Fair Lending Compliance Requires a Strong Compliance Management System

The focus on fair lending is more prominent now than ever. The Consumer Financial Protection Bureau (CFPB) recently reinforced its commitment to racial and economic equity in the housing market and has increased its regulatory scrutiny on mortgage companies to ensure they’re abiding by fair lending laws. 

The best way to ensure compliance with fair lending laws and avoid potential discrimination in marketing communications? A strong compliance management system and technology.

Supervision and Enforcement

In 2020, the CFPB initiated 13 fair lending-related examinations and targeted reviews, as well as a significant number of Prioritized Assessments that included fair lending components. The Bureau also issued several fair lending-related Matters Requiring Attention which directed organizations to take corrective action, followed by continuous monitoring by the CFPB through follow-up supervisions.

The CFPB announced 2 public fair lending enforcement actions in 2020:

• One against a nonbank retail-mortgage creditor who violated ECOA and Regulation B in their marketing efforts. The company “engaged in acts or practices, including making statements during its weekly radio shows and podcasts through which it marketed its services, that illegally discouraged African American prospective applicants from applying for mortgage loans and engaged in illegal redlining by engaging in acts or practices that discouraged prospective applicants living or seeking credit in African American neighborhoods in the Chicago MSA from applying for mortgage loans.” 
• Another against a federally insured national bank for reporting inaccurate HMDA data about its mortgage transactions, which makes it difficult for regulators to discover and stop discrimination in mortgage lending. The Bureau found that the errors in the bank’s data were caused by weaknesses in their compliance management system, specifically in the areas of board and management oversight, monitoring, and policies and procedures.

Also in 2020, the CFPB referred four matters to the DOJ for violations of ECOA:

• Two involved redlining in mortgage origination based on race and national origin
• One involved discrimination based on receipt of public assistance 
• One involved pricing discrimination in mortgage origination based on race and sex

An Increased Focus on Fair Lending

Since 2020, there has been an even bigger focus on fair lending. The CFPB has expressed its strong commitment to fair lending and racial equity throughout 2021:

At the CFPB, I have elevated and expanded existing investigations and exams, and added new ones, to ensure we have a healthy docket intended to address racial equity. This of course means that fair lending enforcement is a top priority and will be emphasized accordingly. We will also look more broadly, beyond fair lending, to identify and root out unlawful conduct that disproportionately impacts communities of color and other vulnerable populations.

—Acting Director Dave Uejio

The Bureau is committed to “using [its] tools and authority through rulemaking, supervision, enforcement, research, and consumer engagement to protect and fight for fairness for all consumers in financial markets.”

Fair Lending Compliance Requires a Strong Compliance Management System

When it comes to fair lending compliance, one thing is clear: a strong compliance management system (CMS) is key. Having the right management, tools, and policies & procedures in place is critical to protect consumers and avoid regulatory scrutiny. 

At PerformLine, we know that a strong compliance management system is key to success for any organization. And, according to Richard Cordray, former Director of the CFPB, a robust CMS includes utilizing technology to automate compliance monitoring.

PerformLine’s ready-to-use rulebooks are an essential part of our platform that helps make compliance easy. Specific to fair lending and racial equity, our Bias & Discrimination and Fair Lending Act (FLA) rulebooks will quickly flag any compliance issues for review by monitoring content against these rules. 

These proprietary rulebooks, paired with PerformLine’s powerful omni-channel platform and our team of experts, will elevate and strengthen your organization’s compliance management system. 

Learn more about our compliance solutions for mortgage and fair lending by speaking to one of our experts today.