Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra warned consumer finance companies that he will be expanding the bureau’s anti-discrimination efforts “to combat discriminatory practices across the board in consumer finance.”
Under the Dodd-Frank Act, it is unlawful for providers of consumer financial products or services to engage in any unfair, deceptive, or abusive act or practice (UDAAP). The Act also provides the CFPB with supervisory and enforcement authority to detect and prevent UDAAPs in connection with any consumer financial product or service.
As part of its anti-discrimination efforts, the CFPB announced revisions to its examination procedures used in evaluating discriminatory practices as potential unfair practices. The updated exam manual provides 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.
The CFPB warned that it will look for discrimination in all consumer finance markets, including credit, servicing, and consumer reporting. Specifically, the CFPB will closely examine financial institutions’ decision-making in advertising, pricing, and other areas to ensure that companies are appropriately testing for and eliminating illegal discrimination. Supervised companies should be prepared to show their processes for assessing risks and discriminatory outcomes, including documentation of consumer demographics and the impact of products and fees on different demographic groups.