For many of us, the mention of fair lending enforcement immediately brings us to the origination side of the industry, specifically conjuring thoughts of redlining and Home Mortgage Disclosure Act (HMDA) data. While these topics will always remain a significant focus of regulatory effort in the fair lending space, the recently released Fair Lending Report of the Consumer Financial Protection Bureau makes clear that fair lending supervision and enforcement is not limited to redlining and HMDA data, and, in fact, is not limited to origination activities. In this report, the Consumer Financial Protection Bureau (CFPB) explicitly highlights its intent to increase focus in the servicing space, both for mortgages and student loans, in an effort to determine whether delinquent borrowers may have more difficulty working out loss mitigation solutions because of their race or ethnicity.
Last week, the CFPB issued its fifth annual Fair Lending Report, which discusses the CFPB’s 2016 supervisory and enforcement activity, rulemaking, and interagency coordination with regard to fair lending. More important to the consumer finance industry looking forward, the report also previews the CFPB’s fair lending priorities for 2017. The report specifically identifies three areas where the CFPB intends to focus its efforts in the coming year: (1) redlining, (2) mortgage and student loan servicing, and (3) small business lending. While redlining in mortgage lending has been a past area of focus, the emphasis on mortgage and student loan servicing and small business lending represents a shift in the CFPB’s efforts. With the announcement of its new priorities, it appears the CFPB has moved away from its 2016 emphasis on indirect auto lending and credit cards, which, along with mortgage lending, provided the basis for the CFPB’s eight referrals to the Department of Justice in 2016 wherein the CFPB cited a pattern or practice of discrimination in violation of the Equal Credit Opportunity Act. According to the report, the CFPB utilized risk-based prioritization to identify its areas of focus for 2017, naming redlining, mortgage and student loan servicing, and small business lending as areas where it saw significant or emerging fair lending risk to consumers.
While the CFPB does not appear to be pulling away from the customary fair lending focus on mortgage origination, last week’s report signals to the industry that the CFPB’s focus will continue to expand to encompass products and activities outside of the traditional space, including servicing activities.