against Synchrony Bank and American Express Centurion Bank. The Fall 
2016 edition of Supervisory Highlights also discussed common features 
of a well-developed compliance management system that can mitigate fair 
lending and other risks associated with providing services to LEP and 
non-English-speaking consumers.
2.1.5 HMDA Data Collection and Reporting Reminders for 2017
    The Fall 2016 edition of Supervisory Highlights \33\ noted HMDA 
data collection and reporting reminders for 2017. Please see Section 
4.1.4 for detail on changes to HMDA data collection and reporting in 
2017 and later years.
---------------------------------------------------------------------------

    \33\ Consumer Financial Protection Bureau, Supervisory 
Highlights Fall 2016 at 25-26 (Oct. 31, 2016), http://files.consumerfinance.gov/f/documents/Supervisory_Highlights_Issue_13__Final_10.31.16.pdf.
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2.1.6 Assessing Redlining Risks
    The Fall 2016 edition of Supervisory Highlights \34\ noted that the 
Office of Fair Lending has identified redlining as a priority area in 
the Bureau's fair lending work. Redlining is a form of unlawful lending 
discrimination under ECOA. Historically, actual red lines were drawn on 
maps around neighborhoods to which credit would not be provided, giving 
this practice its name. The Federal prudential banking regulators have 
collectively defined redlining as ``a form of illegal disparate 
treatment in which a lender provides unequal access to credit, or 
unequal terms of credit, because of the race, color, national origin, 
or other prohibited characteristic(s) of the residents of the area in 
which the credit seeker resides or will reside or in which the 
residential property to be mortgaged is located.'' \35\
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    \34\ Consumer Financial Protection Bureau, Supervisory 
Highlights Fall 2016 at 27 (Oct. 31, 2016), http://files.consumerfinance.gov/f/documents/Supervisory_Highlights_Issue_13__Final_10.31.16.pdf.
    \35\ FFIEC Interagency Fair Lending Examination Procedures 
Manual (Aug. 2009), https://www.ffiec.gov/pdf/fairlend.pdf. CFPB 
Supervision and Examination Manual (Oct. 2012), http://files.consumerfinance.gov/f/201210_cfpb_supervision-and-examination-manual-v2.pdf.
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    The Bureau considers various factors, as appropriate, in assessing 
redlining risk in its supervisory activity. These factors, and the 
scoping process, are described in detail in the Interagency Fair 
Lending Examination Procedures. These factors generally include (but 
are not limited to):

[[Page 25256]]

     Strength of an institution's CMS, including underwriting 
guidelines and policies;
     Unique attributes of relevant geographic areas (population 
demographics, credit profiles, housing market);
     Lending patterns (applications and originations, with and 
without purchased loans);
     Peer and market comparisons;
     Physical presence (full service branches, ATM-only 
branches, brokers, correspondents, loan production offices), including 
consideration of services offered;
     Marketing;
     Mapping;
     Community Reinvestment Act (CRA) assessment area and 
market area more generally;
     An institution's lending policies and procedures record;
     Additional evidence (whistleblower tips, loan officer 
diversity, testing evidence, comparative file reviews); and
     An institution's explanations for apparent differences in 
treatment.
    The Bureau has observed that institutions with strong compliance 
programs examine lending patterns regularly, look for any 
statistically-significant disparities, evaluate physical presence, 
monitor marketing campaigns and programs, and assess CRA assessment 
areas and market areas more generally. Our supervisory experience 
reveals that institutions may reduce fair lending risk by documenting 
risks they identify and by taking appropriate steps in response to 
identified risks, as components of their fair lending compliance 
management programs.
    Examination teams typically assess redlining risk, at the initial 
phase, at the Metropolitan Statistical Area (MSA) level for each 
supervised entity, and consider the unique characteristics of each MSA 
(population demographics, etc.).
    To conduct the initial analysis, examination teams use HMDA data 
and Census data \36\ to assess the lending patterns at institutions 
subject to the Bureau's supervisory authority. To date, examination 
teams have used these publicly available data to conduct this initial 
risk assessment. These initial analyses typically compare a given 
institution's lending patterns to other lenders in the same MSA to 
determine whether the institution received significantly fewer 
applications from minority \37\ areas \38\ relative to other lenders in 
the MSA. Examination teams may consider the difference between the 
subject institution and other lenders in the percentage of their 
applications or originations that come from minority areas, both in 
absolute terms (for example, 10% vs. 20%) and relative terms (for 
example, the subject institution is half as likely to have applications 
or originations in minority areas as other lenders).\39\
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    \36\ The Bureau uses the most current United States national 
census data that apply to the HMDA data--for example, to date it has 
used 2010 census data for HMDA data 2011 and later. Specifically, 
the ``Demographic Profiles'' are used.
    \37\ For these purposes, the term ``minority'' ordinarily refers 
to anyone who identifies with any combination of race or ethnicity 
other than non-Hispanic White. Examination teams have also focused 
on African-American and Hispanic consumers, and could foreseeably 
focus on other more specific minority communities such as Asian, 
Native Hawaiian, or Native Alaskan populations, if appropriate for 
the specific geography. In one examination that escalated to an 
enforcement matter, the statistical evidence presented focused on 
African-American and Hispanic census tracts, rather than all 
minority consumers, because the harmed consumers were primarily 
African-American and Hispanic.
    \38\ Examination teams typically look at majority minority areas 
(>50% minority) and high minority areas (>80% minority), although 
sometimes one metric is more appropriate than another, and sometimes 
other metrics need to be used to account for the population 
demographics of the specific MSA.
    \39\ This relative analysis may be expressed as an odds ratio: 
The given lender's odds of receiving an application or originating a 
loan in a minority area divided by other lenders' comparable odds. 
An odds ratio greater than one means that the institution is more 
likely to receive applications or originate loans in minority areas 
than other lenders; an odds ratio lower than one means that the 
institution is less likely do so. Odds ratios show greater risk as 
they approach zero.
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    Examination teams may also compare an institution to other more 
refined groups of peer institutions. Refined peers can be defined in a 
number of ways, and past Bureau redlining examinations and enforcement 
matters have relied on multiple peer comparisons. The examination team 
often starts by compiling a refined set of peer institutions to find 
lenders of a similar size--for example, lenders that received a similar 
number of applications or originated a similar number of loans in the 
MSA. The examination team may also consider an institution's mix of 
lending products. For example, if an institution participates in the 
Federal Housing Administration (FHA) loan program, it may be compared 
to other institutions that also originate FHA loans; if not, it may be 
compared to other lenders that do not offer FHA loans. Additional 
refinements may incorporate loan purpose (for example, focusing only on 
home purchase loans) or action taken (for example, incorporating 
purchased loans into the analysis). Examination teams have also taken 
suggestions, as appropriate, from institutions about appropriate peers 
in specific markets.
    In considering lending patterns, examination teams generally 
consider marketing activities and physical presence, including 
locations of branches, loan production offices, ATMs, brokers, or 
correspondents. As noted in Supervisory Highlights, in one or more 
supervisory matters, the institutions concentrated marketing in 
majority-White suburban counties of a Metropolitan Statistical Area 
(MSA) and avoided a more urban county with the greatest minority 
population in the MSA. In one or more other exams, examiners observed 
that, although there were disparities in branch locations, the location 
of branches did not affect access to credit in that case because, among 
other things, the branches did not accept ``walk-in'' traffic and all 
applications were submitted online. The results of the examinations 
were also dependent on other factors that showed equitable access to 
credit, and there could be cases in which branch locations in 
combination with other risk-based factors escalate redlining risk.
    For redlining analyses, examination teams generally map 
information, including data on lending patterns (applications and 
originations), marketing, and physical presence, against census data to 
see if there are differences based on the predominant race/ethnicity of 
the census tract, county, or other geographic designation. 
Additionally, examination teams will consider any other available 
evidence about the nature of the lender's business that might help 
explain the observed lending patterns.
    Examination teams have considered numerous factors in each 
redlining examination, and have invited institutions to identify 
explanations for any apparent differences in treatment.
    Although redlining examinations are generally scheduled at 
institutions where the Bureau has identified statistical disparities, 
statistics are never considered in a vacuum. The Bureau will always 
work with institutions to understand their markets, business models, 
and other information that could provide nondiscriminatory explanations 
for lending patterns that would otherwise raise a fair lending risk of 
redlining.
2.1.7 Enforcement Actions Arising From Supervisory Activity
    In addition to providing information on supervisory trends, 
Supervisory Highlights also provides information on enforcement actions 
that resulted from supervisory activity. See Section 3.3.1

[[Page 25257]]

for more information on such public enforcement actions.

3. 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.\40\ 
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.
---------------------------------------------------------------------------

    \40\ 15 U.S.C. 1691e(g).
---------------------------------------------------------------------------

3.1 Fair Lending Public Enforcement Actions
3.1.1 Mortgage
BancorpSouth Bank
    On June 29, 2016, the CFPB and the DOJ announced a joint action 
against BancorpSouth Bank (BancorpSouth) for discriminatory mortgage 
lending practices that harmed African Americans and other minorities. 
The complaint filed by the CFPB and DOJ \41\ alleged that BancorpSouth 
engaged in numerous discriminatory practices, including illegal 
redlining in Memphis; denying certain African Americans mortgage loans 
more often than similarly situated non-Hispanic White applicants; 
charging African-American borrowers more for certain mortgage loans 
than non-Hispanic White borrowers with similar loan qualifications; and 
implementing an explicitly discriminatory loan denial policy. The 
consent order, which was entered by the court on July 25, 2016, 
requires BancorpSouth to pay $4 million in direct loan subsidies in 
minority neighborhoods \42\ in Memphis, at least $800,000 for community 
programs, advertising, outreach, and credit repair, $2.78 million to 
African-American consumers who were unlawfully denied or overcharged 
for loans, and a $3 million penalty.\43\
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    \41\ Complaint, United States v. BancorpSouth Bank, No. 1:16-cv-
00118-GHD-DAS (N.D. Miss. June 29, 2016), ECF No. 1, http://files.consumerfinance.gov/f/documents/201606_cfpb_bancorpsouth-joint-complaint.pdf.
    \42\ Majority-minority neighborhoods or minority neighborhoods 
refers to census tracts with a minority population greater than 50%.
    \43\ Consent Order, United States v. BancorpSouth Bank, No. 
1:16-cv-00118-GHD-DAS (N.D. Miss. July 25, 2016), ECF No. 8, http://files.consumerfinance.gov/f/documents/201606_cfpb_bancorpSouth-consent-order.pdf.
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    BancorpSouth is a regional depository institution headquartered in 
Tupelo, Mississippi that operates branches in eight States: Alabama, 
Arkansas, Florida, Louisiana, Mississippi, Missouri, Tennessee, and 
Texas. In the complaint, CFPB and DOJ alleged that BancorpSouth:
     Illegally redlined in Memphis: The agencies alleged that, 
at least from 2011 to 2013, BancorpSouth illegally redlined in the 
Memphis area--the market from which the bank received the most 
applications--by structuring its business to avoid and discourage 
consumers in minority neighborhoods from accessing mortgages. 
Specifically, the agencies alleged that the bank placed its branches 
outside of minority neighborhoods, excluded nearly all minority 
neighborhoods from the area it chose to serve under the Community 
Reinvestment Act, and directed nearly all of its marketing away from 
minority neighborhoods. As a result, BancorpSouth generated relatively 
few applications from minority neighborhoods as compared to its peers.
     Discriminated in underwriting certain mortgages: The 
agencies also alleged that one of BancorpSouth's lending units 
discriminated against African-American applicants by denying them 
mortgage loans--including loans with consumer as well as business 
purposes--more often than similarly situated non-Hispanic White 
applicants. Specifically, the agencies alleged that BancorpSouth 
granted its employees wide discretion to make credit decisions on 
mortgage loans. This discretion resulted in African-American applicants 
being denied certain mortgages at rates more than two times higher than 
expected if they had been non-Hispanic White.
     Discriminated in pricing certain mortgage loans: The 
agencies also alleged that one of BancorpSouth's lending units 
discriminated against African-American borrowers that it did approve by 
charging them higher annual percentage rates than non-Hispanic White 
borrowers with similar loan qualifications. Specifically, the agencies 
alleged that BancorpSouth granted its employees wide discretion to set 
the prices of mortgage loans. This discretion resulted in African-
American borrowers paying significantly higher annual percentage rates 
than similarly situated non-Hispanic White borrowers, costing African-
American consumers hundreds of dollars more each year they held the 
loan.
     Implemented an explicitly discriminatory denial policy: 
The complaint alleged that BancorpSouth required its employees to deny 
applications from minorities and other ``protected class'' applicants 
more quickly than those from other applicants and not to provide credit 
assistance to ``borderline'' applicants, which may have improved their 
chances of getting a loan. The bank generally permitted loan officers 
to assist marginal applicants, but the explicitly race-based denial 
policy departed from that practice. An audio recording of a 2012 
internal meeting at BancorpSouth clearly articulates this 
discriminatory policy, as well as negative and stereotyped perceptions 
of African Americans.
    The consent order requires BancorpSouth to take a number of 
remedial measures, including paying $4 million into a loan subsidy 
program to increase access to affordable credit, by offering qualified 
applicants in majority-minority neighborhoods in Memphis mortgage loans 
on a more affordable basis than otherwise available from BancorpSouth. 
The loan subsidies can include interest rate reductions, closing cost 
assistance, and down payment assistance. In addition, the consent order 
requires BancorpSouth to spend $500,000 to partner with community-based 
or governmental organizations that provide education, credit repair, 
and other assistance in minority neighborhoods in Memphis, and to spend 
at least $300,000 on a targeted advertising and outreach campaign to 
generate applications for mortgage loans from qualified consumers in 
majority-minority neighborhoods in Memphis. The consent order also 
requires BancorpSouth to pay $2.78 million to African-American 
consumers who were improperly denied mortgage loans or overcharged for 
their loans because of BancorpSouth's allegedly discriminatory pricing 
and underwriting policies. Finally, BancorpSouth paid a $3 million 
penalty to the CFPB's Civil Penalty Fund.
    In addition to the monetary requirements, the court decree orders 
BancorpSouth to expand its physical presence by opening one new branch 
or loan production office in a high-minority neighborhood (a census 
tract with a minority population greater than 80%) in Memphis. The bank 
is also

[[Page 25258]]

required to offer African-American consumers who were denied mortgage 
loans while BancorpSouth's allegedly discriminatory underwriting policy 
was in place the opportunity to apply for a new loan at a subsidized 
interest rate. Among other revisions to its policies, BancorpSouth is 
also required by the consent order to implement policies that require 
its employees to provide equal levels of information and assistance to 
individuals who inquire about mortgage loans, regardless of race or any 
other prohibited characteristic.
    When investigating identified redlining risks, the Bureau's 
approach is consistent with that of other Federal agencies, including 
other Federal law enforcement agencies and bank regulators. For 
example, the Bureau looks to risk indicators described in the 
Interagency Fair Lending Examination Procedures, which were initially 
issued by the prudential regulators and later adopted by the 
Bureau.\44\ The Bureau also looks to the types of evidence that DOJ has 
cited in support of its complaints alleging redlining. These sources 
identify multiple factors that the Bureau considers during a redlining 
investigation, detailed above in Section 2.1.6 on Redlining.
---------------------------------------------------------------------------

    \44\ See CFPB Supervision and Examination Manual (Oct. 2012), 
http://files.consumerfinance.gov/f/201210_cfpb_supervision-and-examination-manual-v2.pdf (CFPB Examination Procedures, Equal Credit 
Opportunity Act Baseline Review Modules).
---------------------------------------------------------------------------

    As part of its investigation, the CFPB also sent testers to several 
BancorpSouth branches to inquire about mortgages, and the results of 
that testing support the CFPB and DOJ allegations. The agencies alleged 
that, in several instances, a BancorpSouth loan officer treated the 
African-American tester less favorably than a non-Hispanic White 
counterpart. Specifically, the complaint alleged that BancorpSouth 
employees treated African-American testers who sought information about 
mortgage loans worse than non-Hispanic White testers with similar 
credit qualifications. For example, BancorpSouth employees provided 
information that would restrict African-American consumers to smaller 
loans than non-Hispanic White testers. This investigation was the 
CFPB's first use of testing to support an allegation of discrimination. 
Testing is a tool the Bureau employs in its enforcement investigative 
activity. Other government agencies, including the DOJ and HUD, as well 
as private fair housing organizations and State and local agencies, 
have used testers for decades as a method of identifying 
discrimination. Courts have long recognized testing as a reliable 
investigative tool.
3.1.2 Auto Finance
Toyota Motor Credit Corporation
    On February 2, 2016, the CFPB resolved an action with Toyota Motor 
Credit Corporation (Toyota Motor Credit) \45\ that requires Toyota 
Motor Credit to change its pricing and compensation system by 
substantially reducing or eliminating discretionary markups to minimize 
the risks of discrimination. On that same date, the DOJ also filed a 
complaint and proposed consent order in the U.S. District Court for the 
Central District of California addressing the same conduct. That 
consent order was entered by the court on February 11, 2016. Toyota 
Motor Credit's past practices resulted in thousands of African-American 
and Asian and Pacific Islander borrowers paying higher interest rates 
than similarly-situated non-Hispanic White borrowers for their auto 
loans. The consent order requires Toyota Motor Credit to pay up to 
$21.9 million in restitution to affected borrowers.
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    \45\ 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.
---------------------------------------------------------------------------

    Toyota Motor Credit is the U.S. financing arm of Toyota Financial 
Services, which is a subsidiary of Toyota Motor Corporation. As of the 
second quarter of 2015, Toyota Motor Credit was the largest captive 
auto lender \46\ in the United States and the fifth largest auto lender 
overall. As an indirect auto lender, Toyota Motor Credit sets risk-
based interest rates, or ``buy rates,'' that it conveys to auto 
dealers. Indirect auto lenders like Toyota Motor Credit then allow auto 
dealers to charge a higher interest rate when they finalize the deal 
with the consumer. This policy or practice is typically called 
``discretionary markup.'' Markups can generate compensation for dealers 
while giving them the discretion to charge similarly-situated consumers 
different rates. Over the time period under review, Toyota Motor Credit 
permitted dealers to mark up consumers' interest rates as much as 2.5%.
---------------------------------------------------------------------------

    \46\ Captive auto lenders are indirect auto lenders that are 
directly affiliated with a particular automobile manufacturer.
---------------------------------------------------------------------------

    The enforcement action was the result of a joint CFPB and DOJ 
investigation that began in April 2013. The agencies investigated 
Toyota Motor Credit's indirect auto lending activities' compliance with 
ECOA. The Bureau found that Toyota Motor Credit violated ECOA by 
adopting policies that resulted in African-American and Asian and 
Pacific Islander borrowers paying higher interest rates for their auto 
loans than non-Hispanic White borrowers as a result of the dealer 
markups that Toyota Motor Credit permitted and incentivized. Toyota 
Motor Credit's pricing and compensation structure meant that for the 
period covered in the order, thousands of African-American borrowers 
were charged, on average, over $200 more for their auto loans, and 
thousands of Asian and Pacific Islander borrowers were charged, on 
average, over $100 more for their auto loans.
    The CFPB's administrative action and DOJ's consent order require 
Toyota Motor Credit to reduce dealer discretion to mark up the interest 
rate to only 1.25% above the buy rate for auto loans with terms of five 
years or less, and 1% for auto loans with longer terms, or to move to 
non-discretionary dealer compensation. Toyota Motor Credit is also 
required to pay $19.9 million in remediation to affected African-
American and Asian and Pacific Islander borrowers whose auto loans were 
financed by Toyota Motor Credit between January 2011 and February 2, 
2016. Toyota Motor Credit is required to pay up to an additional $2 
million into the settlement fund to compensate any affected African-
American and Asian and Pacific Islander borrowers in the time period 
between February 2, 2016, and when Toyota Motor Credit implements its 
new pricing and compensation structure. The Bureau did not assess 
penalties against Toyota Motor Credit because of its responsible 
conduct, namely the proactive steps the institution is taking to 
directly address the fair lending risk of discretionary pricing and 
compensation systems by substantially reducing or eliminating that 
discretion altogether. In addition, Toyota Motor Credit is required to 
hire a settlement administrator who will contact consumers, distribute 
the funds, and ensure that affected borrowers receive compensation.
3.2 HMDA Warning Letters--Potential Mortgage Lending Reporting Failures
    On October 27, 2016, the CFPB issued warning letters to 44 mortgage 
lenders and mortgage brokers. The Bureau had information that appeared 
to show these financial institutions may be required to collect, 
record, and report data about their housing-related lending activity, 
and that they may be in violation of those requirements. The CFPB, in 
sending these letters, made no determination that a legal violation 
did, in fact, occur.
    HMDA, which was originally enacted in 1975, requires many financial

[[Page 25259]]

institutions to collect data about their housing-related lending 
activity, including home purchase loans, home improvement loans, and 
refinancings that they originate or purchase, or for which they receive 
applications. Annually, these financial institutions must report to the 
appropriate Federal agencies and make the data available to the public. 
The public and regulators can use the information to monitor whether 
financial institutions are serving the housing needs of their 
communities, to assist in distributing public-sector investment so as 
to attract private investment to areas where it is needed, and to 
identify possible discriminatory lending patterns.
    Data transparency helps to ensure that financial institutions are 
not engaging in discriminatory lending or failing to meet the credit 
needs of the entire community, including low- and moderate-income 
neighborhoods. Financial institutions that avoid their responsibility 
to collect and report mortgage loan data hinder regulatory efforts to 
enforce fair lending laws.
    The CFPB identified the 44 companies by reviewing available bank 
and nonbank mortgage data. The warning letters flag that entities that 
meet certain requirements are required to collect, record, and report 
mortgage lending data. The letters say that recipients should review 
their practices to ensure they comply with all relevant laws. The 
companies are encouraged to respond to the Bureau to advise if they 
have taken, or will take, steps to ensure compliance with the law. They 
can also tell the Bureau if they think the law does not apply to 
them.\47\
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    \47\ More information on HMDA reporting requirements and a 
sample warning letter are available at http://www.consumerfinance.gov/about-us/newsroom/cfpb-warns-financial-institutions-about-potential-mortgage-lending-reporting-failures/.
---------------------------------------------------------------------------

3.3 Implementing Enforcement Orders
    When an enforcement action is resolved through a public enforcement 
order, the Bureau (and the DOJ, 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 implemented a comprehensive fair lending compliance 
management system. Throughout 2016, the Office of Fair Lending worked 
to implement and oversee compliance with the pending public enforcement 
orders that were entered by Federal courts or entered by the Bureau's 
Director in prior years.
3.3.1 Settlement Administration
Ally Financial Inc. and Ally Bank
    On December 19, 2013, working in close coordination with the DOJ, 
the CFPB ordered Ally Financial Inc. and Ally Bank (Ally) to pay $80 
million in damages to harmed African-American, Hispanic, and Asian and/
or Pacific Islander borrowers. The DOJ simultaneously filed a consent 
order in the United States District Court for the Eastern District of 
Michigan, which was entered by the court on December 23, 2013. This 
public enforcement action represented the Federal government's largest 
auto loan discrimination settlement in history.\48\
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    \48\ Consent Order, In re Ally Financial Inc., CFPB No. 2013-
CFPB-0010 (Dec. 20, 2013), http://files.consumerfinance.gov/f/201312_cfpb_consent-order_ally.pdf.
---------------------------------------------------------------------------

