On September 28, two of the largest and most influential business groups in the country filed a lawsuit against the Consumer Financial Protection Bureau (CFPB) and its director, Rohit Chopra. The action seeks to prevent the CFPB from using its existing authority to protect consumers from racial discrimination when seeking mortgages, car loans, credit cards, bank accounts or other financial services.
The United States Chamber of Commerce, a lobby group of more than 3 million businesses across the country, and the American Bankers Association’s more than 4,000 banks and trust companies are leading the lawsuit. Other co-plaintiffs include the Consumer Bankers Association, the Texas Association of Business and the Independent Bankers Association of Texas.
The lawsuit argues that when the CFPB conducts its regular reviews of non-bank financial institutions, it does not have the authority to seek discrimination – based on race, religion and other personal characteristics – which is illegal under the prohibition of unfair, deceptive practices. , and abusive practices.
“The CFPB pursues an ideological agenda that goes far beyond what is permitted by law and the House will not hesitate to hold them accountable,” said the executive vice president and director of policy of the States House. States, Neil Bradley, in a statement.
But federal law — not ideology — is the framework for the CFPB’s anti-discrimination work.
Discrimination in housing and lending more broadly were prohibited by the Fair Housing Act of 1968 and the Equal Credit Opportunity Act (ECOA) of 1974. Enforcement of these laws is essential to financial fairness.
At the same time, unlawful financial discrimination is pervasive, and some exists beyond the parameters of those fair lending laws that have traditionally been the focus of regulators. For example, the Student Borrower Protection Center has indicated that debt collection, predatory for-profit colleges, credit reporting, and financial advice scams are markets where discriminatory acts or practices may not be. covered by credit-oriented laws, but which nonetheless constitute illegal financial discrimination.
“When a person is denied access to a bank account because of their religion or race, it is unequivocally unfair,” CFPB Director Chopra said in a statement announcing that the office would begin to seek unlawful financial discrimination unrelated to credit.
In a blog post, CFPB oversight and enforcement officials wrote: “[w]When people of color experience racist behavior in the financial market, it can cause significant monetary and non-monetary harm.
Consumer groups have reacted strongly to the business groups’ lawsuit, saying it ignores the impetus for the creation of a federal financial watchdog: to ensure that financial services companies do not attack more to unsuspecting consumers — especially black and Latino consumers who were often targeted for financial abuse.
“It is outrageous that these professional associations could suggest that discrimination in a financial service is not unfair or abusive or that the CFPB should not monitor discrimination in the financial sector wherever it occurs,” said Rich Dubois. , executive director of the National Consumer Law Center. . He added that “people of color are more likely to be unbanked, experience unexplained disparities in credit scores and reports used for purposes other than credit, and experience discrimination in multiple areas while throughout their financial life.
Likewise, Elyse Hicks, consumer policy adviser at Americans for Financial Reform, a broad advocacy coalition that includes civil rights and racial justice advocates, also spoke out.
“With this lawsuit, the banking lobby has joined the shameful campaign of many groups and politicians who exploit racial grievances to prevent the United States from dealing with the very real effects of persistent discrimination,” Hicks said in a statement. communicated. “The big banks’ goal is simply to avoid having to face their own role in the historical harm of structural racism, and the costs of that to their own bottom line.”
“The CFPB has clear authority, as the primary consumer watchdog, to monitor discrimination of all kinds in consumer credit, penalize violators and correct banking practices,” Hicks concluded.
A multi-agency initiative launched almost a year ago and including the CFPB and the Department of Justice has taken a similar approach in response to discrimination in financial services.
That effort culminated in a nearly $9 million settlement with Jackson, Mississippi-headquartered Trustmark National Bank for redlining in majority black and Latino neighborhoods in the Memphis-Mississippi-Memphis Metropolitan Statistical Area. Arkansas. The settlement found that Trustmark violated the ECOA, the Consumer Financial Protection Act and the Fair Housing Act.
The settlement included a civil penalty of $5.5 million payable to the CFPB and the OCC; the creation of a $3.85 million loan fund for black and Latino communities; and an additional $600,000 to fund community partnership activities and advertising in underserved communities.
“Trustmark has deliberately excluded and discriminated against black and Hispanic communities,” CFPB Director Chopra said in a statement. “The federal government will work to rid the marketplace of racist business practices, including those using discriminatory algorithms.”
After 50 years, it is as unfortunate as it is unfair that leading business groups, with this lawsuit, oppose fair lending and civil rights.
Charlene Crowell is a senior researcher at the Center for Responsible Lending.