Dive Brief:

• The Consumer Financial Protection Bureau (CFPB) is making changes to its supervisory operations surrounding fair lending laws and unfair, deceptive and abusive acts and practices (UDAAPs), in an effort to better combat discrimination in consumer finance, it announced in a press release Wednesday.
• The CFPB will scrutinize banks’ and other companies' compliance with consumer protection rules to identify and root out discriminatory conduct that violates federal prohibitions against unfair practices, even in situations where fair lending laws may not apply. 
• The agency on Wednesday published an updated exam manual, which spells out how discriminatory conduct by financial institutions can infringe upon the CFPB’s obligation to prevent unfair practices, without expressly violating fair lending laws. 

Dive Insight:

The CFPB’s newly updated exam manual for evaluating UDAAPs establishes that discrimination can constitute “unfairness” when it causes consumers harm they cannot reasonably avoid and does not offer benefits to consumers or competition. In addition, discrimination can qualify as “unfairness” regardless of whether the action was intentional, and regardless of whether the action is covered by the Equal Credit Opportunity Act (ECOA). 

“For example, denying access to a checking account because the individual is of a particular race could be an unfair practice even in those instances where ECOA may not apply,” the bureau wrote in Wednesday's press release.

The CFPB will hunt for discrimination in all consumer finance markets, including credit, servicing, collections, consumer reporting, payments, remittances and deposits. 

The agency will examine financial institutions’ advertising, pricing and other practices to ensure that companies are doing all they can to eliminate illegal discrimination.

The bureau plans to ask the companies it supervises to divulge their processes for assessing risks and discriminatory outcomes, “including documentation of customer demographics and the impact of products and fees on different demographic groups."

“When a person is denied access to a bank account because of their religion or race, this is unambiguously unfair,” CFPB Director Rohit Chopra said. “We will be expanding our anti-discrimination efforts to combat discriminatory practices across the board in consumer finance.”

Fair lending laws like ECOA allow regulators to investigate whether institutions extend credit on an equitable basis. Other discriminatory practices are prohibited under the Consumer Financial Protection Act (CFPA), which forbids UDAAPs in consumer finance.