On March 16, 2022, the CFPB announced changes to its supervisory operations to better protect families and communities from illegal discrimination, including in situations where fair lending laws may not apply. According to the CFPB, the Bureau will closely examine discriminatory practices that violates the rules against unfair practices. Specifically, the CFPB will focus on financial institutions’ decision-making in advertising, pricing, and other areas to ensure that companies are appropriately testing for and eliminating illegal discrimination.
To guide its examiners, the CFPB published an updated exam manual for evaluating UDAAPs, which notes that discrimination may meet the criteria for “unfairness” by causing substantial harm to consumers that they cannot reasonably avoid, where that harm is not outweighed by countervailing benefits to consumers or competition. According to the Bureau, discrimination can harm consumers regardless of whether it is intentional or not.
In addition, the CFPB will examine for discrimination in all consumer finance markets, including credit, servicing, collections, consumer reporting, payments, remittances, and deposits and will pay particular attention to processes for assessing risks and discriminatory outcomes, including documentation of customer demographics and the impact of products and fees on different demographic groups. It will also observe how companies test and monitor their decision-making processes for unfair discrimination, as well as discrimination under ECOA.
Read the CFPB’s full release here.
Access the updated exam manual for UDAAP here.