    On January 29, 2016, approximately 301,000 harmed borrowers 
participating in the settlement--representing approximately 235,000 
loans--were mailed checks by the Ally settlement administrator, 
totaling $80 million plus interest, which the Bureau announced in a 
blog post in English and Spanish.49 50 In addition, and 
pursuant to its continuing obligations under the terms of the orders, 
Ally has also made ongoing payments to consumers affected after the 
consent orders were entered. Specifically, Ally paid approximately 
$38.9 million in September 2015 and an additional $51.5 million in May 
2016, to consumers that Ally determined were both eligible and 
overcharged on auto loans issued during 2014 and 2015, respectively.
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    \49\ Patrice Ficklin, Harmed Ally Borrowers Have Been Sent $80 
Million in Damages, Consumer Financial Protection Bureau (Jan. 29, 
2016), http://www.consumerfinance.gov/blog/harmed-ally-borrowers-have-been-sent-80-million-in-damages/.
    \50\ Patrice Ficklin, Prestatarios perjudicados por Ally reciben 
$80 millones en da[ntilde]os, Consumer Financial Protection Bureau 
(Feb. 4, 2016), http://www.consumerfinance.gov/about-us/blog/prestatarios-perjudicados-por-ally-reciben-80-millones-en-danos/.
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Provident Funding Associates
    As previously reported, on May 28, 2015, the CFPB and the DOJ filed 
a joint complaint against Provident Funding Associations (Provident) 
for discrimination in mortgage lending, along with a proposed order to 
settle the complaint in the United States District Court for the 
Northern District of California. The complaint alleged that from 2006 
to 2011, Provident discriminated in violation of ECOA by charging over 
14,000 African-American and Hispanic borrowers more in brokers' fees 
than similarly situated non-Hispanic White borrowers on the basis of 
race and national origin. The consent order, which the court entered on 
June 18, 2015, requires Provident to pay $9 million in damages to 
harmed borrowers, to hire a settlement administrator to distribute 
funds to the harmed borrowers identified by the CFPB and DOJ, and not 
to discriminate against borrowers in assessing total broker fees.\51\
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    \51\ Consent Order, United States v. Provident Funding Assocs., 
L.P., No. 3:15-cv-023-73 (N.D. Cal. May 28, 2015), ECF No. 2, http://files.consumerfinance.gov/f/201505_cfpb_consent-order-provident-funding-associates.pdf.
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    In Fall 2016, the Bureau published a blog post in English and 
Spanish announcing the selection of the settlement administrator and 
its mailing of participation packets to eligible 
consumers.52 53 The blog post also provided information to 
consumers on how to contact the administrator, participate in the 
settlement, and submit settlement forms.
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    \52\ Patrice Ficklin, Provident Settlement Administrator to 
Contact Eligible Borrowers Soon, Consumer Financial Protection 
Bureau (Sept. 28, 2016), http://www.consumerfinance.gov/about-us/blog/provident-settlement-administrator-contact-eligible-borrowers-soon/.
    \53\ Patrice Ficklin, Administrador del Acuerdo de Provident 
planea ponerse en contacto con prestatarios elegibles 
pr[oacute]ximamente, Consumer Financial Protection Bureau (Oct. 6, 
2016), http://www.consumerfinance.gov/about-us/blog/administrador-del-acuerdo-de-provident-planea-ponerse-en-contacto-con-prestatarios-elegibles-proximamente/.
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American Honda Finance Corporation
    As previously reported, on July 14, 2015, the CFPB and the DOJ 
resolved an action with American Honda Finance Corporation (Honda) to 
put new measures in place to address discretionary auto loan pricing 
and compensation practices. Honda's past practices resulted in 
thousands of African-American, Hispanic, and Asian and Pacific Islander 
borrowers paying higher interest rates than non-Hispanic White 
borrowers for their auto loans between January 1, 2011, and July 14, 
2015, without regard to their creditworthiness. The consent order 
requires Honda to change its pricing and compensation system to 
substantially reduce dealer discretion and minimize the risks of 
discrimination, and pay $24 million in restitution to affected 
borrowers.\54\
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    \54\ 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.
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    In October 2016, the Bureau published a blog post in English and 
Spanish announcing that the settlement administrator was mailing 
participation

[[Page 25260]]

packets to potentially eligible consumers, and providing information to 
consumers on how to contact the administrator, participate in the 
settlement, and submit settlement forms.55 56
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    \55\ Patrice Ficklin, What you need to know to get money from 
the settlement with Honda Finance for overcharging minorities, 
Consumer Financial Protection Bureau (Oct. 3, 2016), http://www.consumerfinance.gov/about-us/blog/what-you-need-know-get-money-settlement-honda-finance-overcharging-minorities/.
    \56\ Patrice Ficklin, Lo que necesita saber para recibir dinero 
del acuerdo de compensaci[oacute]n con Honda Finance por cobrarles 
de m[aacute]s a las minor[iacute]as, Consumer Financial Protection 
Bureau (Oct. 11, 2016), https://www.consumerfinance.gov/about-us/blog/lo-que-necesita-saber-para-recibir-dinero-del-acuerdo-de-compensacion-con-honda-finance-por-cobrarles-de-mas-las-minorias/.
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3.4 Equal Credit Opportunity Act Referrals to the Department of Justice
    The CFPB must refer to the DOJ 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.\57\ The CFPB also may refer other 
potential ECOA violations to the DOJ. In 2016, the CFPB referred eight 
matters to the DOJ. In four of the eight matters, the DOJ declined to 
open an independent investigation and deferred to the Bureau's handling 
of the matter. The CFPB's referrals to the DOJ in 2016 covered a 
variety of practices, specifically discrimination in mortgage lending 
on the bases of the age, marital status, receipt of public assistance 
income, and sex; discrimination in indirect auto lending on the bases 
of national origin, race, and receipt of public assistance income; and 
discrimination in credit card account management on the bases of 
national origin and race.
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    \57\ 15 U.S.C. 1691e(g).
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3.5 Pending Fair Lending Investigations
    In 2016, the Bureau had a number of ongoing fair lending 
investigations and authorized enforcement actions against a number of 
institutions involving a variety of consumer financial products. 
Consistent with the Bureau's priorities and the Office of Fair 
Lending's risk-based prioritization, 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 2016, the Bureau had a 
number of pending investigations in this area. Additionally, at the end 
of 2016, the Bureau had a number of pending investigations in other 
areas.

4. Rulemaking and Related Guidance

4.1 Home Mortgage Disclosure Act and Regulation C
    On October 2015, the Bureau issued and published in the Federal 
Register a final rule to implement the Dodd-Frank amendments to 
HMDA.\58\ The rule also finalizes certain amendments that the Bureau 
believes are necessary to improve the utility of HMDA data, further the 
purposes of HMDA, improve the quality of HMDA data, and create a more 
transparent mortgage market.
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    \58\ Home Mortgage Disclosure, 80 FR 66128 (Oct. 28, 2015) 
(codified at 12 CFR pt. 1003), https://www.thefederalregister.org/fdsys/pkg/FR-2015-10-28/pdf/2015-26607.pdf.
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4.1.1 HMDA History
    HMDA, as implemented by Regulation C, is intended to provide the 
public with loan data that can be used to help determine whether 
financial institutions are serving the housing needs of their 
communities; to assist public officials in distributing public-sector 
investment to attract private investment in communities where it is 
needed; and to assist in identifying possible discriminatory lending 
patterns and enforcing anti-discrimination statutes.\59\ HMDA data are 
also used for a range of mortgage market monitoring purposes by 
community groups, public officials, the financial industry, economists, 
academics, social scientists, regulators, and the media. Bank 
regulators and other agencies use HMDA to monitor compliance with and 
enforcement of the CRA and Federal anti-discrimination laws, including 
ECOA and the Fair Housing Act (FHA).
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    \59\ 12 U.S.C. 2801; 12 CFR 1003.1(b).
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    The Dodd-Frank Act transferred rulemaking authority for HMDA to the 
Bureau, effective July 2011. It also amended HMDA to require financial 
institutions to report new data points and authorized the Bureau to 
require financial institutions to collect, record, and report 
additional information.
4.1.2 Summary of Regulation C Changes
    The HMDA Rule changes institutional coverage in two phases. First, 
to reduce burden on industry, certain lower-volume depository 
institutions will no longer be required to collect and report HMDA data 
beginning in 2017. A bank, savings association, or credit union will 
not be subject to Regulation C in 2017 unless it meets the asset-size, 
location, federally related, and loan activity tests under current 
Regulation C and it originates at least 25 home purchase loans, 
including refinancings of home purchase loans, in both 2015 and 2016. 
Second, effective January 1, 2018, the HMDA Rule adopts a uniform loan-
volume threshold for all institutions. Beginning in 2018, an 
institution will be subject to Regulation C if it originated at least 
25 covered closed-end mortgage loan originations in each of the two 
preceding calendar years or at least 100 covered open-end lines of 
credit in each of the two preceding calendar years. Other applicable 
coverage requirements will apply, depending on the type of covered 
entity.
    The Rule also modifies the types of transactions covered under 
Regulation C. In general, the HMDA Rule adopts a dwelling-secured 
standard for transactional coverage. Beginning on January 1, 2018, 
covered loans under the HMDA Rule generally will include closed-end 
mortgage loans and open-end lines of credit secured by a dwelling and 
will not include unsecured loans.
    For HMDA data collected on or after January 1, 2018, covered 
institutions will collect, record, and report additional information on 
covered loans. New data points include those specifically identified in 
Dodd-Frank as well as others the Bureau determined will assist in 
carrying out HMDA's purposes. The HMDA Rule adds new data points for 
applicant or borrower age, credit score, automated underwriting system 
information, debt-to-income ratio, combined loan-to-value ratio, unique 
loan identifier, property value, application channel, points and fees, 
borrower-paid origination charges, discount points, lender credits, 
loan term, prepayment penalty, non-amortizing loan features, interest 
rate, and loan originator identifier as well as other data points. The 
HMDA Rule also modifies several existing data points.
    For data collected on or after January 1, 2018, the HMDA Rule 
amends the requirements for collection and reporting of information 
regarding an applicant's or borrower's ethnicity, race, and sex. First, 
a covered institution will report whether or not it collected the 
information on the basis of visual observation or surname. Second, 
covered institutions must permit applicants to self-identify their 
ethnicity and race using disaggregated ethnic and racial subcategories. 
However, the HMDA Rule will not require or permit covered institutions 
to use the disaggregated subcategories when identifying the applicant's 
or borrower's ethnicity and race based on visual observation or 
surname.

[[Page 25261]]

    The Bureau is developing a new web-based submission tool for 
reporting HMDA data, which covered institutions will use beginning in 
2018. Regulation C's appendix A is amended effective January 1, 2018 to 
include new transition requirements for data collected in 2017 and 
reported in 2018. Covered institutions will be required to 
electronically submit their loan application registers (LARs). 
Beginning with data collected in 2018 and reported in 2019, covered 
institutions will report the new dataset required by the HMDA Rule, 
using revised procedures that will be available at 
www.consumerfinance.gov/hmda.
    Beginning in 2020, the HMDA Rule requires quarterly reporting for 
covered institutions that reported a combined total of at least 60,000 
applications and covered loans in the preceding calendar year. An 
institution will not count covered loans that it purchased in the 
preceding calendar year when determining whether it is required to 
report on a quarterly basis. The first quarterly submission will be due 
by May 30, 2020.
    Beginning in 2018, covered institutions will no longer be required 
to provide a disclosure statement or a modified LAR to the public upon 
request. Instead, in response to a request, a covered institution will 
provide a notice that its disclosure statement and modified LAR are 
available on the Bureau's Web site. These revised disclosure 
requirements will apply to data collected on or after January 1, 2017 
and reported in or after 2018.
    For data collected in or after 2018 and reported in or after 2019, 
the Bureau will use a balancing test to determine whether and, if so, 
how HMDA data should be modified prior to its disclosure in order to 
protect applicant and borrower privacy while also fulfilling HMDA's 
disclosure purposes. At a later date, the Bureau will provide a process 
for the public to provide input regarding the application of this 
balancing test to determine the HMDA data to be publicly disclosed.
4.1.3 Reducing Industry Burden
    The Bureau took a number of steps to reduce industry burden while 
ensuring HMDA data are useful and reflective of the current housing 
finance market. A key part of this balancing is ensuring an adequate 
implementation period. Most provisions of the HMDA Rule go into effect 
on January 1, 2018--more than two years after publication of the Rule--
and apply to data collected in 2018 and reported in 2019 or later 
years. At the same time, an institutional coverage change that will 
reduce the number of depository institutions that need to report is 
effective earlier: On January 1, 2017. Institutions subject to the new 
quarterly reporting requirement will have additional time to prepare: 
That requirement is effective on January 1, 2020, and the first 
quarterly submission will be due by May 30, 2020.
    As with all of its rules, the Bureau continues to look for ways to 
help the mortgage industry implement the new mortgage lending data 
reporting rules, and has created regulatory implementation resources 
that are available online. These resources include an overview of the 
final rule, a plain-language compliance guide, a timeline with various 
effective dates, a decision tree to help institutions determine whether 
they need to report mortgage lending data, a chart that provides a 
summary of the reportable data, a chart that describes when to report 
data as not applicable, a chart that describes what transactions are 
reportable, a webinar on the HMDA Rule, and a Technology Preview for 
the Bureau's new web-based submission tool. In addition, the Bureau has 
published Filing Instruction Guides (FIG) for 2017 and 2018 that 
include file specifications. The Bureau will monitor implementation 
progress and will be publishing additional regulatory implementation 
tools and resources on its Web site to support implementation 
needs.\60\ Since the HMDA rule was issued on October 15, 2015, the 
Bureau has focused on outreach by sharing information about the 
regulatory changes, including webinars, responding to industry 
inquiries, and issuing press releases and emails to stakeholder groups. 
In addition, Bureau staff has spoken at numerous industry-focused 
conferences and mortgage events. Since the HMDA rule has been released, 
the Bureau's Web site has had over 50,000 visits to the HMDA 
implementation page and over 18,000 downloads of our plain-language 
HMDA compliance guide.
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    \60\ These resources are available at Consumer Financial 
Protection Bureau, Home Mortgage Disclosure Act rule implementation, 
http://www.consumerfinance.gov/regulatory-implementation/hmda/.
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4.1.4 Filing 2017 HMDA Data
    Beginning with the HMDA data collected in 2017 and submitted in 
2018, responsibility to receive and process HMDA data will transfer 
from the Federal Reserve Board (FRB) to the CFPB. The HMDA agencies 
have agreed that a covered institution filing HMDA data collected in or 
after 2017 with the CFPB will be deemed to have submitted the HMDA data 
to the appropriate Federal agency.\61\ The effective date of the change 
in the Federal agency that receives and processes the HMDA data does 
not coincide with the effective date for the new HMDA data to be 
collected and reported under the Final Rule amending Regulation C 
published in the Federal Register on October 28, 2015. The Final Rule's 
new data requirements will apply to data collected beginning on January 
1, 2018. The data fields for data collected in 2017 have not changed.
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    \61\ The HMDA agencies refer collectively to the CFPB, the 
Office of the Comptroller of the Currency (OCC), the Federal Deposit 
Insurance Corporation (FDIC), the FRB, the National Credit Union 
Administration (NCUA), and the Department of Housing and Urban 
Development (HUD).
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    Also beginning with data collected in 2017, filers will submit 
their HMDA data using a web interface referred to as the ``HMDA 
Platform.'' In addition, beginning with the data collected in 2017, as 
part of the submission process, a HMDA reporter's authorized 
representative with knowledge of the data submitted shall certify to 
the accuracy and completeness of the data submitted. Additional 
information about HMDA, the FIG, and other data submission resources is 
located at the Bureau's Web site.\62\
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    \62\ See Consumer Financial Protection Bureau, Filing 
instructions guide for HMDA data collected in 2017 (July 2016), 
http://www.consumerfinance.gov/data-research/hmda/static/for-filers/2017/2017-HMDA-FIG.pdf.
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4.1.5 HMDA Data Resubmission RFI
    In response to dialogue with industry and other stakeholders, the 
Bureau is considering modifications to its current HMDA resubmission 
guidelines. In comments on the Bureau's proposed changes to Regulation 
C, some stakeholders asked that the Bureau adjust its existing HMDA 
resubmission guidelines to reflect the expanded data the Bureau will 
collect under the HMDA Rule.
    Accordingly, on January 7, 2016, the Bureau published on its Web 
site a Request for Information (RFI) asking for public comment on the 
Bureau's HMDA resubmission guidelines.\63\ Specifically, the Bureau 
requested feedback on the Bureau's use of resubmission error 
thresholds; how they should be calculated; whether they should vary 
with the size of the HMDA submission or kind of data; and the 
consequences for exceeding a threshold, among other

[[Page 25262]]

topics. Some examples of questions posed to the public include:
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    \63\ See Consumer Financial Protection Bureau, CFPB Seeks Public 
Input on Mortgage Lending Information Resubmission Guidelines (Jan. 
7, 2016), http://www.consumerfinance.gov/newsroom/cfpb-seeks-public-input-on-mortgage-lending-information-resubmission-guidelines/.
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     Should the Bureau continue to use error percentage 
thresholds to determine the need for data resubmission? If not, how 
else may the Bureau ensure data integrity and compliance with HMDA and 
Regulation C?
     If the Bureau retains error percentage thresholds, should 
the thresholds be calculated differently than they are today? If so, 
how and why?
     If the Bureau retains error percentage thresholds, should 
it continue to maintain separate error thresholds for the entire HMDA 
LAR sample and individual data fields within the LAR sample? If not, 
why?
    The RFI was published in the Federal Register on January 12, 
2016.\64\ The 60-day comment period ended on March 14, 2016. As of this 
report's publication date, in light of feedback received, the Bureau 
was considering whether to adjust its existing HMDA resubmission 
guidelines and if so, how.
---------------------------------------------------------------------------

    \64\ Request for Info. Regarding Home Mortgage Disclosure Act 
Resubmission Guidelines, 81 F.R. 1405 (Jan. 12, 2016), https://www.thefederalregister.org/fdsys/pkg/FR-2016-01-12/pdf/2016-00442.pdf.
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4.1.6 HMDA Rule Technical Corrections and Clarifying Amendments
    Since issuing the 2015 HMDA Final Rule, the Bureau has identified 
and received information about some areas of uncertainty about 
requirements under the rule. This spring, the Bureau plans to seek 
comment on a proposal to amend certain provisions of Regulation C to 
make technical corrections and to clarify certain requirements under 
Regulation C.
4.2 ECOA and Regulation B
    In 2016, with regard to ECOA, the CFPB published a Bureau Official 
Approval and was in the proposed rule stage to amend certain sections 
of Regulation B.
4.2.1 Status of New Uniform Residential Loan Application and Collection 
of Expanded Home Mortgage Disclosure Act Information About Ethnicity 
and Race in 2017 Under Regulation B
    On September 23, 2016, the Bureau published a Bureau Official 
Approval pursuant to section 706(e) of the ECOA concerning the new 
Uniform Residential Loan Application and the collection of expanded 
HMDA information about ethnicity and race in 2017.\65\
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    \65\ Consumer Financial Protection Bureau, Status of New Uniform 
Residential Loan Application and Collection of Expanded Home 
Mortgage Disclosure Act Information about Ethnicity and Race in 2017 
under Regulation B (Sept. 23, 2016), https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/092016_cfpb_HMDAEthinicityRace.pdf.
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    In accordance with the request by Federal Housing Finance Agency 
and the Federal Home Loan Mortgage Corporation (Freddie Mac) and the 
Federal National Mortgage Association (Fannie Mae), the Bureau reviewed 
the revised and redesigned Uniform Residential Loan Application issued 
on August 23, 2016 (2016 URLA). Under the terms provided in the 
Bureau's notice, the Bureau determined that the relevant language in 
the 2016 URLA is in compliance with the specified provisions of 
Regulation B. A creditor's use of the 2016 URLA is not required under 
Regulation B. However, the notice provides that, a creditor that uses 
the 2016 URLA without any modification that would violate Sec.  
1002.5(b) through (d) would act in compliance with Sec.  1002.5(b) 
through (d).
    The notice also addressed collection of information concerning the 
ethnicity and race of applicants in conformity with Regulation B from 
January 1, 2017, through December 31, 2017. The Bureau's official 
approval provided that at any time from January 1, 2017, through 
December 31, 2017, a creditor may, at its option, permit applicants to 
self-identify using disaggregated ethnic and racial categories as 
instructed in appendix B to Regulation C, as amended by the 2015 HMDA 
final rule. The Bureau believes such authorization may provide 
creditors time to begin to implement the regulatory changes and improve 
their compliance processes before the new requirement becomes 
effective, and therefore mandatory, on January 1, 2018. Allowing for 
this increased implementation period will, in the Bureau's view, reduce 
compliance burden and further the purposes of HMDA and Regulation C.
4.2.2 Amendments to the Equal Credit Opportunity Act (Regulation B) 
Ethnicity and Race Information Collection
    Regulation C currently requires financial institutions to collect 
and report information about the ethnicity and race, as well as certain 
other characteristics, of applicants and borrowers. Regulation C, as 
amended by 2015 HMDA Final Rule, generally effective January 1, 2018, 
will require financial institutions to permit applicants and borrowers 
to self-identify using disaggregated ethnic and racial categories 
beginning January 1, 2018. Regulation B also currently requires 
creditors to request and retain information about the ethnicity and 
race, as well as certain other characteristics, of applicants for 
certain dwelling-secured loans, but uses only aggregate ethnic and 
racial categories. On March 24, 2017, the Bureau issued a proposed rule 
seeking comment on amendments to Regulation B to permit creditors 
additional flexibility in complying with Regulation B in order to 
facilitate compliance with Regulation C, to add certain model forms and 
remove others from Regulation B, and to make 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.\66\
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    \66\ Consumer Financial Protection Bureau, Amendments to Equal 
Credit Opportunity Act (Regulation B) Ethnicity and Race Information 
Collection 2017-0009 (March 24, 2017), http://files.consumerfinance.gov/f/documents/201703_cfpb_NPRM-to-amend-Regulation-B.pdf.
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4.3 Small Business Data Collection
    Section 1071 of the Dodd-Frank Act requires financial institutions 
to compile, maintain, and submit to the Bureau certain data on credit 
applications for women-owned, minority-owned, and small businesses.\67\ 
Congress enacted section 1071 for the purpose of facilitating 
enforcement of fair lending laws and identifying business and community 
development needs and opportunities for women-owned, minority-owned, 
and small businesses. The amendments to ECOA made by the Dodd-Frank Act 
require that certain data be collected and maintained, including the 
number of the application and date the application was received; the 
type and purpose of loan or credit applied for; the amount of credit 
applied for and approved; the type of action taken with regard to each 
application and the date of such action; the census tract of the 
principal place of business; the gross annual revenue of the business; 
and the race, sex, and ethnicity of the principal owners of the 
business. The Bureau's Fall 2016 Unified Agenda and Regulatory Plan 
indicates that rulemaking pursuant to Section 1071 is now in the pre-
rule stage.\68\ This first stage of the Bureau's work will be focused 
on outreach and research and on the potential ways to implement section 
1071, after which the Bureau will begin developing proposed rules 
concerning the data to be collected and determining the appropriate 
operational procedures and privacy protections needed for information-
gathering and public disclosure.
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    \67\ Dodd-Frank Act section 1071 (codified at 15 U.S.C. 1691c-
2).
    \68\ Semiannual Regulatory Agenda, 81 FR 94844, 94846 (Dec. 23, 
2016).

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[[Page 25263]]

    The Bureau has begun to explore some of the issues involved in the 
rulemaking, including through ongoing engagement with industry and 
other stakeholders. In addition, current and future small business 
lending supervisory activity will help expand and enhance the Bureau's 
knowledge in this area, including the credit application process; 
existing data collection processes; and the nature, extent, and 
management of fair lending risk. The Bureau is also considering how 
best to work with other agencies to, in part, gain insight into 
existing business lending data collection efforts and to explore 
possible ways to cooperate in future efforts.
4.4 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 our 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.
    In 2016, the Bureau filed an amicus brief in Alexander v. AmeriPro 
Funding, Inc., in which a group of consumer plaintiffs appealed the 
dismissal by the United States District Court for the Southern District 
of Texas of an ECOA complaint alleging discrimination by mortgage 
lenders on the basis that all or part of the plaintiffs' income derived 
from a public assistance program. The District Court held that the 
complaint failed to allege facts that gave rise to a prima facie 
showing of discrimination under the McDonnell-Douglas framework and 
also failed to allege direct evidence of discrimination because the 
allegations were ``conclusory'' and did not allege hostility or 
animus.\69\ The Bureau filed its amicus brief on February 23, 2016, and 
argued that the District Court's decision imposed pleading burdens on 
ECOA plaintiffs that were not required by ECOA or the Federal Rules of 
Civil Procedure.\70\
---------------------------------------------------------------------------

    \69\ Alexander v. AmeriPro Funding, Inc., No. H-14-2947, 2015 WL 
4545625 at *4-5 (S.D. Tex. July 28, 2015).
    \70\ Br. of Amicus Curiae Consumer Financial Protection Bureau 
in Supp. of Appellants and Reversal, Alexander, et al. v. AmeriPro 
Funding, Inc., et al., No. 15-20710 (5th Cir. Feb. 23, 2016), ECF 
No. 00513394181, https://www.consumerfinance.gov/policy-compliance/amicus/briefs/alexander-ameripro-funding/
---------------------------------------------------------------------------

    On February 16, 2017, in a unanimous decision, the United States 
Court of Appeals for the Fifth Circuit reversed the dismissal with 
respect to some of the plaintiffs but affirmed the dismissal with 
respect to others.\71\ Reversing the District Court, the court held 
that one set of plaintiffs stated an ECOA claim because they alleged 
that they applied for credit, that the creditor refused to consider 
public assistance income in considering their credit applications, and 
that the applicants as a result received less favorable mortgages. 
Unlike the District Court's decision, the court did not require the 
plaintiffs to also allege hostility or animus or to make a prima facie 
showing of discrimination under the McDonnell-Douglas framework. 
Affirming the District Court, the court also held that another set of 
plaintiffs failed to state a claim under ECOA because they either 
failed to allege sufficient facts of discriminatory conduct, failed to 
allege facts indicating that they had applied for credit, or failed to 
allege facts indicating that one defendant was a ``creditor'' under 
ECOA.
---------------------------------------------------------------------------

    \71\ Alexander v. AmeriPro Funding, Inc., 848 F.3d 698 (5th Cir. 
2017).
---------------------------------------------------------------------------

5. Interagency Coordination

5.1 Interagency Coordination and Engagement
    The Office of Fair Lending regularly coordinates the CFPB'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.\72\ 
Through our interagency engagement, we work to address current and 
emerging fair lending risks.
---------------------------------------------------------------------------

    \72\ Dodd-Frank Act section 1013(c)(2)(B) (codified at 12 U.S.C. 
5493(c)(2)(B)).
---------------------------------------------------------------------------

    On November 14, 2016, along with other members of the FFIEC, the 
Bureau issued an updated Uniform Interagency Consumer Compliance Rating 
System.\73\ The revisions reflect the regulatory, supervisory, 
technological, and market changes that have occurred since the system 
was established. The previous rating system was adopted in 1980, and 
the proposed revisions aim to address the broad array of risks in the 
market that can cause consumer harm, including fair lending violations. 
The Bureau plans to implement the updated rating system on consumer 
compliance examinations that begin on or after March 31, 2017.
---------------------------------------------------------------------------

    \73\ Uniform Interagency Consumer Compliance Rating System, 81 
FR 79473 (Nov. 14, 2016), https://www.federalregister.gov/documents/2016/11/14/2016-27226/uniform-interagency-consumer-compliance-rating-system.
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    The CFPB, 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 CFPB 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 comprise 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 prudential regulators to coordinate our fair lending work.
    The CFPB takes part in the FFIEC HMDA/Community Reinvestment Act 
Data Collection Subcommittee, which is a subcommittee of the FFIEC Task 
Force on Consumer Compliance, as its work relates to the collection and 
processing of HMDA data, and the Bureau is one of the agencies to which 
HMDA data is submitted by financial institutions.

