CFPB Announces Shift in Fair Lending Focus for 2017

On December 16, 2016, the fair lending team at the Consumer Financial Protection Bureau (CFPB) announced the markets that it would closely monitor in 2017.  These new monitoring priorities are part of the general priority goals announced by the CFPB in 2016, which included:  1) regulating the use of arbitration clauses; 2) addressing issues within consumer reporting, especially accuracy; 3) enforcing fair and accurate debt collection; 4) reviewing demand-side consumer behavior and improving financial literacy; 5) studying and understanding household balance sheets; 6) ensuring fair and equal access to mortgages and effective servicing; 7) better regulating open-use credit; 8) examining small business lending and ensuring fair lending compliance; and 9) better regulating student lending and servicing.

The CFPB’s December 16th announcement indicates that it plans to fulfill its fair lending goals by focusing on three specific fair lending areas: 1) redlining; 2) mortgage and student loan servicing; and 3) small business lending.  The shift in fair lending priorities is a regular occurrence:  because the CFPB regulates a wide range of markets, it regularly shifts focus on the markets that it views as being the most at risk and in need of monitoring.  In 2017, the CFPB will focus on redlining by evaluating whether banks and other lenders have avoided providing loans in minority neighborhoods.  Its emphasis on servicing will center on whether racial and/or ethnic minority borrowers have had trouble obtaining the same kind of relief as white borrowers when they tried to negotiate assistance with repayment.   Finally, for small business lending, the CFPB is going to monitor whether lenders are discriminating against women and/or minority-owned businesses.

This shift in focus by the CFPB should mean some relief for the auto lending and credit card industries, which were the industries that were prioritized for fair lending focus in 2016.  However, the shift likely means greater scrutiny for banks, student loan servicers, and mortgage lenders operating in the above-referenced priority focus markets.  Institutions in these industries can take this opportunity to evaluate their compliance divisions and policies to ensure that they are in full compliance with fair lending laws.