On May 6, the Consumer Financial Protection Bureau (CFPB or Bureau) released its Fair Lending report for 2021. As in the 2020 report, published last yearthe CFPB shows that it remains focused on what it terms “financial inclusion, racial and economic equity, and fair competition”:
“As part of the prioritization process, the CFPB identifies emerging developments and trends by monitoring key consumer financial markets. If this field and market information identifies fair lending risks in a particular market, this information is used to determine the type and extent of attention required to address those risks.
The 2021 report makes several prominent mentions of the use of artificial intelligence (AI) and machine learning – a practice that Fair Lending director Patrice Ficklin says she is skeptical of, particularly as as a “panacea against biases in credit underwriting and pricing. “The report reaffirms that the CFPB will expand its assessment of AI and machine learning models used by institutions, including to assess applicants for credit.
But while the focus on machine learning and AI is nothing new, there is something very interesting about the report. In this document, the CFPB seems to reframe and broaden the scope of what it considers to be “fair lending”. It does this by framing its actions against a prison financial services company and one non-bank immigration service provider as fair lending cases, rather than as UDAAP (unfair, deceptive and abusive acts and practices) cases, even though the allegations in both cases did not involve discrimination. We had previously understood that the CFPB would prioritize UDAAP and other non-discrimination cases where it believed aggrieved consumers were members of protected classes, and the inclusion of these cases in the report underscores this. point. But if these cases were brought today, would there be allegations of “unfair” discrimination, according to the CFPB’s March 2022 updates to its UDAAP examination manual? We will have to wait and see.
Also of interest for inclusion in the report are the October 2021 injunctions for major tech companies to provide information to the CFPB about their business practices. Specifically, the orders sought information on data collection and monetization, access restriction and user choice, and other consumer protections. Why these orders are included in the Fair Lending Report is unclear; the short story that mentions them says nothing about discrimination.
The CFPB’s 2021 Fair Lending Report confirms much of the messaging we’ve heard over the past year, particularly the Bureau’s continued suspicion of machine learning and AI technologies. But that leaves unanswered open questions about the Bureau’s intentions with respect to the “discrimination as UDAAP” announcement made in March of this year. We will continue to monitor and report on these developments here.