6. Outreach: Promoting Fair Lending Compliance and Education

    Pursuant to Dodd-Frank,\74\ the Office of Fair Lending regularly 
engages in outreach with industry, bar associations, consumer 
advocates, civil rights organizations, other government agencies, and 
other stakeholders to help educate and inform about fair lending. The 
Bureau is committed to communicating directly with all stakeholders on 
its policies, compliance expectations, and fair lending priorities. As 
part of this commitment to outreach and education in the area of fair 
lending, equal opportunity, and ensuring fair access to credit, Bureau 
personnel have engaged in dialogue with stakeholders on issues 
including the use of public assistance income in underwriting, 
redlining, disparate treatment, disparate impact, HMDA data collection 
and reporting, indirect auto financing, the use of proxy methodology, 
and the unique challenges facing LEP and lesbian, gay, bisexual and 
transgender (LGBT) consumers in accessing credit. Outreach is 
accomplished through issuance of Reports to Congress, Interagency

[[Page 25264]]

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 
matters.
---------------------------------------------------------------------------

    \74\ Dodd-Frank Act section 1013(c)(2)(C) (codified at 12 U.S.C. 
5493(c)(2)(C)).
---------------------------------------------------------------------------

6.1 Blog Posts
    The Bureau firmly believes that an informed consumer is the best 
defense against discriminatory lending practices. When issues arise 
that consumers need to know about, the Bureau uses many tools to aid 
consumers in financial decision-making.75 76 The Bureau 
regularly uses its blog as a tool to communicate effectively to 
consumers on timely issues, emerging areas of concern, Bureau 
initiatives, and more. In 2016 we published 14 blog posts related to 
two main fair lending topics: Providing consumers updated information 
about our fair lending enforcement actions and providing consumer 
education on fair lending. Our enforcement update blog posts included 
the announcement (in both English and Spanish) of the BancorpSouth Bank 
settlement,77 78 updates on the Ally Financial Inc. and Ally 
Bank settlement,79 80 updates on the Provident Funding 
Association, L.P. settlement 81 82 and updates on the 
American Honda Finance Corporation settlement.83 84 Our 
consumer education blog posts included reminding consumers of their 
rights for fair treatment in the financial marketplace,85 86 
a series of two blog posts about the history of ECOA \87\ and what it 
means for consumers,\88\ a blog post outlining the 2017 priorities for 
Fair Lending,\89\ and a blog post about shopping for an auto loan.\90\
---------------------------------------------------------------------------

    \75\ For helpful information on shopping for auto loans, please 
see the Bureau's Know Before You Owe: Auto Loans toolkit, at 
Consumer Financial Protection Bureau, Take control of your auto 
loan, http://www.consumerfinance.gov/consumer-tools/auto-loans/.
    \76\ For helpful information on shopping for home loans, please 
see the Bureau's toolkit, at Consumer Financial Protection Bureau, 
Owning a Home: Tools and resources for homebuyers, http://www.consumerfinance.gov/owning-a-home/.
    \77\ Patrice Ficklin & Daniel Dodd-Ramirez, Redlining: CFPB and 
DOJ action requires BancorpSouth Bank to pay millions to harmed 
consumers, Consumer Financial Protection Bureau (June 29, 2016), 
http://www.consumerfinance.gov/about-us/blog/redlining-cfpb-and-doj-action-requires-bancorpsouth-bank-pay-millions-harmed-consumers/.
    \78\ Patrice Ficklin & Daniel Dodd-Ramirez, La 
delimitaci[oacute]n ilegal: Acci[oacute]n del CFPB y del 
Departamento de Justicia requiere que el banco BancorpSouth pague 
millones de d[oacute]lares a consumidores perjudicados, Consumer 
Financial Protection Bureau (July 6, 2016), http://www.consumerfinance.gov/about-us/blog/la-delimitacion-ilegal-accion-del-cfpb-y-del-departamento-de-justicia-requiere-que-el-banco-bancorpsouth-pague-millones-de-dolares-consumidores-perjudicados/.
    \79\ Patrice Ficklin, Harmed Ally borrowers have been sent $80 
million in damages, Consumer Financial Protection Bureau (Jan. 29, 
2016), http://www.consumerfinance.gov/about-us/blog/harmed-ally-borrowers-have-been-sent-80-million-in-damages/.
    \80\ Patrice Ficklin, Prestatarios perjudicados por Ally reciben 
$80 millones en da[ntilde]os, Consumer Financial Protection Bureau 
(Feb. 4, 2016), http://www.consumerfinance.gov/about-us/blog/prestatarios-perjudicados-por-ally-reciben-80-millones-en-danos/.
    \81\ Patrice Ficklin, Provident Settlement Administrator to 
contact eligible borrowers soon, Consumer Financial Protection 
Bureau (Sept. 28, 2016), http://www.consumerfinance.gov/about-us/blog/provident-settlement-administrator-contact-eligible-borrowers-soon/.
    \82\ Patrice Ficklin, Administrador del Acuerdo de Provident 
planea ponerse en contacto con prestatarios elegibles 
pr[oacute]ximamente, Consumer Financial Protection Bureau (Oct. 6, 
2016), http://www.consumerfinance.gov/about-us/blog/administrador-del-acuerdo-de-provident-planea-ponerse-en-contacto-con-prestatarios-elegibles-proximamente/.
    \83\ Patrice Ficklin, What you need to know to get money from 
the settlement with Honda Finance for overcharging minorities, 
Consumer Financial Protection Bureau (Oct. 3, 2016), http://www.consumerfinance.gov/about-us/blog/what-you-need-know-get-money-settlement-honda-finance-overcharging-minorities/.
    \84\ Patrice Ficklin, Lo que necesita saber para recibir dinero 
del acuerdo de compensaci[oacute]n con Honda Finance por cobrarles 
de m[aacute]s a las minor[iacute]as, Consumer Financial Protection 
Bureau (Oct. 11, 2016), http://www.consumerfinance.gov/about-us/blog/lo-que-necesita-saber-para-recibir-dinero-del-acuerdo-de-compensacion-con-honda-finance-por-cobrarles-de-mas-las-minorias/.
    \85\ Patrice Ficklin, You have the right to be treated fairly in 
the financial marketplace, Consumer Financial Protection Bureau 
(Apr. 29, 2016), http://www.consumerfinance.gov/about-us/blog/you-have-right-be-treated-fairly-financial-marketplace/.
    \86\ Patrice Ficklin, Usted tiene derecho a que lo traten de 
manera justa en el mercado financiero, Consumer Financial Protection 
Bureau (May 2, 2016), http://www.consumerfinance.gov/about-us/blog/usted-tiene-derecho-que-lo-traten-de-manera-justa-en-el-mercado-financiero/.
    \87\ Brian Kreiswirth & Anna-Marie Tabor, What you need to know 
about the Equal Credit Opportunity Act and how it can help you: Why 
it was passed and what it is, Consumer Financial Protection Bureau 
(Oct. 31, 2016), http://www.consumerfinance.gov/about-us/blog/what-you-need-know-about-equal-credit-opportunity-act-and-how-it-can-help-you-why-it-was-passed-and-what-it/.
    \88\ Rebecca Gelfond & Frank Vespa-Papaleo, What you need to 
know about the Equal Credit Opportunity Act and how it can help you: 
Know your rights, Consumer Financial Protection Bureau (Nov. 2, 
2016), http://www.consumerfinance.gov/about-us/blog/what-you-need-know-about-equal-credit-opportunity-act-and-how-it-can-help-you-know-your-rights/.
    \89\ 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/.
    \90\ Patrice Ficklin & Daniel Dodd-Ramirez, Don't get taken for 
a ride; protect yourself from an auto loan you can't afford, 
Consumer Financial Protection Bureau (July 5, 2016), http://www.consumerfinance.gov/about-us/blog/dont-get-taken-ride-protect-yourself-auto-loan-you-cant-afford/.
_____________________________________-

    The blog posts may be accessed any time at www.consumerfinance.gov/blog.
6.2 Supervisory Highlights
    Supervisory Highlights reports anchor the Bureau's efforts to 
communicate about the Bureau's supervisory activity. Because the 
Bureau's supervisory process is confidential, Supervisory Highlights 
reports provide information on supervisory trends the Bureau observes, 
without identifying specific entities, as well as information on public 
enforcement matters that arise from supervisory reviews. In 2016, 
Supervisory Highlights covered many topical issues pertaining to fair 
lending, including mortgage servicing, HMDA examinations where 
institutions improperly coded actions taken on conditionally-approved 
applications with unmet underwriting conditions, LEP consumers, 
redlining, and settlement updates for recent enforcement actions that 
originated in the supervisory process.
    More information about the topics discussed this year in 
Supervisory Highlights can be found in Section 2.1 of this Report. As 
with all Bureau resources, all editions of Supervisory Highlights are 
available on www.consumerfinance.gov/reports.
6.3 Speaking Engagements & Roundtables
    To meet our mission of educating and informing stakeholders about 
fair lending, the Office of Fair Lending and Equal Opportunity had the 
opportunity to participate in a number of outreach speaking events and 
roundtables throughout 2016. In these events, we shared information on 
fair lending priorities, emerging issues, and heard feedback from our 
stakeholders on the work we do.
    Fair Lending staff attended numerous roundtables throughout the 
year on a variety of issues related to fair lending. Some examples of 
the topics covered include student lending, language access issues, 
HMDA, small business lending, mortgage servicing, and credit reporting.

7. Interagency Reporting

    Pursuant to ECOA, the CFPB is required to file a report to Congress 
describing the administration of its functions under ECOA, providing an 
assessment of the extent to which compliance with ECOA has been 
achieved, and giving a summary of public enforcement actions taken by 
other agencies with administrative enforcement responsibilities under

[[Page 25265]]

ECOA.\91\ This section of this report provides the following 
information:
---------------------------------------------------------------------------

    \91\ 15 U.S.C. 1691f.
---------------------------------------------------------------------------

     A description of the CFPB's and other agencies' ECOA 
enforcement efforts; and
     an assessment of compliance with ECOA.
    In addition, the CFPB's annual HMDA reporting requirement calls for 
the CFPB, in consultation with HUD, to report annually on the utility 
of HMDA's requirement that covered lenders itemize certain mortgage 
loan data.\92\
---------------------------------------------------------------------------

    \92\ 12 U.S.C. 2807.
---------------------------------------------------------------------------

7.1 Equal Credit Opportunity Act 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.
7.1.1 Public Enforcement Actions
    In addition to the CFPB, the agencies charged with administrative 
enforcement of ECOA under section 704 include: The FRB, the FDIC, the 
OCC, and the NCUA (collectively, the FFIEC agencies); \93\ the FTC, the 
Farm Credit Administration (FCA), the Department of Transportation 
(DOT), the Securities and Exchange Commission (SEC), the Small Business 
Administration (SBA), and the Grain Inspection, Packers and Stockyards 
Administration (GIPSA) of the Department of Agriculture.\94\ In 2016, 
CFPB had two public enforcement actions for violations of ECOA, and the 
OCC issued one public enforcement action for violations of ECOA and/or 
Regulation B.
---------------------------------------------------------------------------

    \93\ 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 March 31, 2017).
    \94\ 15 U.S.C. 1691c.
---------------------------------------------------------------------------

7.1.2 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--Most Frequently Cited Regulation B Violations by FFIEC
                             Agencies: 2016
------------------------------------------------------------------------
     FFIEC agencies reporting           Regulation B violations: 2016
------------------------------------------------------------------------
CFPB, FDIC, FRB, NCUA, OCC........  12 CFR 1002.4(a): Discrimination on
                                     a prohibited basis in a credit
                                     transaction.
                                    12 C.F.R. 1002.6(b): Improperly
                                     considering age, receipt of public
                                     assistance, certain other income,
                                     or another prohibited basis in a
                                     system of evaluating applicant
                                     creditworthiness.
                                    12 C.F.R. 1002.7(d)(1): Improperly
                                     requiring the signature of an
                                     applicant's spouse or other person.
                                    12 C.F.R. 1002.9(a)(1), (a)(1)(i),
                                     (a)(2), (b), (b)(2), (c): Failure
                                     to timely notify an applicant when
                                     an application is denied; 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
                                     sufficient information in an
                                     adverse action notification,
                                     including the specific reasons the
                                     application was denied; failure to
                                     timely and/or appropriately notify
                                     an applicant of either action taken
                                     or of incompleteness after
                                     receiving an application that is
                                     incomplete.
                                    12 C.F.R. 1002.12(b)(1),
                                     (b)(1)(ii)(A): Failure to preserve
                                     records on actions taken on an
                                     application or of incompleteness.
                                    12 C.F.R. 1002.13(a)(1)(i): Failure
                                     to request information on an
                                     application pertaining to an
                                     applicant's ethnicity.
                                    12 C.F.R. 14(a), (a)(1): 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 notice in writing of the
                                     applicant's right to receive a copy
                                     of all written appraisals developed
                                     in connection with the application.
------------------------------------------------------------------------


  TABLE 2--Most Frequently Cited Regulation B Violations by Other ECOA
                             Agencies, 2016
------------------------------------------------------------------------
        Other ECOA agencies             Regulation B violations: 2016
------------------------------------------------------------------------
FCA...............................  12 CFR 1002.9: Failure to timely
                                     notify an applicant when an
                                     application is denied; failure to
                                     provide sufficient information in
                                     an adverse action notification,
                                     including the specific reasons the
                                     application was denied.
                                    12 CFR 1002.13(a)(1): Failure to
                                     request and collect information
                                     about the race, ethnicity, sex,
                                     marital status, and age of
                                     applicants seeking certain types of
                                     mortgage loans.
------------------------------------------------------------------------

    The GIPSA, the SEC, and the SBA reported that they received no 
complaints based on ECOA or Regulation B in 2016. In 2016, 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.
7.2 Referrals to the Department of Justice
    In 2016, the FFIEC agencies including the CFPB referred a total of 
20 matters to the DOJ. The FDIC referred four matters to the DOJ. These 
matters alleged discriminatory treatment of persons in credit 
transactions due to protected characteristics, including age, race, 
national origin, and receipt of public assistance income. The FRB 
referred seven matters to the DOJ. These matters alleged discriminatory 
treatment of persons in credit transactions due to protected 
characteristics, including race, national origin, and marital status. 
The OCC referred one matter to the DOJ on the basis of marital status 
discrimination. The CFPB referred eight matters to the DOJ during 2016, 
finding discrimination in credit transactions on the following 
prohibited bases: Race, national origin, age, receipt of public 
assistance income, sex, and marital status.

[[Page 25266]]

7.3 Reporting on the Home Mortgage Disclosure Act
    The CFPB's annual HMDA reporting requirement calls for the CFPB, in 
consultation with the Department of Housing and Urban Development 
(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.\95\ The CFPB, in consultation 
with HUD, finds that itemization and tabulation of these data further 
the purposes of HMDA. For more information on the Bureau's proposed 
amendments to HMDA's implementing regulation, Regulation C, please see 
the Rulemaking section of this report (Section 4).
---------------------------------------------------------------------------

    \95\ See 12 U.S.C. 2807.
---------------------------------------------------------------------------

8. Conclusion

    In this, our fifth Fair Lending Report to Congress, we outline our 
work in furtherance of our statutory mandate to ensure fair, equitable, 
and nondiscriminatory access to credit. Our work continues to reflect 
the areas that pose the greatest risk of consumer harm, and we continue 
to reprioritize our approach to better position our work to understand 
and address emerging issues. Our multipronged approach uses the full 
variety of tools at our disposal--supervision, enforcement, rulemaking, 
outreach, research, data-driven prioritization, interagency 
coordination, and more. We are pleased to present this report as we 
continue to fulfill our statutory mandate as well as the Bureau's 
mission to help consumer finance markets work by making rules more 
effective, by consistently and fairly enforcing these rules, and by 
empowering consumers to take more control over their economic lives.

Appendix A: Defined Terms

------------------------------------------------------------------------
               Term                              Definition
------------------------------------------------------------------------
Bureau............................  The Consumer Financial Protection
                                     Bureau.
CFPB..............................  The Consumer Financial Protection
                                     Bureau.
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 Consumer Financial
                                     Protection Bureau (CFPB). 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.
LEP...............................  Limited English Proficiency.
LGBT..............................  Lesbian, gay, bisexual and
                                     transgender.
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.
------------------------------------------------------------------------

[2]. Regulatory Requirements

    This Fair Lending Report of the Consumer Financial Protection 
Bureau 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 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: May 24, 2017.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2017-11318 Filed 5-31-17; 8:45 am]
 BILLING CODE 4810-AM-P



                                                  25250                          Federal Register / Vol. 82, No. 104 / Thursday, June 1, 2017 / Notices

                                                  Fannie/Freddie public loan level data,                     2. Analysis of cost of credit before and           V. Request for Comment
                                                  and the National Mortgage Database                      after the rule, as well as recent trends.
                                                                                                             Among other datasets that provide                     To inform the assessment, the Bureau
                                                  (NMDB).35 In addition, the Bureau is
                                                                                                          insight in mortgage pricing, of particular            hereby invites members of the public to
                                                  planning a limited request of data
                                                                                                          value are data procured by the Bureau                 submit information and other comments
                                                  directly from creditors and other
                                                                                                          from Informa Research Services, which                 relevant to the issues identified below,
                                                  stakeholders. As a preliminary matter,
                                                                                                          includes daily rate sheets for thirty to              as well as any information relevant to
                                                  the following types of analyses might be
                                                                                                          fifty top creditors, depending on the                 assessing the effectiveness of the ATR/
                                                  informative of the impact of the rule
                                                                                                          period. These data present a unique                   QM Rule in meeting the purposes and
                                                  (the Bureau will consider other analyses
                                                                                                          opportunity to study changes in cost of               objectives of Title X of the Dodd-Frank
                                                  as well):
                                                                                                          credit as well as changes in eligibility              Act (section 1021) and the specific goals
                                                     (a) The Bureau will utilize HMDA for
                                                                                                          requirements that may have occurred                   of the Bureau (enumerated above). In
                                                  an analysis of both broad market trends
                                                                                                          after the introduction of the rule.                   particular, the Bureau invites the public,
                                                  in origination volumes and trends for
                                                                                                             3. Interviews with creditors regarding             including consumers and their
                                                  particular sub-populations, as well as
                                                                                                          their activities undertaken to comply                 advocates, housing counselors, mortgage
                                                  any changes in the frequency of rejected
                                                                                                          with the requirements of the ATR/QM                   creditors and other industry
                                                  applications and causes for rejections,
                                                                                                          Rule.                                                 representatives, industry analysts, and
                                                  including before and after the
                                                                                                             Through interviews with creditors,                 other interested persons to submit the
                                                  introduction of the rule. This analysis,
                                                                                                          the Bureau will obtain information on:                following:
                                                  although not directly informative of the
                                                  impact of the rule, may indicate                        (a) The changes that creditors might                     (1) Comments on the feasibility and
                                                  whether there were any significant                      have made to their business practices in              effectiveness of the assessment plan, the
                                                  changes in the market right after the                   connection with the requirements of the               objectives of the ATR/QM Rule that the
                                                  introduction of the rule.                               rule, including leaving the market; (b)               Bureau intends to emphasize in the
                                                     (b) The Bureau will use datasets, such               any reported challenges in meeting the                assessment, and the outcomes, metrics,
                                                                                                          rule’s requirements, as experienced by                baselines, and analytical methods for
                                                  as NMDB or servicing datasets, that
                                                                                                          creditors in the three years since the                assessing the effectiveness of the rule as
                                                  contain information about debt-to-
                                                                                                          rule has become effective; and (c)                    described in part IV above;
                                                  income ratios to analyze changes in
                                                                                                          creditors’ experience with the                           (2) Data and other factual information
                                                  origination volumes of jumbo loans with
                                                                                                          Temporary GSE QM, including their                     that may be useful for executing the
                                                  debt-to-income ratios around the 43%
                                                                                                          consideration of the eventual expiration              Bureau’s assessment plan, as described
                                                  cutoff for QM loans.
                                                                                                          of this provision. The primary goal of                in part IV above;
                                                     (c) The Bureau may conduct a similar
                                                                                                          the research is to understand any                        (3) Recommendations to improve the
                                                  analysis with respect to the points and
                                                                                                          changes in pricing and underwriting                   assessment plan, as well as data, other
                                                  fees threshold, provided the available
                                                                                                          strategies made by creditors in                       factual information, and sources of data
                                                  data allow. The Bureau may perform                      connection with the requirements of the
                                                  this analysis for both jumbo loans and                                                                        that would be useful and available to
                                                                                                          rule and the possible impact on access                execute any recommended
                                                  conforming loans because conforming                     to credit for consumers.
                                                  loans also must satisfy the points and                                                                        improvements to the assessment plan;
                                                                                                             4. Consultations with government
                                                  fees test in order to receive QM status.                regulatory agencies, government                          (4) Data and other factual information
                                                     (d) To the extent the existing data and              sponsored enterprises, and private                    about the benefits and costs of the ATR/
                                                  resources allow, the Bureau will                        market participants.                                  QM Rule for consumers, creditors, and
                                                  examine rates of delinquency and                           The Bureau believes that a non-trivial             other stakeholders in the mortgage
                                                  default among major categories of loans:                share of current GSE-eligible and FHA/                industry; and about the impacts of the
                                                  Non-QM loans; General QM Loans, and                     VA/RHA-eligible loans have a debt-to-                 rule on transparency, efficiency, access,
                                                  Temporary GSE QM Loans. Although                        income ratio exceeding 43 percent.                    and innovation in the mortgage market;
                                                  the absolute default rates might have                   Additionally, there may exist a yet                      (5) Data and other factual information
                                                  been affected by factors other than the                 unspecified quantity of GSE or                        about the rule’s effectiveness in meeting
                                                  rule, changes in relative default rates                 government-eligible loans that meet GSE               the purposes and objectives of Title X of
                                                  between different types of QM loans and                 or government underwriting guidelines                 the Dodd-Frank Act (section 1021),
                                                  between QM loans and non-QM loans                       but do not meet Appendix Q                            which are listed in part IV above;
                                                  may be informative regarding the impact                 requirements on documentation and                        (6) Recommendations for modifying,
                                                  of the rule.                                            calculation of income and debt. Many                  expanding, or eliminating the ATR/QM
                                                                                                          such loans would not have been QM if                  Rule.
                                                    35 The NMDB is an ongoing project, jointly
                                                                                                          not for the temporary provision                         Dated: May 23, 2017.
                                                  undertaken by the Federal Housing Finance Agency
                                                                                                          (although potentially a subset of those
                                                  (FHFA) and the Bureau, with the goal of providing                                                             Richard Cordray,
                                                  the public and regulatory agencies with data that       loans could have been QM if
                                                                                                                                                                Director, Bureau of Consumer Financial
                                                  does not include any personally identifiable            documented consistent with Appendix
                                                  information but that otherwise may serve as a                                                                 Protection.
                                                                                                          Q and if the DTI ratio calculated
                                                  comprehensive resource about the U.S. residential                                                             [FR Doc. 2017–11218 Filed 5–31–17; 8:45 am]
                                                  mortgage market. The core data in the NMDB are
                                                                                                          consistent with Appendix Q were at or
                                                                                                                                                                BILLING CODE 4810–AM–P
                                                  drawn from a random, personally anonymous, 1-in-        below 43%). In consultations with
                                                  20 sample of all credit bureau records associated       regulators, GSEs, and private market
                                                  with a closed-end, first-lien mortgage, updated         participants, the Bureau seeks to obtain
mstockstill on DSK30JT082PROD with NOTICES




                                                  quarterly. Mortgages, after being unlinked from any                                                           BUREAU OF CONSUMER FINANCIAL
                                                                                                          data to analyze, or otherwise develop an
                                                  personally identifiable information or                                                                        PROTECTION
                                                  characteristics that could be traced back to any        understanding, of how many loans fall
                                                  borrower, are followed in the NMDB database until       within this category, how effective the               Fair Lending Report of the Consumer
                                                  they terminate through prepayment (including            provision has been in preserving access
                                                  refinancing), foreclosure, or maturity. The                                                                   Financial Protection Bureau, April 2017
                                                  information available to the FHFA, CFPB, or any
                                                                                                          to credit, and anticipated market
                                                  other authorized user of the NMDB data never            responses if the temporary provision                  AGENCY:  Bureau of Consumer Financial
                                                  includes any personally identifiable information.       were to expire.                                       Protection.


