Excellence in Automotive Financing – June 16, 2021
Anyone who has attended a conference that has looked at information from regulators over the past few months couldn’t help but notice that one key area is loan equity and equal access to credit.
While fair lending has always been an important consideration, it is evident that federal regulators are once again focusing on this topic. When Consumer Finance Protection Office (CFPB) interim director David Uejio was appointed in January, he shared a statement reflecting “the new priorities and direction of the CFPB,” specifically noting racial equity as one of the organization’s two key priorities.
“I will elevate and expand existing investigations and reviews and add new ones to ensure that we have a healthy record aimed at tackling racial equity,” Uejio said. “This of course means that the fair application of loans is a top priority and will be emphasized accordingly. But we will also look more broadly, beyond fair loans, to identify and eliminate illegal behavior that disproportionately impacts communities of color and other vulnerable populations, ”he added.
In a video posted to the CFPB website, Uejio pointed out that “CFPB will take action against institutions and individuals whose policies and practices prevent fair and equal access to credit or benefit poor, underserved and underserved communities. disadvantaged ”.
And, in the announcement of the CFPB’s 2020 Equitable Loans to Congress report in April 2021, Uejio said, “In 2021 and beyond, the Bureau will place more emphasis on equitable lending and efforts to combat it. racial equity for underserved communities, and will report on these efforts in 2022.
the Federal Trade Commission (FTC) has also been active in the area of equal access. In a March 26 blog post on its website, the FTC highlighted its 2020 enforcement action against a New York City auto dealership as an illustration of the “need for vigorous enforcement against companies whose the practices lead to discrimination “. This coercive action last year allowed the car dealership to reimburse nearly $ 1.5 million to affected consumers.
According to a statement by the FTC commissioner Rohit chopra, the case was the first time the FTC had accused a car dealership of unlawful racial discrimination. In a potential foreshadowing of things to come, Chopra, who is also the alleged next CFPB director, noted that the practices that the FTC alleged against the car dealership were discriminatory and unfair, noting that the FTC can use its authority to attack the harmful discrimination using disparate impact analysis and other tools.
It would be the same for the CFPB.
Based on this renewed attention from regulators, the time has come for lenders to carefully review their policies, procedures and training programs on equal access and fair lending.
Maintain policies and procedures
Lenders should review their policies and procedures to ensure that they are up to date with respect to all protected categories. Note, for example, that the CFPB issued an interpretive rule on March 9 clarifying that the prohibition of sex discrimination under the Equal Credit Opportunity Act (ECOA) includes discrimination based on sexual orientation or l gender identity. The CFPB will revise its publications and examination guidance documents to update them, as necessary, to reflect this rule of interpretation.
It would be a good time for lenders to do the same.
Lenders should also remember to take state anti-discrimination laws into consideration when reviewing and updating policies and procedures. Some state laws include classifications that go beyond those found in the ECOA.
Cover the whole spectrum
Equal access and fair lending requirements cover all aspects of a client’s relationship with a creditor, starting with advertising. Review your policies and procedures to make sure they cover not only the application and funding stages, but also the way you advertise, the way your salespeople interact with customers, and the service, the collection and final payment of the credit transaction.
Compliance programs should include comprehensive and up-to-date staff training on equal access and other fair loan requirements. As such, staff at all stages of the credit cycle should receive appropriate training; new recruits must receive rapid training; a periodic review of training should include the latest regulatory requirements; and employees should be required to take refresher courses as new developments arise.
There is no better time than now to make sure things are in good shape from an equal access and fair lending perspective.
This article first appeared on Auto Finance Excellence, a sister service of Auto Finance News, and is reprinted with permission. McGlinchey is pleased to be the Official Compliance Partner of Auto Finance Excellence, providing insight and thought leadership through webinars, podcasts and monthly columns.