US watchdog targets discriminatory lending
The new U.S. consumer financial watchdog said on Wednesday it will aggressively pursue discriminatory lending practices, including those that may not be intentional but wind up penalizing minorities or women.
The Consumer Financial Protection Bureau on Wednesday sent a notice to banks and other lenders emphasizing that enforcing anti-discrimination laws is a priority.
The agency has also drawn up a tip sheet to help borrowers determine if they are being discriminated against that will be posted on its website.
“Our economy is in the process of recovering from the worst financial crisis since the Great Depression,” CFPB Director Richard Cordray said in remarks prepared for a speech to the National Community Reinvestment Coalition, which focuses on lending discrimination. “We cannot afford to tolerate practices that either price out or cut off segments of the population – such as women, the elderly, or communities of color – from the credit markets.”
If a lending policy over time results in any group being treated differently, even if that is not the intent, the agency will crack down on the lender, Cordray said.
“It is important to recognize that this subtle but powerful form of discrimination creates damages that are no less direct than the kind of overt and blatant discrimination that, we hope and assume, is increasingly a relic of a bygone era,” he said.
As an example Cordray offered a scenario in which lending officers have wide discretion to determine interest rates and fees for borrowers, resulting in minority groups or women being charged more.
The agency, which was created by the 2010 Dodd-Frank law to police lending products like credit cards and mortgages, also said it would pursue practices that result in a lower availability of loan products for minorities or women.
The agency has been heralded by supporters as an antidote to the lending abuses that occurred in the run up to the 2007-2009 financial crisis.
Banks have been wary of the new watchdog, warning that too many restrictions will constrain lending and prevent many consumers from being able to get loans for buying a home or other products.
Cordray on Wednesday again emphasized his point that the agency can help banks through its power to oversee competing lenders that had not previously been overseen by a federal regulator.
“The bureau will be supervising these entities in a tough but fair manner to single out the silent pickpocket and stop discrimination in its tracks,” he said.