                                             VerDate Sep<11>2014   18:32 May 31, 2017   Jkt 241001   PO 00000   Frm 00027   Fmt 4703   Sfmt 4703   E:\FR\FM\01JNN1.SGM   01JNN1


                                                                                 Federal Register / Vol. 82, No. 104 / Thursday, June 1, 2017 / Notices                                                   25251

                                                        Fair Lending Report of the
                                                  ACTION:                                    potential fair lending violations, based                           enforcement’’ of ECOA. We drew from
                                                  Consumer Financial Protection Bureau.      on our prior guidance.                                             our experiences and dialogue with
                                                                                                We also have achieved remarkable                                industry, the information transferred to
                                                  SUMMARY: The Bureau of Consumer            success in our fair lending enforcement                            us from our sister prudential regulators,
                                                  Financial Protection (CFPB or Bureau) is activities during this time period,                                  civil rights and consumer advocate
                                                  issuing its fifth Fair Lending Report of   reaching historic resolution of the                                groups’ perspectives, and the expertise
                                                  the Consumer Financial Protection          largest redlining, auto finance, and                               of the Bureau’s markets teams to
                                                  Bureau (Fair Lending Report) to            credit card fair lending cases, and                                establish our first three fair lending
                                                  Congress. We are committed to ensuring instituting relief that has halted illegal                             priorities: mortgage origination, auto
                                                  fair access to credit and eliminating      practices. Our fair lending supervision                            finance, and credit cards. We have
                                                  discriminatory lending practices. This     and enforcement activities have resulted                           accomplished much in these markets
                                                  report describes our fair lending          in over $400 million in remediation to                             over these past five years, not the least
                                                  activities in prioritization, supervision, harmed consumers.                                                  of which are the $400 million in
                                                  enforcement, rulemaking, interagency          In the coming years, we will increase                           remediation to harmed consumers and
                                                  coordination, and outreach for calendar our focus on markets or products where                                the remarkable and robust dialogue we
                                                  year 2016.                                 we see significant or emerging fair                                enjoy with many financial services
                                                  DATES: The Bureau released the April       lending risk to consumers, including                               providers in support of their efforts to
                                                  2017 Fair Lending Report on its Web        redlining, mortgage loan servicing,                                treat all of their customers in a fair and
                                                  site on April 14, 2017.                    student loan servicing, and small                                  responsible manner.
                                                  FOR FURTHER INFORMATION CONTACT:           business lending. Discrimination on                                   As outlined in my December 2016
                                                  Anita Visser, Senior Policy Advisor to     prohibited grounds in the financial                                blog post,1 my team has again looked to
                                                  the Director of Fair Lending, Office of    marketplace, though squarely against                               our statutory mandate and relevant data
                                                  Fair Lending and Equal Opportunity,        the law, is by no means a thing of the                             to refresh the Bureau’s fair lending
                                                  Consumer Financial Protection Bureau,      past. The Consumer Bureau will                                     priorities. In 2017 we will increase our
                                                  1–855–411–2372.                            continue to enforce existing fair lending                          focus in the areas of redlining and
                                                  SUPPLEMENTARY INFORMATION:                 laws at a steady and vigorous pace,                                mortgage and student loan servicing to
                                                                                             taking care to ensure broad-based                                  ensure that creditworthy consumers
                                                  1. Fair Lending Report of the Consumer
                                                                                             industry engagement and consistent                                 have access to mortgage loans and to the
                                                  Financial Protection Bureau, April
                                                                                             oversight.                                                         full array of appropriate options when
                                                  2017
                                                                                                I am proud to present our 2016 Fair                             they have trouble paying their
                                                  Message From Richard Cordray, Director Lending Report.                                                        mortgages or student loans, regardless of
                                                  of the CFPB                                Sincerely,                                                         their race or ethnicity. In addition, we
                                                     For over five years, the Consumer       Richard Cordray                                                    will focus more fully on pursuing our
                                                  Financial Protection Bureau has                                                                               statutory mandate to promote fair credit
                                                                                             Message From Patrice Alexander                                     access for minority- and women-owned
                                                  pursued its statutory mandate to
                                                                                             Ficklin, Director, Office of Fair Lending                          businesses. We know that these
                                                  provide ‘‘oversight and enforcement’’ of
                                                                                             and Equal Opportunity                                              businesses play an important role in job
                                                  the fair lending laws under our
                                                  jurisdiction. I am proud of all we have       When I left private practice to join the                        creation for communities of color, while
                                                  accomplished in ensuring that              CFPB in 2011, I carried with me my                                 also strengthening our economy.
                                                  creditworthy consumers are not denied      experiences as industry counsel,                                      The Dodd-Frank Act mandated the
                                                  credit or charged more because of their    advising bank and nonbank clients on                               creation of the CFPB’s Office of Fair
                                                  race or ethnicity or any other prohibited fair lending compliance. I knew from                                Lending and Equal Opportunity and
                                                  basis.                                     my work that many lenders are                                      charged it with ensuring fair, equitable,
                                                     Our fair lending guidance,              interested in building and maintaining                             and nondiscriminatory access to credit
                                                  supervisory activity, and enforcement      robust fair lending self-monitoring                                to consumers; coordinating our fair
                                                  actions have three goals: To strengthen    systems that reflect best practices in                             lending efforts with Federal and State
                                                  industry compliance programs, root out consumer protection. I advised my                                      agencies and regulators; working with
                                                  illegal activity, and ensure that harmed   clients on their efforts to evaluate and                           private industry, fair lending, civil
                                                  consumers are remediated. Over these       address fair lending risk not only in                              rights, consumer and community
                                                  past five years, we have engaged in        mortgage origination, but also in                                  advocates to promote fair lending
                                                  robust fair lending dialogue with          mortgage servicing, credit cards, and                              compliance and education; and
                                                  industry and this dialogue has served to other areas that had not been a                                      annually reporting to Congress on our
                                                  significantly strengthen industry          traditional fair lending focus. Together                           efforts.
                                                  compliance programs. Members of our        we enhanced the existing methods of                                   I am proud to say that the Office
                                                  Fair Lending Office have logged over       proxying for race and ethnicity; an                                continues to fulfill our Dodd-Frank
                                                  300 outreach meetings and events, not      essential step to allow my clients to                              mandate and looks forward to
                                                  to mention preparing responses to the      fully implement the mandate contained                              continuing to work together with all
                                                  many calls and emails received from        in the Equal Credit Opportunity Act                                stakeholders in protecting America’s
                                                  compliance officials. We have invested     (ECOA), which prohibits discrimination                             consumers. To that end, I am excited to
                                                  significant efforts toward strengthening   in all manner of consumer credit, not                              share our progress in this, our fifth, Fair
                                                  industry compliance management             simply mortgages.                                                  Lending Report.2
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                                                  systems because they are critical first-      Shortly after arriving at the CFPB in
                                                  line measures to protect consumers from 2011, I led a handful of other public                                    1 Patrice Ficklin, Fair Lending priorities in the

                                                  discriminatory lending policies and        servants in founding the CFPB’s Fair                               new year, Consumer Financial Protection Bureau
                                                  practices. As a result, our examiners      Lending Office, which the Dodd-Frank                               (Dec. 16, 2016), http:www.consumerfinance.gov/
                                                                                                                                                                about-us/blog/fair-lending-priorities-new-year/.
                                                  now often find that lenders have already Wall Street Reform and Consumer                                         2 See Dodd-Frank Act section 1013(c)(2)(D),
                                                  implemented sound policies and             Protection Act (Dodd-Frank Act)                                    Public Law 111–203, 124 Stat. 1376 (2010) (codified
                                                  procedures to identify and address         charged with ‘‘oversight and                                       at 12 U.S.C. 5493(c)(2)(D)).



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                                                  25252                          Federal Register / Vol. 82, No. 104 / Thursday, June 1, 2017 / Notices

                                                  Sincerely,                                              work, we never look at numbers alone                  and if so, how.9 On September 23, 2016,
                                                  Patrice Alexander Ficklin                               or in a vacuum, but rather consider                   the Bureau published a Bureau Official
                                                                                                          multiple factors, including potentially               Approval pursuant to section 706(e) of
                                                  Executive Summary                                       nondiscriminatory explanations for                    the ECOA concerning the new Uniform
                                                     The Dodd-Frank Wall Street Reform                    differential lending patterns. See                    Residential Loan Application and the
                                                  and Consumer Protection Act (Dodd-                      Sections 2.1.6 and 3.1.1 for more                     collection of expanded HMDA
                                                  Frank or Dodd-Frank Act) 3 established                  information. Through 2016, our                        information about ethnicity and race in
                                                  the Bureau as the Nation’s first Federal                mortgage origination work has covered                 2017. On March 24, 2017, the Bureau
                                                  agency with a mission focused solely on                 institutions responsible for close to half            published a proposed rule concerning
                                                  consumer financial protection and                       of the transactions reported pursuant to              amendments to Regulation B’s ethnicity
                                                  making consumer financial markets                       the Home Mortgage Disclosure Act                      and race information collection
                                                  work for all Americans. Dodd-Frank                      (HMDA), and more than 60% of the                      provisions.10 See Section 4 for more
                                                  established the Office of Fair Lending                  transactions reported by institutions                 information.
                                                  and Equal Opportunity (the Office of                    subject to the CFPB’s supervision and                    • Interagency coordination and
                                                  Fair Lending) within the CFPB, and                      enforcement authority.6                               collaboration. The Bureau continues to
                                                  charged it with ‘‘providing oversight                      In 2016, the Bureau continued its                  coordinate with the Federal Financial
                                                  and enforcement of Federal laws                         work in overseeing and enforcing                      Institutions Examination Council
                                                  intended to ensure the fair, equitable,                 compliance with ECOA in indirect auto                 (FFIEC) agencies,11 as well as the
                                                  and nondiscriminatory access to credit                  lending through both supervisory and                  Department of Justice (DOJ), the Federal
                                                  for both individuals and                                enforcement activity, including                       Trade Commission (FTC), and the
                                                  communities.’’ 4                                        monitoring compliance with our                        Department of Housing and Urban
                                                     • Prioritization. The Bureau’s risk-                 previous supervisory and enforcement                  Development (HUD), as we each play a
                                                  based prioritization process allows the                 actions. Our indirect auto lending work               role in ensuring compliance with and
                                                  Office of Fair Lending to focus our                     has covered institutions responsible for              enforcing our nation’s fair lending laws
                                                  supervisory and enforcement efforts on                  approximately 60% of the auto loan                    and regulations. See Section 5 for more
                                                  the markets, products, and institutions                 market share by volume.7                              information on our interagency
                                                  that represent the greatest fair lending                                                                      coordination and collaboration in 2016.
                                                                                                             The Bureau also continued fair                        • Outreach to industry, advocates,
                                                  risk for consumers. Based on the risks                  lending supervisory and enforcement
                                                  we identified, our market-level focus for                                                                     consumers, and other stakeholders. The
                                                                                                          work in the credit card market. We have               Bureau continues to initiate and
                                                  the past five years has been on ensuring                focused in particular on the quality of
                                                  that consumers are not excluded from or                                                                       encourage industry and consumer
                                                                                                          fair lending compliance management                    engagement opportunities to discuss fair
                                                  made to pay more for mortgages,                         systems (CMS) and on fair lending risks
                                                  indirect auto loans, and credit cards                                                                         lending compliance and access to credit
                                                                                                          in underwriting, line assignment, and                 issues, including through speeches,
                                                  because of their race, ethnicity, sex, or               servicing. Our work in this highly-
                                                  age.                                                                                                          presentations, blog posts, webinars,
                                                                                                          concentrated market has covered                       rulemaking, and public comments. See
                                                     Going forward, because of emerging                   institutions responsible for more than
                                                  fair lending risks in other areas, we are                                                                     Section 6 for more information on our
                                                                                                          85% of outstanding credit card balances               outreach activities in 2016.
                                                  increasing our focus on redlining,                      in the United States.8
                                                  mortgage and student loan servicing,                                                                             This report generally covers the
                                                                                                             The Bureau has conducted                           Bureau’s fair lending work during
                                                  and small business lending. We remain
                                                                                                          supervision and enforcement work in                   calendar year 2016.
                                                  committed to assessing and evaluating
                                                                                                          other markets as well. For example, this
                                                  fair lending risk in all credit markets                                                                       1. Fair Lending Prioritization
                                                                                                          year we continued targeted ECOA
                                                  under the Bureau’s jurisdiction. See
                                                                                                          reviews of small-business lending,                    1.1 Risk-Based Prioritization: A Data-
                                                  Section 1 for more information.
                                                                                                          focusing in particular on the quality of              Driven Approach to Prioritizing Areas of
                                                     • Supervision and enforcement
                                                                                                          fair lending compliance management                    Potential Fair Lending Harm to
                                                  activity. In 2016, our fair lending
                                                                                                          systems and on fair lending risks in                  Consumers
                                                  supervisory and public enforcement
                                                                                                          underwriting, pricing, and redlining.
                                                  actions resulted in approximately $46                                                                           To use the CFPB’s fair lending
                                                                                                          Our supervisory work to date in small
                                                  million in remediation to harmed                                                                              resources most effectively, the Office of
                                                                                                          business lending has covered
                                                  consumers.5 Mortgage lending                                                                                  Fair Lending, working with other offices
                                                                                                          institutions responsible for
                                                  continues to be a key priority for the                                                                        in the Bureau, has developed and
                                                                                                          approximately 10% of the non-
                                                  Office of Fair Lending for both
                                                                                                          agricultural small business market
                                                  supervision and enforcement. We have                                                                             9 Consumer Financial Protection Bureau, Request
                                                                                                          share. See Sections 2 and 3 for more                  for Information Regarding Home Mortgage
                                                  focused in particular on redlining risk,
                                                                                                          information.                                          Disclosure Act Resubmission Guidelines 2015–0058
                                                  evaluating whether lenders have
                                                  intentionally discouraged prospective                      • Rulemaking. In January 2016, in                  (Jan. 7, 2016), http://files.consumerfinance.gov/f/
                                                                                                                                                                201601_cfpb_request-for-information-regarding-
                                                  applicants in minority neighborhoods                    response to ongoing conversations with                home-mortgage-disclosure-act-resubmission.pdf.
                                                  from applying for credit. Although                      industry about compliance with                           10 Consumer Financial Protection Bureau,

                                                  statistics play an important role in this               Regulation C, HMDA’s implementing                     Amendments to Equal Credit Opportunity Act
                                                                                                          Regulation, the Bureau issued a Request               (Regulation B) Ethnicity and Race Information
                                                                                                                                                                Collection 2017–0009 (March 24, 2017), http://
                                                    3 Public  Law 111–203, 124 Stat. 1376 (2010).         for Information (RFI) on the Bureau’s                 files.consumerfinance.gov/f/documents/201703_
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                                                    4 Dodd-Frank   Act section 1013(c)(2)(A) (codified    HMDA data resubmission guidelines,                    cfpb_NPRM-to-amend-Regulation-B.pdf.
                                                  at 12 U.S.C. 5493(c)(2)(A)).                            and is considering whether to adjust its                 11 The FFIEC member agencies are the Board of
                                                     5 Figures represent estimates of monetary relief
                                                                                                          existing HMDA resubmission guidelines                 Governors of the Federal Reserve System (FRB), the
                                                  for consumers ordered or required by the Bureau or                                                            Federal Deposit Insurance Corporation (FDIC), the
                                                  a court as a result of supervisory or enforcement                                                             National Credit Union Administration (NCUA), the
                                                                                                            6 CFPB analysis of HMDA data for 2015.
                                                  actions on fair lending matters in 2016, as well as                                                           Office of the Comptroller of the Currency (OCC),
                                                                                                            7 CFPB analysis of 2015 AutoCount data from
                                                  other monetary payments such as loan subsidies,                                                               and the Consumer Financial Protection Bureau
                                                  increased consumer financial education, and civil       Experian Automotive.                                  (CFPB). The State Liaison Committee was added to
                                                  money penalties.                                          8 CFPB analysis of 3Q 2016 call reports.            FFIEC in 2006 as a voting member.



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                                                                                 Federal Register / Vol. 82, No. 104 / Thursday, June 1, 2017 / Notices                                          25253

                                                  refined a risk-based prioritization                     process. For example, we can schedule                 and minority-owned businesses may
                                                  approach that determines how best to                    an institution for a supervisory review               experience discrimination when they
                                                  address areas of potential fair-lending-                or, where appropriate, open an                        apply for credit, and has required the
                                                  related consumer harm in the entities,                  enforcement investigation. We can also                CFPB to take steps to ensure their fair
                                                  products, and markets under our                         commit to further research, policy                    access to credit. Small business lending
                                                  jurisdiction.                                           development, and/or outreach,                         supervisory activity will also help
                                                     One critical piece of information that               especially for new issues or risks. Once              expand and enhance the Bureau’s
                                                  we consider in the fair lending                         this strategic planning process is                    knowledge in this area, including the
                                                  prioritization process is the quality of an             complete, we regularly coordinate with                credit process; existing data collection
                                                  institution’s compliance management                     other regulators so we can inform each                processes; and the nature, extent, and
                                                  system, which the Bureau typically                      other’s work, complement each other’s                 management of fair lending risk. The
                                                  ascertains through its supervisory work.                efforts, and reduce any burden on                     Bureau remains committed to ensuring
                                                  The Bureau has previously identified                    subject institutions.                                 that consumers are protected from
                                                  common features of a well-developed                        Risk-based prioritization is an                    discrimination in all credit markets
                                                  fair lending compliance management                      ongoing process, and we continue to                   under its authority.
                                                  system,12 though we recognize that the                  receive and evaluate relevant
                                                  appropriate scope of an institution’s fair              information even after priorities are                 2. Fair Lending Supervision
                                                  lending compliance management system                    identified. At an institution level, such                The CFPB’s Fair Lending Supervision
                                                  will vary based on its size, complexity,                information may include new tips and                  program assesses compliance with
                                                  and risk profile. In our experience, the                leads, consumer complaints, additional                ECOA and HMDA at banks and
                                                  higher the quality of an institution’s fair             risks identified in current supervisory               nonbanks over which the Bureau has
                                                  lending compliance management                           and enforcement activities, and                       supervisory authority. Supervision
                                                  system, the lower the institution’s fair                compliance issues identified and                      activities range from assessments of
                                                  lending risk to consumers, other things                 brought to our attention by institutions              institutions’ fair lending compliance
                                                  being equal.                                            themselves. In determining how best to                management systems to in-depth
                                                     As part of the prioritization process                address this additional information, the              reviews of products or activities that
                                                  the Office of Fair Lending also works                   Office of Fair Lending considers several              may pose heightened fair lending risks
                                                  closely with the Bureau’s special                       factors, including (1) the nature and                 to consumers. As part of its Fair
                                                  population offices, including the Office                extent of the fair lending risk, (2) the              Lending Supervision program, the
                                                  for Students and Young Consumers, the                   degree of consumer harm, and (3)                      Bureau continues to conduct three types
                                                  Office of Older Americans, and the                      whether the risk was self-identified and/             of fair lending reviews at Bureau-
                                                  Bureau’s Markets offices, which identify                or self-reported to the Bureau. Fair                  supervised institutions: ECOA baseline
                                                  emerging developments and trends by                     Lending takes account of responsible                  reviews, ECOA targeted reviews, and
                                                  monitoring key consumer financial                       conduct as set forth in CFPB Bulletin                 HMDA data integrity reviews.
                                                  markets. If this market intelligence                    2013–06, Responsible Business                            When the CFPB identifies situations
                                                  identifies fair lending risks in a                      Conduct: Self-Policing, Self-Reporting,               in which fair lending compliance is
                                                  particular market that require further                  Remediation, and Cooperation.13                       inadequate, it directs institutions to
                                                  attention, we incorporate that                                                                                establish fair lending compliance
                                                  information into our prioritization                     1.2 Fair Lending Priorities                           programs commensurate with the size
                                                  process to determine the type and extent                  Because the CFPB is responsible for                 and complexity of the institution and its
                                                  of attention required to address those                  overseeing so many products and so                    lines of business. When fair lending
                                                  risks. For instance, Fair Lending’s work                many lenders, we re-prioritize our work               violations are identified, the CFPB may
                                                  with the Office of Consumer Lending,                    from time to time to make sure that we                direct institutions to provide
                                                  Reporting, and Collections Markets and                  are focused on the areas of greatest risk             remediation and restitution to
                                                  the Office for Students and Young                       to consumers. In the coming year, we                  consumers, and may pursue other
                                                  Consumers highlighted potential                         will increase our focus on the markets                appropriate relief. The CFPB also refers
                                                  steering risks in student loan servicing,               or products listed below, which present               a matter to the Justice Department when
                                                  which resulted in the prioritization of                 substantial risk of credit discrimination             it has reason to believe that a creditor
                                                  this market in our supervisory work.                    for consumers.                                        has engaged in a pattern or practice of
                                                     The fair lending prioritization process                Redlining. We will continue to                      lending discrimination in violation of
                                                  incorporates a number of additional                     evaluate whether lenders have                         ECOA.14 The CFPB may also refer other
                                                  factors as well, including; consumer                    intentionally discouraged prospective                 potential ECOA violations to the Justice
                                                  complaints; tips and leads from                         applicants in minority neighborhoods                  Department.
                                                  advocacy groups, whistleblowers, and                    from applying for credit.
                                                  government agencies; supervisory and                      Mortgage and Student Loan Servicing.                2.1 Fair Lending Supervisory
                                                  enforcement history; and results from                   We will evaluate whether some                         Observations
                                                  analysis of HMDA and other data.                        borrowers who are behind on their                       Although the Bureau’s supervisory
                                                     Once the Bureau has evaluated these                  mortgage or student loan payments may                 process is confidential, the Bureau
                                                  inputs to prioritize institutions,                      have more difficulty working out a new                publishes regular reports called
                                                  products, and markets based on an                       solution with the servicer because of                 Supervisory Highlights, which provide
                                                  assessment of fair lending risk posed to                their race, ethnicity, sex, or age.                   information on supervisory trends the
                                                  consumers, the Office of Fair Lending                     Small Business Lending. Congress                    Bureau observes without identifying
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                                                  considers how best to address those                     expressed concern that women-owned                    specific entities. The Bureau may also
                                                  risks as part of its strategic planning                                                                       draw on its supervisory experience to
                                                                                                             13 Consumer Financial Protection Bureau,
                                                                                                                                                                publish compliance bulletins in order to
                                                    12 See Consumer Financial Protection Bureau,          Responsible Business Conduct: Self-Policing, Self-    remind the institutions that we
                                                  Fair Lending Report of the Consumer Financial           Reporting, Remediation, and Cooperation, CFPB
                                                  Protection Bureau at 13–14 (Apr. 2014), http://         Bulletin 2013–06 (June 25, 2013), http://             supervise of their legal obligations.
                                                  files.consumerfinance.gov/f/201404_cfpb_report_         files.consumerfinance.gov/f/201306_cfpb_bulletin_
                                                  fair-lending.pdf.                                       responsible-conduct.pdf.                                14 15   U.S.C. 1691e(g).



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                                                  25254                          Federal Register / Vol. 82, No. 104 / Thursday, June 1, 2017 / Notices

                                                  Industry participants can use this                      Loan Application Register (LAR) where                    As Supervisory Highlights noted,
                                                  information to inform and assist in                     the number of errors exceeded the                      during the course of the Bureau’s
                                                  complying with ECOA and HMDA.                           CFPB’s HMDA resubmission thresholds.                   supervisory activity, examination teams
                                                                                                                                                                 have observed credit decisions made
                                                  2.1.1 Evaluating Mortgage Servicing                     2.1.3 Expanding Credit Through the
                                                                                                                                                                 pursuant to the terms of programs that
                                                  Compliance Programs                                     Use of Special Purpose Credit Programs
                                                                                                                                                                 for-profit institutions have described as
                                                     Our supervisory work has included                      • The Summer 2016 edition of                         special purpose credit programs.
                                                  use of the ECOA Baseline Modules,                       Supervisory Highlights 18 discussed                    Examination teams have reviewed the
                                                  which are part of the CFPB Supervision                  supervisory observations of special                    terms of the programs, including the
                                                  and Examination Manual. Examination                     purpose credit programs, which are                     written plan required by Regulation B,
                                                  teams use these modules to conduct                      established and administered to extend                 and the institution’s determination that
                                                  ECOA Baseline Reviews, which evaluate                   credit to a class of persons who                       the program would benefit a class of
                                                  how well institutions’ compliance                       otherwise probably would not receive                   people who would otherwise be denied
                                                  management systems identify and                         such credit or would receive it on less                credit or would receive it on less
                                                  manage fair lending risks. The Mortgage                 favorable terms. ECOA 19 and                           favorable terms.
                                                  Servicing Special Edition of Supervisory                Regulation B 20 permit a creditor to                     In every case, special purpose credit
                                                  Highlights,15 published in June 2016,                   extend special purpose credit to                       program status depends upon adherence
                                                  reminded institutions that Module 4 of                  applicants who meet eligibility                        to the ECOA and Regulation B
                                                  the ECOA baseline review modules,                       requirements for certain types of credit               requirements for special purpose credit
                                                  ‘‘Fair Lending Risks Related to                         programs.21 Regulation B specifically                  programs. A program, for example,
                                                  Servicing,’’ is used by Bureau examiners                confers special purpose credit program                 offering more favorable pricing or
                                                  to evaluate compliance management                       status upon:                                           products exclusively to a particular
                                                  systems under ECOA. Among other                           Any special purpose credit program                   class of persons without evidence that
                                                  things, Module 4 contains questions                     offered by a for-profit organization, or in            such individuals would otherwise be
                                                  regarding fair lending training of                      which such an organization participates                denied credit or would receive it on less
                                                  servicing staff, fair lending monitoring                to meet special social needs, if:                      favorable terms would not satisfy the
                                                  of servicing, and servicing of consumers                  (i) The program is established and                   ECOA and Regulation B requirements
                                                  with limited English proficiency.                       administered pursuant to a written plan                for a special purpose credit program.
                                                                                                          that identifies the class of persons that              With that in mind, however, the Bureau
                                                  2.1.2 Reporting Actions Taken for                       the program is designed to benefit and
                                                  Conditionally-Approved Applications                                                                            generally takes a favorable view of
                                                                                                          sets forth the procedures and standards                conscientious efforts that institutions
                                                  With Unmet Underwriting Conditions                      for extending credit pursuant to the                   may undertake to develop special
                                                    The Summer 2016 edition of                            program; and                                           purpose credit programs to promote
                                                  Supervisory Highlights,16 published in                    (ii) The program is established and                  extensions of credit to any class of
                                                  June 2016, highlighted findings from                    administered to extend credit to a class               persons who would otherwise be denied
                                                  examinations where institutions                         of persons who, under the                              credit or would receive it on less
                                                  improperly coded actions taken in                       organization’s customary standards of                  favorable terms.
                                                  reported HMDA data. Among other                         creditworthiness, probably would not
                                                  things, Regulation C requires covered                   receive such credit or would receive it                2.1.4 Offering Language Services to
                                                  depository and non-depository                           on less favorable terms than are                       Limited English Proficient (LEP)
                                                  institutions to submit to the appropriate               ordinarily available to other applicants               Consumers
                                                  Federal agency data they collect and                    applying to the organization for a                       The Fall 2016 edition of Supervisory
                                                  record pursuant to Regulation C,                        similar type and amount of credit.22                   Highlights,24 published in October 2016,
                                                  including the type of action taken on                     The commentary to Regulation B                       discussed supervisory observations
                                                  reportable transactions.17 As reported in               clarifies that, in order to satisfy these              about the provision of language services
                                                  Supervisory Highlights, examiners                       requirements, ‘‘a for-profit organization              to consumers with limited English
                                                  found that after issuing a conditional                  must determine that the program will                   proficiency (LEP). The Dodd-Frank Act,
                                                  approval subject to underwriting                        benefit a class of people who would                    ECOA,25 and Regulation B 26 mandate
                                                  conditions, the institutions did not                    otherwise be denied credit or would                    that the Office of Fair Lending ‘‘ensure
                                                  accurately report the action taken on the               receive it on less favorable terms. This               the fair, equitable, and
                                                  loans or applications. As a result,                     determination can be based on a broad                  nondiscriminatory access to credit’’ 27
                                                  Supervision directed one or more                        analysis using the organization’s own                  and ‘‘promote the availability of
                                                  institutions to enhance their policies                  research or data from outside sources,                 credit.’’ 28 Consistent with that mandate,
                                                  and procedures regarding their HMDA                     including governmental reports and                     the CFPB, including through its Office
                                                  reporting of the actions taken on loans                 studies.’’ 23                                          of Fair Lending, continues to encourage
                                                  and applications and, where necessary,                                                                         lenders to provide assistance to LEP
                                                  provide adverse action notices.                           18 Consumer Financial Protection Bureau,
                                                                                                                                                                 consumers.29 Financial institutions may
                                                                                                          Supervisory Highlights Summer 2016 at 16–18 (June
                                                  Supervision also required one or more                   30, 2016), http://files.consumerfinance.gov/f/
                                                  institutions to resubmit their HMDA                     documents/Supervisory_Highlights_Issue_12.pdf.           24 Consumer Financial Protection Bureau,

                                                                                                            19 15 U.S.C. 1691 et seq.                            Supervisory Highlights Fall 2016 at 20 (Oct. 31,
                                                     15 Consumer Financial Protection Bureau,               20 12 CFR part 1002.                                 2016), http://files.consumerfinance.gov/f/
                                                  Supervisory Highlights Mortgage Servicing Special         21 15 U.S.C. 1691(c)(3) (providing that ECOA’s
                                                                                                                                                                 documents/Supervisory_Highlights_Issue_13__
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                                                  Edition 2016 at 5 (June 22, 2016), http://                                                                     Final_10.31.16.pdf.
                                                                                                          prohibitions against discrimination are not violated     25 12 U.S.C. 1691 et seq.
                                                  files.consumerfinance.gov/f/documents/Mortgage_         when a creditor refuses to extend credit offered
                                                                                                                                                                   26 12 CFR part 1002 et seq.
                                                  Servicing_Supervisory_Highlights_11_Final_              pursuant to certain special purpose credit programs
                                                  web_.pdf.                                                                                                        27 12 U.S.C. 5493(c)(2)(A).
                                                                                                          satisfying Regulation B-prescribed standards); 12
                                                     16 Consumer Financial Protection Bureau,             CFR 1002.8 (special purpose credit program               28 12 CFR 1002.1(b).

                                                  Supervisory Highlights Summer 2016 at 13–16 (June       standards).                                              29 According to recent American Community
                                                  30, 2016), http://files.consumerfinance.gov/f/            22 12 CFR 1002.8(a)(3).
                                                                                                                                                                 Survey estimates, there are approximately 25
                                                  documents/Supervisory_Highlights_Issue_12.pdf.            23 12 CFR part 1002, Suppl. I, 1002.8, comment       million people in the United States who speak
                                                     17 12 CFR 1003.4(a), (a)(8); 12 CFR 1003.5(a)(1).    8(a) at 5.                                             English less than ‘‘very well.’’ U.S. Census Bureau,



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                                                                                  Federal Register / Vol. 82, No. 104 / Thursday, June 1, 2017 / Notices                                                     25255

                                                  provide access to credit in languages                    English and the extent of those services,                  As reported in Supervisory Highlights,
                                                  other than English in a manner that is                   some of which include: Census Bureau                    the Bureau’s supervisory activity
                                                  beneficial to consumers as well as the                   data on the demographics or prevalence                  resulted in public enforcement actions
                                                  institution, while taking steps to ensure                of non-English languages within the                     related to the treatment of LEP and non-
                                                  their actions are compliant with ECOA                    financial institution’s footprint;                      English-speaking consumers, including
                                                  and other applicable laws.                               communications and activities that most                 actions against Synchrony Bank and
                                                    As reported in Supervisory Highlights,                 significantly impact consumers (e.g.,                   American Express Centurion Bank. The
                                                  in the course of conducting supervisory                  loss mitigation and/or default servicing);              Fall 2016 edition of Supervisory
                                                  activity, examiners have observed one                    and compliance with Federal, State, and                 Highlights also discussed common
                                                  or more financial institutions providing                 other regulatory provisions that address                features of a well-developed compliance
                                                  services in languages other than English,                obligations pertaining to languages other               management system that can mitigate
                                                  including to consumers with limited                      than English.32 Factors relevant in the                 fair lending and other risks associated
                                                  English proficiency,30 in a manner that                  compliance context may vary depending                   with providing services to LEP and non-
                                                  did not result in any adverse                            on the institution and circumstances.                   English-speaking consumers.
                                                  supervisory or enforcement action                           Examiners also have observed
                                                  under the facts and circumstances of the                                                                         2.1.5 HMDA Data Collection and
                                                                                                           situations in which financial                           Reporting Reminders for 2017
                                                  reviews. Specifically, examiners                         institutions’ treatment of LEP and non-
                                                  observed:                                                English-speaking consumers posed fair                     The Fall 2016 edition of Supervisory
                                                    • Marketing and servicing of loans in                  lending risk. For example, examiners                    Highlights 33 noted HMDA data
                                                  languages other than English;                            observed one or more institutions                       collection and reporting reminders for
                                                    • Collection of customer language                      marketing only some of their available                  2017. Please see Section 4.1.4 for detail
                                                  information to facilitate communication                  credit card products to Spanish-                        on changes to HMDA data collection
                                                  with LEP consumers in a language other                   speaking consumers, while marketing                     and reporting in 2017 and later years.
                                                  than English;                                            several additional credit card products
                                                    • Translation of certain financial                                                                             2.1.6 Assessing Redlining Risks
                                                                                                           to English-speaking consumers. One or                      The Fall 2016 edition of Supervisory
                                                  institution documents sent to borrowers,
                                                                                                           more such institutions also lacked                      Highlights 34 noted that the Office of
                                                  including monthly statements and
                                                                                                           documentation describing how they                       Fair Lending has identified redlining as
                                                  payment assistance forms, into
                                                                                                           decided to exclude those products from                  a priority area in the Bureau’s fair
                                                  languages other than English;
                                                    • Use of bilingual and/or multilingual                 Spanish language marketing, raising                     lending work. Redlining is a form of
                                                  customer service agents, including                       questions about the adequacy of their                   unlawful lending discrimination under
                                                  single points of contact,31 and other                    compliance management systems                           ECOA. Historically, actual red lines
                                                  forms of oral customer assistance in                     related to fair lending. To mitigate any                were drawn on maps around
                                                  languages other than English; and                        compliance risks related to these                       neighborhoods to which credit would
                                                    • Quality assurance testing and                        practices, one or more financial                        not be provided, giving this practice its
                                                  monitoring of customer assistance                        institutions revised their marketing                    name. The Federal prudential banking
                                                  provided in languages other than                         materials to notify consumers in                        regulators have collectively defined
                                                  English.                                                 Spanish of the availability of other                    redlining as ‘‘a form of illegal disparate
                                                    Examiners have observed a number of                    credit card products and included clear                 treatment in which a lender provides
                                                  factors that financial institutions                      and timely disclosures to prospective                   unequal access to credit, or unequal
                                                  consider in determining whether to                       consumers describing the extent and                     terms of credit, because of the race,
                                                  provide services in languages other than                 limits of any language services provided                color, national origin, or other
                                                                                                           throughout the product lifecycle.                       prohibited characteristic(s) of the
                                                  Language Spoken at Home, 2011–2015 American              Institutions were not required to                       residents of the area in which the credit
                                                  Community Survey 5-Year Estimates, https://              provide Spanish language services to                    seeker resides or will reside or in which
                                                  factfinder.census.gov/faces/tableservices/jsf/pages/     address this risk beyond the Spanish
                                                  productview.xhtml?pid=ACS_15_5YR_S1601&
                                                                                                                                                                   the residential property to be mortgaged
                                                  prodType=table.
                                                                                                           language services they were already                     is located.’’ 35
                                                     30 The Bureau recently updated its ECOA baseline      providing.                                                 The Bureau considers various factors,
                                                  review modules. See Consumer Financial                                                                           as appropriate, in assessing redlining
                                                  Protection Bureau, Supervisory Highlights: Winter           32 See, e.g., 12 CFR 1005.31(g)(1)(i) (requiring
                                                                                                                                                                   risk in its supervisory activity. These
                                                  2016 at 28–29 (Mar. 8, 2016), http://files.consumer      disclosures in languages other than English in
                                                  finance.gov/f/201603_cfpb_supervisory-
                                                                                                                                                                   factors, and the scoping process, are
                                                                                                           certain circumstances involving remittance
                                                  highlights.pdf. Among other updates, the modules         transfers); 12 CFR 1026.24(i)(7) (addressing            described in detail in the Interagency
                                                  include new questions related to the provision of        obligations relating to advertising and disclosures     Fair Lending Examination Procedures.
                                                  language services, including to LEP consumers, in        in languages other than English for closed-end          These factors generally include (but are
                                                  the context of origination and servicing. See            credit); 12 CFR 1002.4(e) (providing that disclosures
                                                  Consumer Financial Protection Bureau, CFPB
                                                                                                                                                                   not limited to):
                                                                                                           made in languages other than English must be
                                                  Examination Procedures, ECOA Baseline Review             available in English upon request); Cal. Civ. Code
                                                                                                                                                                      33 Consumer Financial Protection Bureau,
                                                  Modules 13, 21–22 (Oct. 2015), http://                   Sec.1632(b) (requiring that certain agreements
                                                  files.consumerfinance.gov/f/201510_cfpb_ecoa-            ‘‘primarily’’ negotiated in Spanish, Chinese,           Supervisory Highlights Fall 2016 at 25–26 (Oct. 31,
                                                  baseline-review-modules.pdf. These modules are           Tagalog, Vietnamese, or Korean must be translated       2016), http://files.consumerfinance.gov/f/
                                                  used by examiners during ECOA baseline reviews           to the language of the negotiation under certain        documents/Supervisory_Highlights_Issue_13__
                                                  to identify and analyze risks of ECOA violations, to     circumstances); Or. Rev. Stat. § 86A.198 (requiring     Final_10.31.16.pdf.
                                                  facilitate the identification of certain types of ECOA                                                              34 Consumer Financial Protection Bureau,
                                                                                                           a mortgage banker, broker, or originator to provide
                                                  and Regulation B violations, and to inform fair          translations of certain notices related to the          Supervisory Highlights Fall 2016 at 27 (Oct. 31,
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                                                  lending prioritization decisions for future CFPB         mortgage transaction if the banker, broker, or          2016), http://files.consumerfinance.gov/f/
                                                  reviews. Id. at 1.                                       originator advertises and negotiates in a language      documents/Supervisory_Highlights_Issue_13__
                                                     31 See 12 CFR 1024.40(a)(1) & (2) (requiring          other than English under certain circumstances);        Final_10.31.16.pdf.
                                                  mortgage servicers to assign personnel to a              Tex. Fin. Code Ann. Sec. 341.502(a–1) (providing           35 FFIEC Interagency Fair Lending Examination

                                                  delinquent borrower within a certain time after          that for certain loan contracts negotiated in           Procedures Manual (Aug. 2009), https://
                                                  delinquency and make assigned personnel available        Spanish, a summary of the loan terms must be made       www.ffiec.gov/pdf/fairlend.pdf. CFPB Supervision
                                                  by phone in order to respond to borrower inquiries       available to the debtor in Spanish in a form            and Examination Manual (Oct. 2012), http://
                                                  and assist with loss mitigation options, as              identical to required TILA disclosures for closed-      files.consumerfinance.gov/f/201210_cfpb_
                                                  applicable).                                             end credit).                                            supervision-and-examination-manual-v2.pdf.



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                                                  25256                          Federal Register / Vol. 82, No. 104 / Thursday, June 1, 2017 / Notices

                                                     • Strength of an institution’s CMS,                  minority 37 areas 38 relative to other                  appropriate, from institutions about
                                                  including underwriting guidelines and                   lenders in the MSA. Examination teams                   appropriate peers in specific markets.
                                                  policies;                                               may consider the difference between the                    In considering lending patterns,
                                                     • Unique attributes of relevant                      subject institution and other lenders in                examination teams generally consider
                                                  geographic areas (population                            the percentage of their applications or                 marketing activities and physical
                                                  demographics, credit profiles, housing                  originations that come from minority                    presence, including locations of
                                                  market);                                                areas, both in absolute terms (for                      branches, loan production offices,
                                                     • Lending patterns (applications and                 example, 10% vs. 20%) and relative                      ATMs, brokers, or correspondents. As
                                                  originations, with and without                          terms (for example, the subject                         noted in Supervisory Highlights, in one
                                                  purchased loans);                                       institution is half as likely to have                   or more supervisory matters, the
                                                     • Peer and market comparisons;                       applications or originations in minority                institutions concentrated marketing in
                                                     • Physical presence (full service                    areas as other lenders).39                              majority-White suburban counties of a
                                                  branches, ATM-only branches, brokers,                      Examination teams may also compare                   Metropolitan Statistical Area (MSA) and
                                                  correspondents, loan production                         an institution to other more refined                    avoided a more urban county with the
                                                  offices), including consideration of                    groups of peer institutions. Refined                    greatest minority population in the
                                                  services offered;                                       peers can be defined in a number of                     MSA. In one or more other exams,
                                                     • Marketing;                                         ways, and past Bureau redlining                         examiners observed that, although there
                                                     • Mapping;                                           examinations and enforcement matters                    were disparities in branch locations, the
                                                     • Community Reinvestment Act                         have relied on multiple peer                            location of branches did not affect
                                                  (CRA) assessment area and market area                   comparisons. The examination team                       access to credit in that case because,
                                                  more generally;                                         often starts by compiling a refined set of              among other things, the branches did
                                                     • An institution’s lending policies                  peer institutions to find lenders of a                  not accept ‘‘walk-in’’ traffic and all
                                                  and procedures record;                                  similar size—for example, lenders that                  applications were submitted online. The
                                                     • Additional evidence (whistleblower                 received a similar number of                            results of the examinations were also
                                                  tips, loan officer diversity, testing                   applications or originated a similar                    dependent on other factors that showed
                                                  evidence, comparative file reviews); and                number of loans in the MSA. The                         equitable access to credit, and there
                                                     • An institution’s explanations for                  examination team may also consider an                   could be cases in which branch
                                                  apparent differences in treatment.                      institution’s mix of lending products.                  locations in combination with other
                                                     The Bureau has observed that                         For example, if an institution                          risk-based factors escalate redlining risk.
                                                  institutions with strong compliance                     participates in the Federal Housing                        For redlining analyses, examination
                                                  programs examine lending patterns                       Administration (FHA) loan program, it                   teams generally map information,
                                                  regularly, look for any statistically-                  may be compared to other institutions                   including data on lending patterns
                                                  significant disparities, evaluate physical              that also originate FHA loans; if not, it               (applications and originations),
                                                  presence, monitor marketing campaigns                   may be compared to other lenders that                   marketing, and physical presence,
                                                  and programs, and assess CRA                            do not offer FHA loans. Additional                      against census data to see if there are
                                                  assessment areas and market areas more                  refinements may incorporate loan                        differences based on the predominant
                                                  generally. Our supervisory experience                   purpose (for example, focusing only on                  race/ethnicity of the census tract,
                                                  reveals that institutions may reduce fair               home purchase loans) or action taken                    county, or other geographic designation.
                                                  lending risk by documenting risks they                  (for example, incorporating purchased                   Additionally, examination teams will
                                                  identify and by taking appropriate steps                loans into the analysis). Examination                   consider any other available evidence
                                                  in response to identified risks, as                     teams have also taken suggestions, as                   about the nature of the lender’s business
                                                  components of their fair lending                                                                                that might help explain the observed
                                                  compliance management programs.                           37 For these purposes, the term ‘‘minority’’          lending patterns.
                                                     Examination teams typically assess                   ordinarily refers to anyone who identifies with any        Examination teams have considered
                                                  redlining risk, at the initial phase, at the            combination of race or ethnicity other than non-
                                                                                                          Hispanic White. Examination teams have also
                                                                                                                                                                  numerous factors in each redlining
                                                  Metropolitan Statistical Area (MSA)                     focused on African-American and Hispanic                examination, and have invited
                                                  level for each supervised entity, and                   consumers, and could foreseeably focus on other         institutions to identify explanations for
                                                  consider the unique characteristics of                  more specific minority communities such as Asian,       any apparent differences in treatment.
                                                  each MSA (population demographics,                      Native Hawaiian, or Native Alaskan populations, if
                                                                                                          appropriate for the specific geography. In one
                                                                                                                                                                     Although redlining examinations are
                                                  etc.).                                                  examination that escalated to an enforcement            generally scheduled at institutions
                                                     To conduct the initial analysis,                     matter, the statistical evidence presented focused      where the Bureau has identified
                                                  examination teams use HMDA data and                     on African-American and Hispanic census tracts,         statistical disparities, statistics are never
                                                  Census data 36 to assess the lending                    rather than all minority consumers, because the
                                                                                                          harmed consumers were primarily African-
                                                                                                                                                                  considered in a vacuum. The Bureau
                                                  patterns at institutions subject to the                 American and Hispanic.                                  will always work with institutions to
                                                  Bureau’s supervisory authority. To date,                  38 Examination teams typically look at majority       understand their markets, business
                                                  examination teams have used these                       minority areas (>50% minority) and high minority        models, and other information that
                                                  publicly available data to conduct this                 areas (>80% minority), although sometimes one           could provide nondiscriminatory
                                                  initial risk assessment. These initial                  metric is more appropriate than another, and
                                                                                                          sometimes other metrics need to be used to account      explanations for lending patterns that
                                                  analyses typically compare a given                      for the population demographics of the specific         would otherwise raise a fair lending risk
                                                  institution’s lending patterns to other                 MSA.                                                    of redlining.
                                                  lenders in the same MSA to determine                      39 This relative analysis may be expressed as an
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                                                  whether the institution received                        odds ratio: The given lender’s odds of receiving an     2.1.7 Enforcement Actions Arising
                                                  significantly fewer applications from                   application or originating a loan in a minority area    From Supervisory Activity
                                                                                                          divided by other lenders’ comparable odds. An
                                                                                                          odds ratio greater than one means that the                In addition to providing information
                                                    36 The Bureau uses the most current United States     institution is more likely to receive applications or   on supervisory trends, Supervisory
                                                  national census data that apply to the HMDA data—       originate loans in minority areas than other lenders;
                                                  for example, to date it has used 2010 census data       an odds ratio lower than one means that the
                                                                                                                                                                  Highlights also provides information on
                                                  for HMDA data 2011 and later. Specifically, the         institution is less likely do so. Odds ratios show      enforcement actions that resulted from
                                                  ‘‘Demographic Profiles’’ are used.                      greater risk as they approach zero.                     supervisory activity. See Section 3.3.1


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                                                                                  Federal Register / Vol. 82, No. 104 / Thursday, June 1, 2017 / Notices                                           25257

                                                  for more information on such public                      at least $800,000 for community                       resulted in African-American borrowers
                                                  enforcement actions.                                     programs, advertising, outreach, and                  paying significantly higher annual
                                                                                                           credit repair, $2.78 million to African-              percentage rates than similarly situated
                                                  3. Fair Lending Enforcement
                                                                                                           American consumers who were                           non-Hispanic White borrowers, costing
                                                     The Bureau conducts investigations of                 unlawfully denied or overcharged for                  African-American consumers hundreds
                                                  potential violations of HMDA and                         loans, and a $3 million penalty.43                    of dollars more each year they held the
                                                  ECOA, and if it believes a violation has                    BancorpSouth is a regional depository              loan.
                                                  occurred, can file a complaint either                    institution headquartered in Tupelo,                     • Implemented an explicitly
                                                  through its administrative enforcement                   Mississippi that operates branches in                 discriminatory denial policy: The
                                                  process or in Federal court. Like the                    eight States: Alabama, Arkansas,                      complaint alleged that BancorpSouth
                                                  other Federal bank regulators, the                       Florida, Louisiana, Mississippi,                      required its employees to deny
                                                  Bureau refers matters to the DOJ when                    Missouri, Tennessee, and Texas. In the                applications from minorities and other
                                                  it has reason to believe that a creditor                 complaint, CFPB and DOJ alleged that                  ‘‘protected class’’ applicants more
                                                  has engaged in a pattern or practice of                  BancorpSouth:                                         quickly than those from other applicants
                                                  lending discrimination.40 However,                          • Illegally redlined in Memphis: The               and not to provide credit assistance to
                                                  when the Bureau makes a referral to the                  agencies alleged that, at least from 2011             ‘‘borderline’’ applicants, which may
                                                  DOJ, the Bureau can still take its own                   to 2013, BancorpSouth illegally redlined              have improved their chances of getting
                                                  independent action to address a                          in the Memphis area—the market from                   a loan. The bank generally permitted
                                                  violation. In 2016, the Bureau                           which the bank received the most                      loan officers to assist marginal
                                                  announced two fair lending                               applications—by structuring its                       applicants, but the explicitly race-based
                                                  enforcement actions in mortgage                          business to avoid and discourage                      denial policy departed from that
                                                  origination and indirect auto lending.                   consumers in minority neighborhoods                   practice. An audio recording of a 2012
                                                  The Bureau also has a number of                          from accessing mortgages. Specifically,               internal meeting at BancorpSouth
                                                  ongoing fair lending investigations and                  the agencies alleged that the bank                    clearly articulates this discriminatory
                                                  has authority to settle or sue in a                      placed its branches outside of minority               policy, as well as negative and
                                                  number of matters. In addition, the                      neighborhoods, excluded nearly all                    stereotyped perceptions of African
                                                  Bureau issued warning letters to                         minority neighborhoods from the area it               Americans.
                                                  mortgage lenders and mortgage brokers                    chose to serve under the Community                       The consent order requires
                                                  that may be in violation of HMDA                         Reinvestment Act, and directed nearly                 BancorpSouth to take a number of
                                                  requirements to report on housing-                       all of its marketing away from minority               remedial measures, including paying $4
                                                  related lending activity.                                neighborhoods. As a result,                           million into a loan subsidy program to
                                                                                                           BancorpSouth generated relatively few                 increase access to affordable credit, by
                                                  3.1 Fair Lending Public Enforcement
                                                                                                           applications from minority                            offering qualified applicants in majority-
                                                  Actions
                                                                                                           neighborhoods as compared to its peers.               minority neighborhoods in Memphis
                                                  3.1.1     Mortgage                                          • Discriminated in underwriting                    mortgage loans on a more affordable
                                                  BancorpSouth Bank                                        certain mortgages: The agencies also                  basis than otherwise available from
                                                                                                           alleged that one of BancorpSouth’s                    BancorpSouth. The loan subsidies can
                                                     On June 29, 2016, the CFPB and the                    lending units discriminated against                   include interest rate reductions, closing
                                                  DOJ announced a joint action against                     African-American applicants by                        cost assistance, and down payment
                                                  BancorpSouth Bank (BancorpSouth) for                     denying them mortgage loans—                          assistance. In addition, the consent
                                                  discriminatory mortgage lending                          including loans with consumer as well                 order requires BancorpSouth to spend
                                                  practices that harmed African                            as business purposes—more often than                  $500,000 to partner with community-
                                                  Americans and other minorities. The                      similarly situated non-Hispanic White                 based or governmental organizations
                                                  complaint filed by the CFPB and DOJ 41                   applicants. Specifically, the agencies                that provide education, credit repair,
                                                  alleged that BancorpSouth engaged in                     alleged that BancorpSouth granted its                 and other assistance in minority
                                                  numerous discriminatory practices,                       employees wide discretion to make                     neighborhoods in Memphis, and to
                                                  including illegal redlining in Memphis;                  credit decisions on mortgage loans. This              spend at least $300,000 on a targeted
                                                  denying certain African Americans                        discretion resulted in African-American               advertising and outreach campaign to
                                                  mortgage loans more often than                           applicants being denied certain                       generate applications for mortgage loans
                                                  similarly situated non-Hispanic White                    mortgages at rates more than two times                from qualified consumers in majority-
                                                  applicants; charging African-American                    higher than expected if they had been                 minority neighborhoods in Memphis.
                                                  borrowers more for certain mortgage                      non-Hispanic White.                                   The consent order also requires
                                                  loans than non-Hispanic White                               • Discriminated in pricing certain                 BancorpSouth to pay $2.78 million to
                                                  borrowers with similar loan                              mortgage loans: The agencies also                     African-American consumers who were
                                                  qualifications; and implementing an                      alleged that one of BancorpSouth’s                    improperly denied mortgage loans or
                                                  explicitly discriminatory loan denial                    lending units discriminated against                   overcharged for their loans because of
                                                  policy. The consent order, which was                     African-American borrowers that it did                BancorpSouth’s allegedly
                                                  entered by the court on July 25, 2016,                   approve by charging them higher annual                discriminatory pricing and underwriting
                                                  requires BancorpSouth to pay $4                          percentage rates than non-Hispanic                    policies. Finally, BancorpSouth paid a
                                                  million in direct loan subsidies in                      White borrowers with similar loan                     $3 million penalty to the CFPB’s Civil
                                                  minority neighborhoods 42 in Memphis,                    qualifications. Specifically, the agencies            Penalty Fund.
                                                                                                           alleged that BancorpSouth granted its                    In addition to the monetary
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                                                    40 15 U.S.C. 1691e(g).
                                                    41 Complaint,
                                                                                                           employees wide discretion to set the                  requirements, the court decree orders
                                                                   United States v. BancorpSouth
                                                  Bank, No. 1:16–cv–00118–GHD–DAS (N.D. Miss.              prices of mortgage loans. This discretion             BancorpSouth to expand its physical
                                                  June 29, 2016), ECF No. 1, http://files.consumer                                                               presence by opening one new branch or
                                                  finance.gov/f/documents/201606_cfpb_                        43 Consent Order, United States v. BancorpSouth
                                                                                                                                                                 loan production office in a high-
                                                  bancorpsouth-joint-complaint.pdf.                        Bank, No. 1:16–cv–00118–GHD–DAS (N.D. Miss.
                                                     42 Majority-minority neighborhoods or minority        July 25, 2016), ECF No. 8, http://files.consumer
                                                                                                                                                                 minority neighborhood (a census tract
                                                  neighborhoods refers to census tracts with a             finance.gov/f/documents/201606_cfpb_                  with a minority population greater than
                                                  minority population greater than 50%.                    bancorpSouth-consent-order.pdf.                       80%) in Memphis. The bank is also


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                                                  25258                          Federal Register / Vol. 82, No. 104 / Thursday, June 1, 2017 / Notices

                                                  required to offer African-American                      recognized testing as a reliable                        in African-American and Asian and
                                                  consumers who were denied mortgage                      investigative tool.                                     Pacific Islander borrowers paying higher
                                                  loans while BancorpSouth’s allegedly                                                                            interest rates for their auto loans than
                                                                                                          3.1.2    Auto Finance
                                                  discriminatory underwriting policy was                                                                          non-Hispanic White borrowers as a
                                                  in place the opportunity to apply for a                 Toyota Motor Credit Corporation                         result of the dealer markups that Toyota
                                                  new loan at a subsidized interest rate.                    On February 2, 2016, the CFPB                        Motor Credit permitted and
                                                  Among other revisions to its policies,                  resolved an action with Toyota Motor                    incentivized. Toyota Motor Credit’s
                                                  BancorpSouth is also required by the                    Credit Corporation (Toyota Motor                        pricing and compensation structure
                                                  consent order to implement policies that                Credit) 45 that requires Toyota Motor                   meant that for the period covered in the
                                                  require its employees to provide equal                  Credit to change its pricing and                        order, thousands of African-American
                                                  levels of information and assistance to                 compensation system by substantially                    borrowers were charged, on average,
                                                  individuals who inquire about mortgage                  reducing or eliminating discretionary                   over $200 more for their auto loans, and
                                                  loans, regardless of race or any other                  markups to minimize the risks of                        thousands of Asian and Pacific Islander
                                                  prohibited characteristic.                              discrimination. On that same date, the                  borrowers were charged, on average,
                                                     When investigating identified                        DOJ also filed a complaint and proposed                 over $100 more for their auto loans.
                                                  redlining risks, the Bureau’s approach is               consent order in the U.S. District Court                   The CFPB’s administrative action and
                                                  consistent with that of other Federal                   for the Central District of California                  DOJ’s consent order require Toyota
                                                  agencies, including other Federal law                   addressing the same conduct. That                       Motor Credit to reduce dealer discretion
                                                  enforcement agencies and bank                           consent order was entered by the court                  to mark up the interest rate to only
                                                  regulators. For example, the Bureau                     on February 11, 2016. Toyota Motor                      1.25% above the buy rate for auto loans
                                                  looks to risk indicators described in the               Credit’s past practices resulted in                     with terms of five years or less, and 1%
                                                  Interagency Fair Lending Examination                    thousands of African-American and                       for auto loans with longer terms, or to
                                                  Procedures, which were initially issued                 Asian and Pacific Islander borrowers                    move to non-discretionary dealer
                                                  by the prudential regulators and later                  paying higher interest rates than                       compensation. Toyota Motor Credit is
                                                  adopted by the Bureau.44 The Bureau                     similarly-situated non-Hispanic White                   also required to pay $19.9 million in
                                                  also looks to the types of evidence that                borrowers for their auto loans. The                     remediation to affected African-
                                                  DOJ has cited in support of its                         consent order requires Toyota Motor                     American and Asian and Pacific
                                                  complaints alleging redlining. These                    Credit to pay up to $21.9 million in                    Islander borrowers whose auto loans
                                                  sources identify multiple factors that the              restitution to affected borrowers.                      were financed by Toyota Motor Credit
                                                  Bureau considers during a redlining                        Toyota Motor Credit is the U.S.                      between January 2011 and February 2,
                                                  investigation, detailed above in Section                financing arm of Toyota Financial                       2016. Toyota Motor Credit is required to
                                                  2.1.6 on Redlining.                                     Services, which is a subsidiary of                      pay up to an additional $2 million into
                                                                                                          Toyota Motor Corporation. As of the                     the settlement fund to compensate any
                                                     As part of its investigation, the CFPB
                                                                                                          second quarter of 2015, Toyota Motor                    affected African-American and Asian
                                                  also sent testers to several
                                                                                                          Credit was the largest captive auto                     and Pacific Islander borrowers in the
                                                  BancorpSouth branches to inquire about
                                                                                                          lender 46 in the United States and the                  time period between February 2, 2016,
                                                  mortgages, and the results of that testing
                                                                                                          fifth largest auto lender overall. As an                and when Toyota Motor Credit
                                                  support the CFPB and DOJ allegations.
                                                                                                          indirect auto lender, Toyota Motor                      implements its new pricing and
                                                  The agencies alleged that, in several
                                                                                                          Credit sets risk-based interest rates, or               compensation structure. The Bureau did
                                                  instances, a BancorpSouth loan officer                                                                          not assess penalties against Toyota
                                                  treated the African-American tester less                ‘‘buy rates,’’ that it conveys to auto
                                                                                                          dealers. Indirect auto lenders like                     Motor Credit because of its responsible
                                                  favorably than a non-Hispanic White                                                                             conduct, namely the proactive steps the
                                                  counterpart. Specifically, the complaint                Toyota Motor Credit then allow auto
                                                                                                          dealers to charge a higher interest rate                institution is taking to directly address
                                                  alleged that BancorpSouth employees                                                                             the fair lending risk of discretionary
                                                  treated African-American testers who                    when they finalize the deal with the
                                                                                                          consumer. This policy or practice is                    pricing and compensation systems by
                                                  sought information about mortgage                                                                               substantially reducing or eliminating
                                                  loans worse than non-Hispanic White                     typically called ‘‘discretionary markup.’’
                                                                                                          Markups can generate compensation for                   that discretion altogether. In addition,
                                                  testers with similar credit qualifications.                                                                     Toyota Motor Credit is required to hire
                                                  For example, BancorpSouth employees                     dealers while giving them the discretion
                                                                                                          to charge similarly-situated consumers                  a settlement administrator who will
                                                  provided information that would restrict                                                                        contact consumers, distribute the funds,
                                                  African-American consumers to smaller                   different rates. Over the time period
                                                                                                          under review, Toyota Motor Credit                       and ensure that affected borrowers
                                                  loans than non-Hispanic White testers.                                                                          receive compensation.
                                                                                                          permitted dealers to mark up
                                                  This investigation was the CFPB’s first
                                                                                                          consumers’ interest rates as much as                    3.2 HMDA Warning Letters—Potential
                                                  use of testing to support an allegation of
                                                                                                          2.5%.                                                   Mortgage Lending Reporting Failures
                                                  discrimination. Testing is a tool the                      The enforcement action was the result
                                                  Bureau employs in its enforcement                       of a joint CFPB and DOJ investigation                      On October 27, 2016, the CFPB issued
                                                  investigative activity. Other government                that began in April 2013. The agencies                  warning letters to 44 mortgage lenders
                                                  agencies, including the DOJ and HUD,                    investigated Toyota Motor Credit’s                      and mortgage brokers. The Bureau had
                                                  as well as private fair housing                         indirect auto lending activities’                       information that appeared to show these
                                                  organizations and State and local                       compliance with ECOA. The Bureau                        financial institutions may be required to
                                                  agencies, have used testers for decades                 found that Toyota Motor Credit violated                 collect, record, and report data about
                                                  as a method of identifying                                                                                      their housing-related lending activity,
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                                                                                                          ECOA by adopting policies that resulted
                                                  discrimination. Courts have long                                                                                and that they may be in violation of
                                                                                                             45 Consent Order, In re Toyota Motor Credit Corp.,   those requirements. The CFPB, in
                                                    44 SeeCFPB Supervision and Examination                CFPB No. 2016–CFPB–0002 (Feb. 2, 2016), http://         sending these letters, made no
                                                  Manual (Oct. 2012), http://files.consumer               files.consumerfinance.gov/f/201602_cfpb_consent-        determination that a legal violation did,
                                                  finance.gov/f/201210_cfpb_supervision-and-              order-toyota-motor-credit-corporation.pdf.
                                                  examination-manual-v2.pdf (CFPB Examination                46 Captive auto lenders are indirect auto lenders    in fact, occur.
                                                  Procedures, Equal Credit Opportunity Act Baseline       that are directly affiliated with a particular             HMDA, which was originally enacted
                                                  Review Modules).                                        automobile manufacturer.                                in 1975, requires many financial


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                                                                                 Federal Register / Vol. 82, No. 104 / Thursday, June 1, 2017 / Notices                                                    25259

                                                  institutions to collect data about their                courts or entered by the Bureau’s                      brokers’ fees than similarly situated
                                                  housing-related lending activity,                       Director in prior years.                               non-Hispanic White borrowers on the
                                                  including home purchase loans, home                                                                            basis of race and national origin. The
                                                                                                          3.3.1    Settlement Administration
                                                  improvement loans, and refinancings                                                                            consent order, which the court entered
                                                  that they originate or purchase, or for                 Ally Financial Inc. and Ally Bank                      on June 18, 2015, requires Provident to
                                                  which they receive applications.                           On December 19, 2013, working in                    pay $9 million in damages to harmed
                                                  Annually, these financial institutions                  close coordination with the DOJ, the                   borrowers, to hire a settlement
                                                  must report to the appropriate Federal                  CFPB ordered Ally Financial Inc. and                   administrator to distribute funds to the
                                                  agencies and make the data available to                 Ally Bank (Ally) to pay $80 million in                 harmed borrowers identified by the
                                                  the public. The public and regulators                   damages to harmed African-American,                    CFPB and DOJ, and not to discriminate
                                                  can use the information to monitor                      Hispanic, and Asian and/or Pacific                     against borrowers in assessing total
                                                  whether financial institutions are                      Islander borrowers. The DOJ                            broker fees.51
                                                  serving the housing needs of their                      simultaneously filed a consent order in                  In Fall 2016, the Bureau published a
                                                  communities, to assist in distributing                  the United States District Court for the               blog post in English and Spanish
                                                  public-sector investment so as to attract               Eastern District of Michigan, which was                announcing the selection of the
                                                  private investment to areas where it is                 entered by the court on December 23,                   settlement administrator and its mailing
                                                  needed, and to identify possible                        2013. This public enforcement action                   of participation packets to eligible
                                                  discriminatory lending patterns.                        represented the Federal government’s                   consumers.52 53 The blog post also
                                                     Data transparency helps to ensure that               largest auto loan discrimination                       provided information to consumers on
                                                  financial institutions are not engaging in              settlement in history.48                               how to contact the administrator,
                                                  discriminatory lending or failing to meet                  On January 29, 2016, approximately                  participate in the settlement, and submit
                                                  the credit needs of the entire                          301,000 harmed borrowers participating                 settlement forms.
                                                  community, including low- and                           in the settlement—representing                         American Honda Finance Corporation
                                                  moderate-income neighborhoods.                          approximately 235,000 loans—were
                                                  Financial institutions that avoid their                                                                          As previously reported, on July 14,
                                                                                                          mailed checks by the Ally settlement
                                                  responsibility to collect and report                                                                           2015, the CFPB and the DOJ resolved an
                                                                                                          administrator, totaling $80 million plus
                                                  mortgage loan data hinder regulatory                                                                           action with American Honda Finance
                                                                                                          interest, which the Bureau announced                   Corporation (Honda) to put new
                                                  efforts to enforce fair lending laws.                   in a blog post in English and
                                                     The CFPB identified the 44                                                                                  measures in place to address
                                                                                                          Spanish.49 50 In addition, and pursuant                discretionary auto loan pricing and
                                                  companies by reviewing available bank
                                                                                                          to its continuing obligations under the                compensation practices. Honda’s past
                                                  and nonbank mortgage data. The
                                                                                                          terms of the orders, Ally has also made                practices resulted in thousands of
                                                  warning letters flag that entities that
                                                                                                          ongoing payments to consumers affected                 African-American, Hispanic, and Asian
                                                  meet certain requirements are required
                                                                                                          after the consent orders were entered.                 and Pacific Islander borrowers paying
                                                  to collect, record, and report mortgage
                                                                                                          Specifically, Ally paid approximately                  higher interest rates than non-Hispanic
                                                  lending data. The letters say that
                                                                                                          $38.9 million in September 2015 and an                 White borrowers for their auto loans
                                                  recipients should review their practices
                                                                                                          additional $51.5 million in May 2016, to               between January 1, 2011, and July 14,
                                                  to ensure they comply with all relevant
                                                  laws. The companies are encouraged to                   consumers that Ally determined were                    2015, without regard to their
                                                  respond to the Bureau to advise if they                 both eligible and overcharged on auto                  creditworthiness. The consent order
                                                  have taken, or will take, steps to ensure               loans issued during 2014 and 2015,                     requires Honda to change its pricing and
                                                  compliance with the law. They can also                  respectively.                                          compensation system to substantially
                                                  tell the Bureau if they think the law                   Provident Funding Associates                           reduce dealer discretion and minimize
                                                  does not apply to them.47                                  As previously reported, on May 28,                  the risks of discrimination, and pay $24
                                                                                                          2015, the CFPB and the DOJ filed a joint               million in restitution to affected
                                                  3.3 Implementing Enforcement Orders
                                                                                                          complaint against Provident Funding                    borrowers.54
                                                    When an enforcement action is                                                                                  In October 2016, the Bureau
                                                  resolved through a public enforcement                   Associations (Provident) for
                                                                                                                                                                 published a blog post in English and
                                                  order, the Bureau (and the DOJ, when                    discrimination in mortgage lending,
                                                                                                                                                                 Spanish announcing that the settlement
                                                  relevant) takes steps to ensure that the                along with a proposed order to settle the
                                                                                                                                                                 administrator was mailing participation
                                                  respondent or defendant complies with                   complaint in the United States District
                                                  the requirements of the order. As                       Court for the Northern District of                        51 Consent Order, United States v. Provident

                                                  appropriate to the specific requirements                California. The complaint alleged that                 Funding Assocs., L.P., No. 3:15–cv–023–73 (N.D.
                                                  of individual public enforcement orders,                from 2006 to 2011, Provident                           Cal. May 28, 2015), ECF No. 2, http://files.consumer
                                                                                                          discriminated in violation of ECOA by                  finance.gov/f/201505_cfpb_consent-order-
                                                  the Bureau may take steps to ensure that                                                                       provident-funding-associates.pdf.
                                                  borrowers who are eligible for                          charging over 14,000 African-American                     52 Patrice Ficklin, Provident Settlement

                                                  compensation receive remuneration and                   and Hispanic borrowers more in                         Administrator to Contact Eligible Borrowers Soon,
                                                  that the defendant has implemented a                                                                           Consumer Financial Protection Bureau (Sept. 28,
                                                                                                             48 Consent Order, In re Ally Financial Inc., CFPB   2016), http://www.consumerfinance.gov/about-us/
                                                  comprehensive fair lending compliance                   No. 2013–CFPB–0010 (Dec. 20, 2013), http://            blog/provident-settlement-administrator-contact-
                                                  management system. Throughout 2016,                     files.consumerfinance.gov/f/201312_cfpb_consent-       eligible-borrowers-soon/.
                                                  the Office of Fair Lending worked to                    order_ally.pdf.                                           53 Patrice Ficklin, Administrador del Acuerdo de
                                                                                                             49 Patrice Ficklin, Harmed Ally Borrowers Have      Provident planea ponerse en contacto con
                                                  implement and oversee compliance
                                                                                                          Been Sent $80 Million in Damages, Consumer             prestatarios elegibles próximamente, Consumer
                                                  with the pending public enforcement
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                                                                                                          Financial Protection Bureau (Jan. 29, 2016), http://   Financial Protection Bureau (Oct. 6, 2016), http://
                                                  orders that were entered by Federal                     www.consumerfinance.gov/blog/harmed-ally-              www.consumerfinance.gov/about-us/blog/
                                                                                                          borrowers-have-been-sent-80-million-in-damages/.       administrador-del-acuerdo-de-provident-planea-
                                                    47 More information on HMDA reporting                    50 Patrice Ficklin, Prestatarios perjudicados por   ponerse-en-contacto-con-prestatarios-elegibles-
                                                  requirements and a sample warning letter are            Ally reciben $80 millones en daños, Consumer          proximamente/.
                                                  available at http://www.consumerfinance.gov/            Financial Protection Bureau (Feb. 4, 2016), http://       54 Consent Order, In re American Honda Finance

                                                  about-us/newsroom/cfpb-warns-financial-                 www.consumerfinance.gov/about-us/blog/                 Corp., CFPB No. 2015–CFPB–0014 (July 14, 2015),
                                                  institutions-about-potential-mortgage-lending-          prestatarios-perjudicados-por-ally-reciben-80-         http://files.consumerfinance.gov/f/201507_cfpb_
                                                  reporting-failures/.                                    millones-en-danos/.                                    consent-order_honda.pdf.



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                                                  25260                          Federal Register / Vol. 82, No. 104 / Thursday, June 1, 2017 / Notices

                                                  packets to potentially eligible                         at the end of 2016, the Bureau had a                  under current Regulation C and it
                                                  consumers, and providing information                    number of pending investigations in                   originates at least 25 home purchase
                                                  to consumers on how to contact the                      other areas.                                          loans, including refinancings of home
                                                  administrator, participate in the                                                                             purchase loans, in both 2015 and 2016.
                                                                                                          4. Rulemaking and Related Guidance
                                                  settlement, and submit settlement                                                                             Second, effective January 1, 2018, the
                                                  forms.55 56                                             4.1 Home Mortgage Disclosure Act and                  HMDA Rule adopts a uniform loan-
                                                  3.4 Equal Credit Opportunity Act                        Regulation C                                          volume threshold for all institutions.
                                                  Referrals to the Department of Justice                     On October 2015, the Bureau issued                 Beginning in 2018, an institution will be
                                                                                                          and published in the Federal Register a               subject to Regulation C if it originated
                                                    The CFPB must refer to the DOJ a                                                                            at least 25 covered closed-end mortgage
                                                  matter when it has reason to believe that               final rule to implement the Dodd-Frank
                                                                                                          amendments to HMDA.58 The rule also                   loan originations in each of the two
                                                  a creditor has engaged in a pattern or                                                                        preceding calendar years or at least 100
                                                  practice of lending discrimination in                   finalizes certain amendments that the
                                                                                                          Bureau believes are necessary to                      covered open-end lines of credit in each
                                                  violation of ECOA.57 The CFPB also                                                                            of the two preceding calendar years.
                                                  may refer other potential ECOA                          improve the utility of HMDA data,
                                                                                                          further the purposes of HMDA, improve                 Other applicable coverage requirements
                                                  violations to the DOJ. In 2016, the CFPB                                                                      will apply, depending on the type of
                                                  referred eight matters to the DOJ. In four              the quality of HMDA data, and create a
                                                                                                          more transparent mortgage market.                     covered entity.
                                                  of the eight matters, the DOJ declined to                                                                        The Rule also modifies the types of
                                                  open an independent investigation and                   4.1.1 HMDA History                                    transactions covered under Regulation
                                                  deferred to the Bureau’s handling of the                                                                      C. In general, the HMDA Rule adopts a
                                                                                                             HMDA, as implemented by
                                                  matter. The CFPB’s referrals to the DOJ                                                                       dwelling-secured standard for
                                                                                                          Regulation C, is intended to provide the
                                                  in 2016 covered a variety of practices,                                                                       transactional coverage. Beginning on
                                                  specifically discrimination in mortgage                 public with loan data that can be used
                                                                                                          to help determine whether financial                   January 1, 2018, covered loans under
                                                  lending on the bases of the age, marital
                                                                                                          institutions are serving the housing                  the HMDA Rule generally will include
                                                  status, receipt of public assistance
                                                                                                          needs of their communities; to assist                 closed-end mortgage loans and open-
                                                  income, and sex; discrimination in
                                                                                                          public officials in distributing public-              end lines of credit secured by a dwelling
                                                  indirect auto lending on the bases of
                                                                                                          sector investment to attract private                  and will not include unsecured loans.
                                                  national origin, race, and receipt of
                                                  public assistance income; and                           investment in communities where it is                    For HMDA data collected on or after
                                                  discrimination in credit card account                   needed; and to assist in identifying                  January 1, 2018, covered institutions
                                                  management on the bases of national                     possible discriminatory lending patterns              will collect, record, and report
                                                  origin and race.                                        and enforcing anti-discrimination                     additional information on covered
                                                                                                          statutes.59 HMDA data are also used for               loans. New data points include those
                                                  3.5 Pending Fair Lending                                a range of mortgage market monitoring                 specifically identified in Dodd-Frank as
                                                  Investigations                                          purposes by community groups, public                  well as others the Bureau determined
                                                    In 2016, the Bureau had a number of                   officials, the financial industry,                    will assist in carrying out HMDA’s
                                                  ongoing fair lending investigations and                 economists, academics, social scientists,             purposes. The HMDA Rule adds new
                                                  authorized enforcement actions against                  regulators, and the media. Bank                       data points for applicant or borrower
                                                  a number of institutions involving a                    regulators and other agencies use                     age, credit score, automated
                                                  variety of consumer financial products.                 HMDA to monitor compliance with and                   underwriting system information, debt-
                                                  Consistent with the Bureau’s priorities                 enforcement of the CRA and Federal                    to-income ratio, combined loan-to-value
                                                  and the Office of Fair Lending’s risk-                  anti-discrimination laws, including                   ratio, unique loan identifier, property
                                                  based prioritization, one key area on                   ECOA and the Fair Housing Act (FHA).                  value, application channel, points and
                                                  which the Bureau focused its fair                          The Dodd-Frank Act transferred                     fees, borrower-paid origination charges,
                                                  lending enforcement efforts was                         rulemaking authority for HMDA to the                  discount points, lender credits, loan
                                                  addressing potential discrimination in                  Bureau, effective July 2011. It also                  term, prepayment penalty, non-
                                                  mortgage lending, including the                         amended HMDA to require financial                     amortizing loan features, interest rate,
                                                  unlawful practice of redlining.                         institutions to report new data points                and loan originator identifier as well as
                                                  Redlining occurs when a lender                          and authorized the Bureau to require                  other data points. The HMDA Rule also
                                                  provides unequal access to credit, or                   financial institutions to collect, record,            modifies several existing data points.
                                                  unequal terms of credit, because of the                 and report additional information.                       For data collected on or after January
                                                  racial or ethnic composition of a                                                                             1, 2018, the HMDA Rule amends the
                                                                                                          4.1.2 Summary of Regulation C
                                                  neighborhood. At the end of 2016, the                                                                         requirements for collection and
                                                                                                          Changes
                                                  Bureau had a number of pending                                                                                reporting of information regarding an
                                                  investigations in this area. Additionally,                The HMDA Rule changes institutional                 applicant’s or borrower’s ethnicity, race,
                                                                                                          coverage in two phases. First, to reduce              and sex. First, a covered institution will
                                                     55 Patrice Ficklin, What you need to know to get     burden on industry, certain lower-                    report whether or not it collected the
                                                  money from the settlement with Honda Finance for        volume depository institutions will no                information on the basis of visual
                                                  overcharging minorities, Consumer Financial             longer be required to collect and report
                                                  Protection Bureau (Oct. 3, 2016), http://                                                                     observation or surname. Second,
                                                  www.consumerfinance.gov/about-us/blog/what-             HMDA data beginning in 2017. A bank,                  covered institutions must permit
                                                  you-need-know-get-money-settlement-honda-               savings association, or credit union will             applicants to self-identify their ethnicity
                                                  finance-overcharging-minorities/.                       not be subject to Regulation C in 2017                and race using disaggregated ethnic and
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                                                     56 Patrice Ficklin, Lo que necesita saber para
                                                                                                          unless it meets the asset-size, location,             racial subcategories. However, the
                                                  recibir dinero del acuerdo de compensación con
                                                  Honda Finance por cobrarles de más a las minorı́as,    federally related, and loan activity tests            HMDA Rule will not require or permit
                                                  Consumer Financial Protection Bureau (Oct. 11,                                                                covered institutions to use the
                                                  2016), https://www.consumerfinance.gov/about-us/          58 Home Mortgage Disclosure, 80 FR 66128 (Oct.
                                                                                                                                                                disaggregated subcategories when
                                                  blog/lo-que-necesita-saber-para-recibir-dinero-del-     28, 2015) (codified at 12 CFR pt. 1003), https://
                                                  acuerdo-de-compensacion-con-honda-finance-por-          www.gpo.gov/fdsys/pkg/FR-2015-10-28/pdf/2015-         identifying the applicant’s or borrower’s
                                                  cobrarles-de-mas-las-minorias/.                         26607.pdf.                                            ethnicity and race based on visual
                                                     57 15 U.S.C. 1691e(g).                                 59 12 U.S.C. 2801; 12 CFR 1003.1(b).                observation or surname.


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                                                                                 Federal Register / Vol. 82, No. 104 / Thursday, June 1, 2017 / Notices                                                  25261

                                                     The Bureau is developing a new web-                  change that will reduce the number of                 the HMDA data to the appropriate
                                                  based submission tool for reporting                     depository institutions that need to                  Federal agency.61 The effective date of
                                                  HMDA data, which covered institutions                   report is effective earlier: On January 1,            the change in the Federal agency that
                                                  will use beginning in 2018. Regulation                  2017. Institutions subject to the new                 receives and processes the HMDA data
                                                  C’s appendix A is amended effective                     quarterly reporting requirement will                  does not coincide with the effective date
                                                  January 1, 2018 to include new                          have additional time to prepare: That                 for the new HMDA data to be collected
                                                  transition requirements for data                        requirement is effective on January 1,                and reported under the Final Rule
                                                  collected in 2017 and reported in 2018.                 2020, and the first quarterly submission              amending Regulation C published in the
                                                  Covered institutions will be required to                will be due by May 30, 2020.                          Federal Register on October 28, 2015.
                                                  electronically submit their loan                           As with all of its rules, the Bureau               The Final Rule’s new data requirements
                                                  application registers (LARs). Beginning                 continues to look for ways to help the                will apply to data collected beginning
                                                  with data collected in 2018 and reported                mortgage industry implement the new                   on January 1, 2018. The data fields for
                                                  in 2019, covered institutions will report               mortgage lending data reporting rules,                data collected in 2017 have not
                                                  the new dataset required by the HMDA                    and has created regulatory                            changed.
                                                  Rule, using revised procedures that will                implementation resources that are                       Also beginning with data collected in
                                                  be available at                                         available online. These resources                     2017, filers will submit their HMDA
                                                  www.consumerfinance.gov/hmda.                           include an overview of the final rule, a              data using a web interface referred to as
                                                     Beginning in 2020, the HMDA Rule                     plain-language compliance guide, a                    the ‘‘HMDA Platform.’’ In addition,
                                                  requires quarterly reporting for covered                timeline with various effective dates, a              beginning with the data collected in
                                                  institutions that reported a combined                   decision tree to help institutions                    2017, as part of the submission process,
                                                  total of at least 60,000 applications and               determine whether they need to report                 a HMDA reporter’s authorized
                                                  covered loans in the preceding calendar                 mortgage lending data, a chart that                   representative with knowledge of the
                                                  year. An institution will not count                     provides a summary of the reportable                  data submitted shall certify to the
                                                  covered loans that it purchased in the                  data, a chart that describes when to                  accuracy and completeness of the data
                                                  preceding calendar year when                            report data as not applicable, a chart                submitted. Additional information
                                                  determining whether it is required to                   that describes what transactions are                  about HMDA, the FIG, and other data
                                                  report on a quarterly basis. The first                  reportable, a webinar on the HMDA                     submission resources is located at the
                                                  quarterly submission will be due by                     Rule, and a Technology Preview for the                Bureau’s Web site.62
                                                  May 30, 2020.                                           Bureau’s new web-based submission
                                                     Beginning in 2018, covered                           tool. In addition, the Bureau has                     4.1.5    HMDA Data Resubmission RFI
                                                  institutions will no longer be required to              published Filing Instruction Guides                     In response to dialogue with industry
                                                  provide a disclosure statement or a                     (FIG) for 2017 and 2018 that include file             and other stakeholders, the Bureau is
                                                  modified LAR to the public upon                         specifications. The Bureau will monitor               considering modifications to its current
                                                  request. Instead, in response to a                      implementation progress and will be                   HMDA resubmission guidelines. In
                                                  request, a covered institution will                     publishing additional regulatory
                                                                                                                                                                comments on the Bureau’s proposed
                                                  provide a notice that its disclosure                    implementation tools and resources on
                                                                                                                                                                changes to Regulation C, some
                                                  statement and modified LAR are                          its Web site to support implementation
                                                                                                                                                                stakeholders asked that the Bureau
                                                  available on the Bureau’s Web site.                     needs.60 Since the HMDA rule was
                                                  These revised disclosure requirements                                                                         adjust its existing HMDA resubmission
                                                                                                          issued on October 15, 2015, the Bureau
                                                  will apply to data collected on or after                                                                      guidelines to reflect the expanded data
                                                                                                          has focused on outreach by sharing
                                                  January 1, 2017 and reported in or after                                                                      the Bureau will collect under the HMDA
                                                                                                          information about the regulatory
                                                  2018.                                                                                                         Rule.
                                                                                                          changes, including webinars,
                                                     For data collected in or after 2018 and              responding to industry inquiries, and                   Accordingly, on January 7, 2016, the
                                                  reported in or after 2019, the Bureau                   issuing press releases and emails to                  Bureau published on its Web site a
                                                  will use a balancing test to determine                  stakeholder groups. In addition, Bureau               Request for Information (RFI) asking for
                                                  whether and, if so, how HMDA data                       staff has spoken at numerous industry-                public comment on the Bureau’s HMDA
                                                  should be modified prior to its                         focused conferences and mortgage                      resubmission guidelines.63 Specifically,
                                                  disclosure in order to protect applicant                events. Since the HMDA rule has been                  the Bureau requested feedback on the
                                                  and borrower privacy while also                         released, the Bureau’s Web site has had               Bureau’s use of resubmission error
                                                  fulfilling HMDA’s disclosure purposes.                  over 50,000 visits to the HMDA                        thresholds; how they should be
                                                  At a later date, the Bureau will provide                implementation page and over 18,000                   calculated; whether they should vary
                                                  a process for the public to provide input               downloads of our plain-language HMDA                  with the size of the HMDA submission
                                                  regarding the application of this                       compliance guide.                                     or kind of data; and the consequences
                                                  balancing test to determine the HMDA                                                                          for exceeding a threshold, among other
                                                                                                          4.1.4 Filing 2017 HMDA Data
                                                  data to be publicly disclosed.
                                                                                                            Beginning with the HMDA data                           61 The HMDA agencies refer collectively to the
                                                  4.1.3 Reducing Industry Burden                          collected in 2017 and submitted in                    CFPB, the Office of the Comptroller of the Currency
                                                                                                                                                                (OCC), the Federal Deposit Insurance Corporation
                                                     The Bureau took a number of steps to                 2018, responsibility to receive and                   (FDIC), the FRB, the National Credit Union
                                                  reduce industry burden while ensuring                   process HMDA data will transfer from                  Administration (NCUA), and the Department of
                                                  HMDA data are useful and reflective of                  the Federal Reserve Board (FRB) to the                Housing and Urban Development (HUD).
                                                  the current housing finance market. A                   CFPB. The HMDA agencies have agreed                      62 See Consumer Financial Protection Bureau,

                                                  key part of this balancing is ensuring an               that a covered institution filing HMDA                Filing instructions guide for HMDA data collected
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                                                                                                                                                                in 2017 (July 2016), http://www.consumer
                                                  adequate implementation period. Most                    data collected in or after 2017 with the              finance.gov/data-research/hmda/static/for-filers/
                                                  provisions of the HMDA Rule go into                     CFPB will be deemed to have submitted                 2017/2017-HMDA-FIG.pdf.
                                                  effect on January 1, 2018—more than                                                                              63 See Consumer Financial Protection Bureau,

                                                  two years after publication of the Rule—                  60 These resources are available at Consumer        CFPB Seeks Public Input on Mortgage Lending
                                                                                                          Financial Protection Bureau, Home Mortgage            Information Resubmission Guidelines (Jan. 7, 2016),
                                                  and apply to data collected in 2018 and                 Disclosure Act rule implementation, http://www.       http://www.consumerfinance.gov/newsroom/cfpb-
                                                  reported in 2019 or later years. At the                 consumerfinance.gov/regulatory-implementation/        seeks-public-input-on-mortgage-lending-
                                                  same time, an institutional coverage                    hmda/.                                                information-resubmission-guidelines/.



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                                                  25262                          Federal Register / Vol. 82, No. 104 / Thursday, June 1, 2017 / Notices

                                                  topics. Some examples of questions                         In accordance with the request by                  characteristics, of applicants for certain
                                                  posed to the public include:                            Federal Housing Finance Agency and                    dwelling-secured loans, but uses only
                                                    • Should the Bureau continue to use                   the Federal Home Loan Mortgage                        aggregate ethnic and racial categories.
                                                  error percentage thresholds to determine                Corporation (Freddie Mac) and the                     On March 24, 2017, the Bureau issued
                                                  the need for data resubmission? If not,                 Federal National Mortgage Association                 a proposed rule seeking comment on
                                                  how else may the Bureau ensure data                     (Fannie Mae), the Bureau reviewed the                 amendments to Regulation B to permit
                                                  integrity and compliance with HMDA                      revised and redesigned Uniform                        creditors additional flexibility in
                                                  and Regulation C?                                       Residential Loan Application issued on                complying with Regulation B in order to
                                                    • If the Bureau retains error                         August 23, 2016 (2016 URLA). Under                    facilitate compliance with Regulation C,
                                                  percentage thresholds, should the                       the terms provided in the Bureau’s                    to add certain model forms and remove
                                                  thresholds be calculated differently than               notice, the Bureau determined that the                others from Regulation B, and to make
                                                  they are today? If so, how and why?                     relevant language in the 2016 URLA is                 various other amendments to Regulation
                                                    • If the Bureau retains error                         in compliance with the specified                      B and its commentary to facilitate the
                                                  percentage thresholds, should it                        provisions of Regulation B. A creditor’s              collection and retention of information
                                                  continue to maintain separate error                     use of the 2016 URLA is not required                  about the ethnicity, sex, and race of
                                                  thresholds for the entire HMDA LAR                      under Regulation B. However, the notice               certain mortgage applicants.66
                                                  sample and individual data fields                       provides that, a creditor that uses the
                                                                                                          2016 URLA without any modification                    4.3      Small Business Data Collection
                                                  within the LAR sample? If not, why?
                                                    The RFI was published in the Federal                  that would violate § 1002.5(b) through                  Section 1071 of the Dodd-Frank Act
                                                  Register on January 12, 2016.64 The 60-                 (d) would act in compliance with                      requires financial institutions to
                                                  day comment period ended on March                       § 1002.5(b) through (d).                              compile, maintain, and submit to the
                                                  14, 2016. As of this report’s publication                  The notice also addressed collection               Bureau certain data on credit
                                                  date, in light of feedback received, the                of information concerning the ethnicity               applications for women-owned,
                                                  Bureau was considering whether to                       and race of applicants in conformity                  minority-owned, and small
                                                  adjust its existing HMDA resubmission                   with Regulation B from January 1, 2017,               businesses.67 Congress enacted section
                                                  guidelines and if so, how.                              through December 31, 2017. The                        1071 for the purpose of facilitating
                                                                                                          Bureau’s official approval provided that              enforcement of fair lending laws and
                                                  4.1.6 HMDA Rule Technical                               at any time from January 1, 2017,                     identifying business and community
                                                  Corrections and Clarifying Amendments                   through December 31, 2017, a creditor                 development needs and opportunities
                                                    Since issuing the 2015 HMDA Final                     may, at its option, permit applicants to              for women-owned, minority-owned, and
                                                  Rule, the Bureau has identified and                     self-identify using disaggregated ethnic              small businesses. The amendments to
                                                  received information about some areas                   and racial categories as instructed in                ECOA made by the Dodd-Frank Act
                                                  of uncertainty about requirements under                 appendix B to Regulation C, as amended                require that certain data be collected
                                                  the rule. This spring, the Bureau plans                 by the 2015 HMDA final rule. The                      and maintained, including the number
                                                  to seek comment on a proposal to                        Bureau believes such authorization may                of the application and date the
                                                  amend certain provisions of Regulation                  provide creditors time to begin to                    application was received; the type and
                                                  C to make technical corrections and to                  implement the regulatory changes and                  purpose of loan or credit applied for; the
                                                  clarify certain requirements under                      improve their compliance processes                    amount of credit applied for and
                                                  Regulation C.                                           before the new requirement becomes                    approved; the type of action taken with
                                                                                                          effective, and therefore mandatory, on                regard to each application and the date
                                                  4.2   ECOA and Regulation B                             January 1, 2018. Allowing for this                    of such action; the census tract of the
                                                    In 2016, with regard to ECOA, the                     increased implementation period will,                 principal place of business; the gross
                                                  CFPB published a Bureau Official                        in the Bureau’s view, reduce                          annual revenue of the business; and the
                                                  Approval and was in the proposed rule                   compliance burden and further the                     race, sex, and ethnicity of the principal
                                                  stage to amend certain sections of                      purposes of HMDA and Regulation C.                    owners of the business. The Bureau’s
                                                  Regulation B.                                           4.2.2 Amendments to the Equal Credit                  Fall 2016 Unified Agenda and
                                                                                                          Opportunity Act (Regulation B)                        Regulatory Plan indicates that
                                                  4.2.1 Status of New Uniform
                                                                                                          Ethnicity and Race Information                        rulemaking pursuant to Section 1071 is
                                                  Residential Loan Application and
                                                                                                          Collection                                            now in the pre-rule stage.68 This first
                                                  Collection of Expanded Home Mortgage
                                                                                                                                                                stage of the Bureau’s work will be
                                                  Disclosure Act Information About                           Regulation C currently requires
                                                                                                                                                                focused on outreach and research and
                                                  Ethnicity and Race in 2017 Under                        financial institutions to collect and
                                                                                                                                                                on the potential ways to implement
                                                  Regulation B                                            report information about the ethnicity
                                                                                                                                                                section 1071, after which the Bureau
                                                    On September 23, 2016, the Bureau                     and race, as well as certain other
                                                                                                                                                                will begin developing proposed rules
                                                  published a Bureau Official Approval                    characteristics, of applicants and
                                                                                                                                                                concerning the data to be collected and
                                                  pursuant to section 706(e) of the ECOA                  borrowers. Regulation C, as amended by
                                                                                                                                                                determining the appropriate operational
                                                  concerning the new Uniform Residential                  2015 HMDA Final Rule, generally
                                                                                                                                                                procedures and privacy protections
                                                  Loan Application and the collection of                  effective January 1, 2018, will require
                                                                                                                                                                needed for information-gathering and
                                                  expanded HMDA information about                         financial institutions to permit
                                                                                                                                                                public disclosure.
                                                  ethnicity and race in 2017.65                           applicants and borrowers to self-identify
                                                                                                          using disaggregated ethnic and racial                    66 Consumer Financial Protection Bureau,
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                                                    64 Request for Info. Regarding Home Mortgage          categories beginning January 1, 2018.                 Amendments to Equal Credit Opportunity Act
                                                  Disclosure Act Resubmission Guidelines, 81 F.R.         Regulation B also currently requires                  (Regulation B) Ethnicity and Race Information
                                                  1405 (Jan. 12, 2016), https://www.gpo.gov/fdsys/        creditors to request and retain                       Collection 2017–0009 (March 24, 2017), http://
                                                  pkg/FR-2016-01-12/pdf/2016-00442.pdf.                                                                         files.consumerfinance.gov/f/documents/201703_
                                                    65 Consumer Financial Protection Bureau, Status
                                                                                                          information about the ethnicity and                   cfpb_NPRM-to-amend-Regulation-B.pdf.
                                                  of New Uniform Residential Loan Application and         race, as well as certain other                           67 Dodd-Frank Act section 1071 (codified at 15

                                                  Collection of Expanded Home Mortgage Disclosure                                                               U.S.C. 1691c–2).
                                                  Act Information about Ethnicity and Race in 2017        s3.amazonaws.com/files.consumerfinance.gov/f/            68 Semiannual Regulatory Agenda, 81 FR 94844,

                                                  under Regulation B (Sept. 23, 2016), https://           documents/092016_cfpb_HMDAEthinicityRace.pdf.         94846 (Dec. 23, 2016).



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                                                                                  Federal Register / Vol. 82, No. 104 / Thursday, June 1, 2017 / Notices                                                    25263

                                                     The Bureau has begun to explore                      Appeals for the Fifth Circuit reversed                 Federal Housing Finance Agency,
                                                  some of the issues involved in the                      the dismissal with respect to some of                  comprise the Interagency Task Force on
                                                  rulemaking, including through ongoing                   the plaintiffs but affirmed the dismissal              Fair Lending. The Task Force meets
                                                  engagement with industry and other                      with respect to others.71 Reversing the                regularly to discuss fair lending
                                                  stakeholders. In addition, current and                  District Court, the court held that one                enforcement efforts, share current
                                                  future small business lending                           set of plaintiffs stated an ECOA claim                 methods of conducting supervisory and
                                                  supervisory activity will help expand                   because they alleged that they applied                 enforcement fair lending activities, and
                                                  and enhance the Bureau’s knowledge in                   for credit, that the creditor refused to               coordinate fair lending policies.
                                                  this area, including the credit                         consider public assistance income in                      The CFPB belongs to a standing
                                                  application process; existing data                      considering their credit applications,                 working group of Federal agencies—
                                                  collection processes; and the nature,                   and that the applicants as a result                    with the DOJ, HUD, and FTC—that
                                                  extent, and management of fair lending                  received less favorable mortgages.                     meets regularly to discuss issues
                                                  risk. The Bureau is also considering                    Unlike the District Court’s decision, the              relating to fair lending enforcement.
                                                  how best to work with other agencies to,                court did not require the plaintiffs to                These agencies comprise the
                                                  in part, gain insight into existing                     also allege hostility or animus or to                  Interagency Working Group on Fair
                                                  business lending data collection efforts                make a prima facie showing of                          Lending Enforcement. The agencies use
                                                  and to explore possible ways to                         discrimination under the McDonnell-                    these meetings to discuss fair lending
                                                  cooperate in future efforts.                            Douglas framework. Affirming the                       developments and trends,
                                                                                                          District Court, the court also held that               methodologies for evaluating fair
                                                  4.4 Amicus Program                                                                                             lending risks and violations, and
                                                                                                          another set of plaintiffs failed to state a
                                                     The Bureau’s Amicus Program files                    claim under ECOA because they either                   coordination of fair lending enforcement
                                                  amicus, or friend-of-the-court, briefs in               failed to allege sufficient facts of                   efforts. In addition to these interagency
                                                  court cases concerning the Federal                      discriminatory conduct, failed to allege               working groups, we meet periodically
                                                  consumer financial protection laws that                 facts indicating that they had applied                 and on an ad hoc basis with the
                                                  the Bureau is charged with                              for credit, or failed to allege facts                  prudential regulators to coordinate our
                                                  implementing, including ECOA. These                     indicating that one defendant was a                    fair lending work.
                                                  amicus briefs provide the courts with                   ‘‘creditor’’ under ECOA.                                  The CFPB takes part in the FFIEC
                                                  our views on significant consumer                                                                              HMDA/Community Reinvestment Act
                                                  financial protection issues and help                    5. Interagency Coordination                            Data Collection Subcommittee, which is
                                                  ensure that consumer financial                          5.1 Interagency Coordination and                       a subcommittee of the FFIEC Task Force
                                                  protection statutes and regulations are                 Engagement                                             on Consumer Compliance, as its work
                                                  correctly and consistently interpreted by                                                                      relates to the collection and processing
                                                                                                             The Office of Fair Lending regularly
                                                  the courts.                                                                                                    of HMDA data, and the Bureau is one of
                                                     In 2016, the Bureau filed an amicus                  coordinates the CFPB’s fair lending
                                                                                                          regulatory, supervisory and enforcement                the agencies to which HMDA data is
                                                  brief in Alexander v. AmeriPro Funding,                                                                        submitted by financial institutions.
                                                  Inc., in which a group of consumer                      activities with those of other Federal
                                                  plaintiffs appealed the dismissal by the                agencies and State regulators to promote               6. Outreach: Promoting Fair Lending
                                                  United States District Court for the                    consistent, efficient, and effective                   Compliance and Education
                                                  Southern District of Texas of an ECOA                   enforcement of Federal fair lending
                                                                                                                                                                    Pursuant to Dodd-Frank,74 the Office
                                                  complaint alleging discrimination by                    laws.72 Through our interagency
                                                                                                                                                                 of Fair Lending regularly engages in
                                                  mortgage lenders on the basis that all or               engagement, we work to address current
                                                                                                                                                                 outreach with industry, bar associations,
                                                  part of the plaintiffs’ income derived                  and emerging fair lending risks.
                                                                                                             On November 14, 2016, along with                    consumer advocates, civil rights
                                                  from a public assistance program. The                                                                          organizations, other government
                                                                                                          other members of the FFIEC, the Bureau
                                                  District Court held that the complaint                                                                         agencies, and other stakeholders to help
                                                                                                          issued an updated Uniform Interagency
                                                  failed to allege facts that gave rise to a                                                                     educate and inform about fair lending.
                                                                                                          Consumer Compliance Rating System.73
                                                  prima facie showing of discrimination                                                                          The Bureau is committed to
                                                                                                          The revisions reflect the regulatory,
                                                  under the McDonnell-Douglas                                                                                    communicating directly with all
                                                                                                          supervisory, technological, and market
                                                  framework and also failed to allege                                                                            stakeholders on its policies, compliance
                                                                                                          changes that have occurred since the
                                                  direct evidence of discrimination                                                                              expectations, and fair lending priorities.
                                                                                                          system was established. The previous
                                                  because the allegations were                                                                                   As part of this commitment to outreach
                                                                                                          rating system was adopted in 1980, and
                                                  ‘‘conclusory’’ and did not allege                                                                              and education in the area of fair
                                                                                                          the proposed revisions aim to address
                                                  hostility or animus.69 The Bureau filed                                                                        lending, equal opportunity, and
                                                                                                          the broad array of risks in the market
                                                  its amicus brief on February 23, 2016,                                                                         ensuring fair access to credit, Bureau
                                                                                                          that can cause consumer harm,
                                                  and argued that the District Court’s                                                                           personnel have engaged in dialogue
                                                                                                          including fair lending violations. The
                                                  decision imposed pleading burdens on                                                                           with stakeholders on issues including
                                                                                                          Bureau plans to implement the updated
                                                  ECOA plaintiffs that were not required                                                                         the use of public assistance income in
                                                                                                          rating system on consumer compliance
                                                  by ECOA or the Federal Rules of Civil                                                                          underwriting, redlining, disparate
                                                                                                          examinations that begin on or after
                                                  Procedure.70                                                                                                   treatment, disparate impact, HMDA data
                                                     On February 16, 2017, in a unanimous                 March 31, 2017.
                                                                                                             The CFPB, along with the FTC, DOJ,                  collection and reporting, indirect auto
                                                  decision, the United States Court of                                                                           financing, the use of proxy
                                                                                                          HUD, FDIC, FRB, NCUA, OCC, and the
                                                     69 Alexander v. AmeriPro Funding, Inc., No. H–
                                                                                                                                                                 methodology, and the unique challenges
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                                                  14–2947, 2015 WL 4545625 at *4–5 (S.D. Tex. July
                                                                                                             71 Alexander v. AmeriPro Funding, Inc., 848 F.3d    facing LEP and lesbian, gay, bisexual
                                                  28, 2015).                                              698 (5th Cir. 2017).                                   and transgender (LGBT) consumers in
                                                                                                             72 Dodd-Frank Act section 1013(c)(2)(B) (codified
                                                     70 Br. of Amicus Curiae Consumer Financial                                                                  accessing credit. Outreach is
                                                  Protection Bureau in Supp. of Appellants and            at 12 U.S.C. 5493(c)(2)(B)).
                                                                                                             73 Uniform Interagency Consumer Compliance
                                                                                                                                                                 accomplished through issuance of
                                                  Reversal, Alexander, et al. v. AmeriPro Funding,
                                                  Inc., et al., No. 15–20710 (5th Cir. Feb. 23, 2016),    Rating System, 81 FR 79473 (Nov. 14, 2016),            Reports to Congress, Interagency
                                                  ECF No. 00513394181, https://www.consumer               https://www.federalregister.gov/documents/2016/
                                                  finance.gov/policy-compliance/amicus/briefs/            11/14/2016-27226/uniform-interagency-consumer-            74 Dodd-Frank Act section 1013(c)(2)(C) (codified

                                                  alexander-ameripro-funding/                             compliance-rating-system.                              at 12 U.S.C. 5493(c)(2)(C)).



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                                                  25264                          Federal Register / Vol. 82, No. 104 / Thursday, June 1, 2017 / Notices

                                                  Statements, Supervisory Highlights,                     settlement 81 82 and updates on the                         The blog posts may be accessed any
                                                  Compliance Bulletins, letters, blog                     American Honda Finance Corporation                        time at www.consumerfinance.gov/blog.
                                                  posts, speeches and presentations at                    settlement.83 84 Our consumer education
                                                                                                                                                                    6.2   Supervisory Highlights
                                                  conferences and trainings, and                          blog posts included reminding
                                                  participation in meetings to discuss fair               consumers of their rights for fair                           Supervisory Highlights reports anchor
                                                  lending and access to credit matters.                   treatment in the financial                                the Bureau’s efforts to communicate
                                                                                                          marketplace,85 86 a series of two blog                    about the Bureau’s supervisory activity.
                                                  6.1   Blog Posts                                        posts about the history of ECOA 87 and                    Because the Bureau’s supervisory
                                                                                                          what it means for consumers,88 a blog                     process is confidential, Supervisory
                                                     The Bureau firmly believes that an
                                                                                                          post outlining the 2017 priorities for                    Highlights reports provide information
                                                  informed consumer is the best defense
                                                                                                          Fair Lending,89 and a blog post about                     on supervisory trends the Bureau
                                                  against discriminatory lending
                                                                                                          shopping for an auto loan.90                              observes, without identifying specific
                                                  practices. When issues arise that
                                                  consumers need to know about, the                                                                                 entities, as well as information on
                                                                                                             81 Patrice Ficklin, Provident Settlement
                                                  Bureau uses many tools to aid                                                                                     public enforcement matters that arise
                                                                                                          Administrator to contact eligible borrowers soon,
                                                  consumers in financial decision-                        Consumer Financial Protection Bureau (Sept. 28,           from supervisory reviews. In 2016,
                                                  making.75 76 The Bureau regularly uses                  2016), http://www.consumerfinance.gov/about-us/           Supervisory Highlights covered many
                                                                                                          blog/provident-settlement-administrator-contact-          topical issues pertaining to fair lending,
                                                  its blog as a tool to communicate                       eligible-borrowers-soon/.
                                                  effectively to consumers on timely                         82 Patrice Ficklin, Administrador del Acuerdo de
                                                                                                                                                                    including mortgage servicing, HMDA
                                                  issues, emerging areas of concern,                      Provident planea ponerse en contacto con                  examinations where institutions
                                                                                                          prestatarios elegibles próximamente, Consumer            improperly coded actions taken on
                                                  Bureau initiatives, and more. In 2016 we                Financial Protection Bureau (Oct. 6, 2016), http://       conditionally-approved applications
                                                  published 14 blog posts related to two                  www.consumerfinance.gov/about-us/blog/                    with unmet underwriting conditions,
                                                  main fair lending topics: Providing                     administrador-del-acuerdo-de-provident-planea-
                                                                                                          ponerse-en-contacto-con-prestatarios-elegibles-           LEP consumers, redlining, and
                                                  consumers updated information about
                                                                                                          proximamente/.                                            settlement updates for recent
                                                  our fair lending enforcement actions                       83 Patrice Ficklin, What you need to know to get
                                                                                                                                                                    enforcement actions that originated in
                                                  and providing consumer education on                     money from the settlement with Honda Finance for          the supervisory process.
                                                  fair lending. Our enforcement update                    overcharging minorities, Consumer Financial
                                                  blog posts included the announcement                    Protection Bureau (Oct. 3, 2016), http://                    More information about the topics
                                                  (in both English and Spanish) of the
                                                                                                          www.consumerfinance.gov/about-us/blog/what-               discussed this year in Supervisory
                                                                                                          you-need-know-get-money-settlement-honda-                 Highlights can be found in Section 2.1
                                                  BancorpSouth Bank settlement,77 78                      finance-overcharging-minorities/.
                                                  updates on the Ally Financial Inc. and                     84 Patrice Ficklin, Lo que necesita saber para         of this Report. As with all Bureau
                                                  Ally Bank settlement,79 80 updates on                   recibir dinero del acuerdo de compensación con           resources, all editions of Supervisory
                                                  the Provident Funding Association, L.P.                 Honda Finance por cobrarles de más a las minorı́as,      Highlights are available on
                                                                                                          Consumer Financial Protection Bureau (Oct. 11,            www.consumerfinance.gov/reports.
                                                                                                          2016), http://www.consumerfinance.gov/about-us/
                                                     75 For helpful information on shopping for auto      blog/lo-que-necesita-saber-para-recibir-dinero-del-       6.3 Speaking Engagements &
                                                  loans, please see the Bureau’s Know Before You          acuerdo-de-compensacion-con-honda-finance-por-            Roundtables
                                                  Owe: Auto Loans toolkit, at Consumer Financial          cobrarles-de-mas-las-minorias/.
                                                  Protection Bureau, Take control of your auto loan,         85 Patrice Ficklin, You have the right to be treated
                                                                                                                                                                      To meet our mission of educating and
                                                  http://www.consumerfinance.gov/consumer-tools/          fairly in the financial marketplace, Consumer
                                                  auto-loans/.                                            Financial Protection Bureau (Apr. 29, 2016), http://      informing stakeholders about fair
                                                     76 For helpful information on shopping for home      www.consumerfinance.gov/about-us/blog/you-have-           lending, the Office of Fair Lending and
                                                  loans, please see the Bureau’s toolkit, at Consumer     right-be-treated-fairly-financial-marketplace/.           Equal Opportunity had the opportunity
                                                  Financial Protection Bureau, Owning a Home: Tools          86 Patrice Ficklin, Usted tiene derecho a que lo
                                                                                                                                                                    to participate in a number of outreach
                                                  and resources for homebuyers, http://                   traten de manera justa en el mercado financiero,
                                                  www.consumerfinance.gov/owning-a-home/.                 Consumer Financial Protection Bureau (May 2,
                                                                                                                                                                    speaking events and roundtables
                                                     77 Patrice Ficklin & Daniel Dodd-Ramirez,            2016), http://www.consumerfinance.gov/about-us/           throughout 2016. In these events, we
                                                  Redlining: CFPB and DOJ action requires                 blog/usted-tiene-derecho-que-lo-traten-de-manera-         shared information on fair lending
                                                  BancorpSouth Bank to pay millions to harmed             justa-en-el-mercado-financiero/.                          priorities, emerging issues, and heard
                                                  consumers, Consumer Financial Protection Bureau            87 Brian Kreiswirth & Anna-Marie Tabor, What
                                                                                                                                                                    feedback from our stakeholders on the
                                                  (June 29, 2016), http://www.consumerfinance.gov/        you need to know about the Equal Credit
                                                  about-us/blog/redlining-cfpb-and-doj-action-            Opportunity Act and how it can help you: Why it           work we do.
                                                  requires-bancorpsouth-bank-pay-millions-harmed-         was passed and what it is, Consumer Financial               Fair Lending staff attended numerous
                                                  consumers/.                                             Protection Bureau (Oct. 31, 2016), http://                roundtables throughout the year on a
                                                     78 Patrice Ficklin & Daniel Dodd-Ramirez, La         www.consumerfinance.gov/about-us/blog/what-
                                                  delimitación ilegal: Acción del CFPB y del            you-need-know-about-equal-credit-opportunity-act-         variety of issues related to fair lending.
                                                  Departamento de Justicia requiere que el banco          and-how-it-can-help-you-why-it-was-passed-and-            Some examples of the topics covered
                                                  BancorpSouth pague millones de dólares a               what-it/.                                                 include student lending, language
                                                  consumidores perjudicados, Consumer Financial              88 Rebecca Gelfond & Frank Vespa-Papaleo, What
                                                                                                                                                                    access issues, HMDA, small business
                                                  Protection Bureau (July 6, 2016), http://               you need to know about the Equal Credit
                                                  www.consumerfinance.gov/about-us/blog/la-               Opportunity Act and how it can help you: Know
                                                                                                                                                                    lending, mortgage servicing, and credit
                                                  delimitacion-ilegal-accion-del-cfpb-y-del-              your rights, Consumer Financial Protection Bureau         reporting.
                                                  departamento-de-justicia-requiere-que-el-banco-         (Nov. 2, 2016), http://www.consumerfinance.gov/
                                                  bancorpsouth-pague-millones-de-dolares-                 about-us/blog/what-you-need-know-about-equal-             7. Interagency Reporting
                                                  consumidores-perjudicados/.                             credit-opportunity-act-and-how-it-can-help-you-
                                                     79 Patrice Ficklin, Harmed Ally borrowers have       know-your-rights/.                                          Pursuant to ECOA, the CFPB is
                                                  been sent $80 million in damages, Consumer                 89 Patrice Ficklin, Fair Lending priorities in the     required to file a report to Congress
                                                  Financial Protection Bureau (Jan. 29, 2016), http://    new year, Consumer Financial Protection Bureau            describing the administration of its
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                                                  www.consumerfinance.gov/about-us/blog/harmed-           (Dec. 16, 2016), http://www.consumerfinance.gov/          functions under ECOA, providing an
                                                  ally-borrowers-have-been-sent-80-million-in-            about-us/blog/fair-lending-priorities-new-year/.
                                                  damages/.                                                  90 Patrice Ficklin & Daniel Dodd-Ramirez, Don’t        assessment of the extent to which
                                                     80 Patrice Ficklin, Prestatarios perjudicados por    get taken for a ride; protect yourself from an auto       compliance with ECOA has been
                                                  Ally reciben $80 millones en daños, Consumer           loan you can’t afford, Consumer Financial                 achieved, and giving a summary of
                                                  Financial Protection Bureau (Feb. 4, 2016), http://     Protection Bureau (July 5, 2016), http://                 public enforcement actions taken by
                                                  www.consumerfinance.gov/about-us/blog/                  www.consumerfinance.gov/about-us/blog/dont-get-
                                                  prestatarios-perjudicados-por-ally-reciben-80-          taken-ride-protect-yourself-auto-loan-you-cant-
                                                                                                                                                                    other agencies with administrative
                                                  millones-en-danos/.                                     afford/.                                                  enforcement responsibilities under


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                                                                                           Federal Register / Vol. 82, No. 104 / Thursday, June 1, 2017 / Notices                                                    25265

                                                  ECOA.91 This section of this report                                7.1 Equal Credit Opportunity Act                      and Exchange Commission (SEC), the
                                                  provides the following information:                                Enforcement                                           Small Business Administration (SBA),
                                                     • A description of the CFPB’s and                                 The enforcement efforts and                         and the Grain Inspection, Packers and
                                                  other agencies’ ECOA enforcement                                   compliance assessments made by all the                Stockyards Administration (GIPSA) of
                                                  efforts; and                                                       agencies assigned enforcement authority               the Department of Agriculture.94 In
                                                                                                                     under section 704 of ECOA are                         2016, CFPB had two public enforcement
                                                     • an assessment of compliance with                                                                                    actions for violations of ECOA, and the
                                                                                                                     discussed in this section.
                                                  ECOA.                                                                                                                    OCC issued one public enforcement
                                                     In addition, the CFPB’s annual HMDA                             7.1.1 Public Enforcement Actions                      action for violations of ECOA and/or
                                                  reporting requirement calls for the                                  In addition to the CFPB, the agencies               Regulation B.
                                                  CFPB, in consultation with HUD, to                                 charged with administrative                           7.1.2 Violations Cited During ECOA
                                                  report annually on the utility of                                  enforcement of ECOA under section 704                 Examinations
                                                  HMDA’s requirement that covered                                    include: The FRB, the FDIC, the OCC,
                                                  lenders itemize certain mortgage loan                              and the NCUA (collectively, the FFIEC                   Among institutions examined for
                                                  data.92                                                            agencies); 93 the FTC, the Farm Credit                compliance with ECOA and Regulation
                                                                                                                     Administration (FCA), the Department                  B, the FFIEC agencies reported that the
                                                                                                                     of Transportation (DOT), the Securities               most frequently cited violations were:

                                                                           TABLE 1—MOST FREQUENTLY CITED REGULATION B VIOLATIONS BY FFIEC AGENCIES: 2016
                                                         FFIEC agencies reporting                                                                   Regulation B violations: 2016

                                                  CFPB, FDIC, FRB, NCUA, OCC ....                         12 CFR 1002.4(a): Discrimination on a prohibited basis in a credit transaction.
                                                                                                          12 C.F.R. 1002.6(b): Improperly considering age, receipt of public assistance, certain other income, or an-
                                                                                                            other prohibited basis in a system of evaluating applicant creditworthiness.
                                                                                                          12 C.F.R. 1002.7(d)(1): Improperly requiring the signature of an applicant’s spouse or other person.
                                                                                                          12 C.F.R. 1002.9(a)(1), (a)(1)(i), (a)(2), (b), (b)(2), (c): Failure to timely notify an applicant when an appli-
                                                                                                            cation is denied; 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
                                                                                                            sufficient information in an adverse action notification, including the specific reasons the application was
                                                                                                            denied; failure to timely and/or appropriately notify an applicant of either action taken or of incomplete-
                                                                                                            ness after receiving an application that is incomplete.
                                                                                                          12 C.F.R. 1002.12(b)(1), (b)(1)(ii)(A): Failure to preserve records on actions taken on an application or of
                                                                                                            incompleteness.
                                                                                                          12 C.F.R. 1002.13(a)(1)(i): Failure to request information on an application pertaining to an applicant’s eth-
                                                                                                            nicity.
                                                                                                          12 C.F.R. 14(a), (a)(1): Failure to routinely provide an applicant with a copy of all appraisals and other writ-
                                                                                                            ten 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 notice in writing of the applicant’s right to re-
                                                                                                            ceive a copy of all written appraisals developed in connection with the application.


                                                                   TABLE 2—MOST FREQUENTLY CITED REGULATION B VIOLATIONS BY OTHER ECOA AGENCIES, 2016
                                                           Other ECOA agencies                                                                      Regulation B violations: 2016

                                                  FCA .................................................   12 CFR 1002.9: Failure to timely notify an applicant when an application is denied; failure to provide suffi-
                                                                                                            cient information in an adverse action notification, including the specific reasons the application was de-
                                                                                                            nied.
                                                                                                          12 CFR 1002.13(a)(1): Failure to request and collect information about the race, ethnicity, sex, marital sta-
                                                                                                            tus, and age of applicants seeking certain types of mortgage loans.



                                                     The GIPSA, the SEC, and the SBA                                 7.2 Referrals to the Department of                    of persons in credit transactions due to
                                                  reported that they received no                                     Justice                                               protected characteristics, including race,
                                                  complaints based on ECOA or                                           In 2016, the FFIEC agencies including              national origin, and marital status. The
                                                  Regulation B in 2016. In 2016, the DOT                             the CFPB referred a total of 20 matters               OCC referred one matter to the DOJ on
                                                  reported that it received a ‘‘small                                to the DOJ. The FDIC referred four                    the basis of marital status
                                                  number of consumer inquiries or                                    matters to the DOJ. These matters                     discrimination. The CFPB referred eight
                                                  complaints concerning credit matters                               alleged discriminatory treatment of                   matters to the DOJ during 2016, finding
                                                  possibly covered by ECOA,’’ which it                               persons in credit transactions due to                 discrimination in credit transactions on
                                                  ‘‘processed informally.’’ The FTC is an                            protected characteristics, including age,             the following prohibited bases: Race,
                                                  enforcement agency and does not                                    race, national origin, and receipt of                 national origin, age, receipt of public
                                                  conduct compliance examinations.                                   public assistance income. The FRB                     assistance income, sex, and marital
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                                                                                                                     referred seven matters to the DOJ. These              status.
                                                                                                                     matters alleged discriminatory treatment
                                                    91 15 U.S.C. 1691f.                                              standards, and report forms for the Federal           institutions.’’ Federal Financial Institutions
                                                    92 12 U.S.C. 2807.                                               examination of financial institutions’’ by the        Examination Council, http://www.ffiec.gov (last
                                                    93 The FFIEC is a ‘‘formal interagency body                      member agencies listed above and the State Liaison    visited March 31, 2017).
                                                                                                                     Committee ‘‘and to make recommendations to              94 15 U.S.C. 1691c.
                                                  empowered to prescribe uniform principles,                         promote uniformity in the supervision of financial



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                                                  25266                                    Federal Register / Vol. 82, No. 104 / Thursday, June 1, 2017 / Notices

                                                  7.3 Reporting on the Home Mortgage                                 more information on the Bureau’s                        understand and address emerging
                                                  Disclosure Act                                                     proposed amendments to HMDA’s                           issues. Our multipronged approach uses
                                                                                                                     implementing regulation, Regulation C,                  the full variety of tools at our disposal—
                                                     The CFPB’s annual HMDA reporting
                                                                                                                     please see the Rulemaking section of                    supervision, enforcement, rulemaking,
                                                  requirement calls for the CFPB, in
                                                                                                                     this report (Section 4).                                outreach, research, data-driven
                                                  consultation with the Department of
                                                                                                                                                                             prioritization, interagency coordination,
                                                  Housing and Urban Development                                      8. Conclusion                                           and more. We are pleased to present this
                                                  (HUD), to report annually on the utility
                                                                                                                       In this, our fifth Fair Lending Report                report as we continue to fulfill our
                                                  of HMDA’s requirement that covered
                                                                                                                     to Congress, we outline our work in                     statutory mandate as well as the
                                                  lenders itemize loan data in order to
                                                                                                                     furtherance of our statutory mandate to                 Bureau’s mission to help consumer
                                                  disclose the number and dollar amount
                                                                                                                     ensure fair, equitable, and                             finance markets work by making rules
                                                  of certain mortgage loans and
                                                                                                                                                                             more effective, by consistently and
                                                  applications, grouped according to                                 nondiscriminatory access to credit. Our
                                                                                                                                                                             fairly enforcing these rules, and by
                                                  various characteristics.95 The CFPB, in                            work continues to reflect the areas that
                                                                                                                                                                             empowering consumers to take more
                                                  consultation with HUD, finds that                                  pose the greatest risk of consumer harm,
                                                                                                                                                                             control over their economic lives.
                                                  itemization and tabulation of these data                           and we continue to reprioritize our
                                                  further the purposes of HMDA. For                                  approach to better position our work to                 Appendix A: Defined Terms

                                                                        Term                                                                                    Definition

                                                  Bureau .............................................    The Consumer Financial Protection Bureau.
                                                  CFPB ...............................................    The Consumer Financial Protection Bureau.
                                                  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 Consumer Financial Protection Bureau (CFPB). 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.
                                                  LEP .................................................   Limited English Proficiency.
                                                  LGBT ...............................................    Lesbian, gay, bisexual and transgender.
                                                  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.



                                                  [2]. Regulatory Requirements                                       requirements on covered entities or                     CORPORATION FOR NATIONAL AND
                                                    This Fair Lending Report of the                                  members of the public that would be                     COMMUNITY SERVICE
                                                  Consumer Financial Protection Bureau                               collections of information requiring
                                                                                                                     OMB approval under the Paperwork                        Proposed Information Collection;
                                                  summarizes existing requirements                                                                                           Comment Request
                                                  under the law, and summarizes findings                             Reduction Act, 44 U.S.C. 3501, et seq.
                                                  made in the course of exercising the                                 Dated: May 24, 2017.                                  AGENCY: Corporation for National and
                                                  Bureau’s supervisory and enforcement                               Richard Cordray,                                        Community Service.
                                                  authority. It is therefore exempt from                             Director, Bureau of Consumer Financial                  ACTION: Notice.
                                                  notice and comment rulemaking                                      Protection.
                                                  requirements under the Administrative                                                                                      SUMMARY:    The Corporation for National
                                                                                                                     [FR Doc. 2017–11318 Filed 5–31–17; 8:45 am]
                                                  Procedure Act pursuant to 5 U.S.C.                                                                                         and Community Service (CNCS), as part
                                                                                                                     BILLING CODE 4810–AM–P
                                                  553(b). Because no notice of proposed                                                                                      of its continuing effort to reduce
                                                  rulemaking is required, the Regulatory                                                                                     paperwork and respondent burden,
                                                  Flexibility Act does not require an                                                                                        conducts a pre-clearance consultation
                                                  initial or final regulatory flexibility                                                                                    program to provide the general public
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                                                  analysis. 5 U.S.C. 603(a), 604(a). The                                                                                     and Federal agencies with an
                                                  Bureau has determined that this Fair                                                                                       opportunity to comment on proposed
                                                  Lending Report does not impose any                                                                                         and/or continuing collections of
                                                  new or revise any existing                                                                                                 information in accordance with the
                                                  recordkeeping, reporting, or disclosure                                                                                    Paperwork Reduction Act of 1995. This

                                                    95 See   12 U.S.C. 2807.



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Document Created: 2017-06-01 03:04:52
Document Modified: 2017-06-01 03:04:52
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
ActionFair Lending Report of the Consumer Financial Protection Bureau.
DatesThe Bureau released the April 2017 Fair Lending Report on its Web site on April 14, 2017.
ContactAnita Visser, Senior Policy Advisor to the Director of Fair Lending, Office of Fair Lending and Equal Opportunity, Consumer Financial Protection Bureau, 1-855-411-2372.
FR Citation82 FR 25250 

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