The division of the Consumer Financial Protection Bureau that was tasked with ensuring that lenders don’t discriminate against Americans based on race, religion, sex and other factors, has been stripped of its enforcement power by the CFPB’s acting director, Mick Mulvaney, appointed last year by President Trump.
The CFPB told secrecy-minded website The Intercept, which broke the news earlier this week, that the adjustment will improve efficiency and that the bureau will continue to enforce fair lending regulations, just not through its Office of Fair Lending and Equal Opportunity (OFLEO). The news comes on the heels of Mulvaney requesting $0 for the agency’s budget in 2018 and the agency dropping lawsuits against four payday lenders.
Consumer advocates said the latest move would make disadvantaged borrowers more vulnerable to bias. Lenders have a long history of rejecting or overcharging people of color at higher rates than white Americans with the same qualifications.
“This minimizes the importance of fair lending,” Christopher Peterson, once the senior council for enforcement policy at the CFPB, told The Intercept. “People who care about those issues will have more hoops to jump through in grabbing for resources to pursue those cases. All of that is, of course, the point.”
In an email to American Banker, Sen. Elizabeth Warren, D-Mass. charged that Mulvaney–who also heads up the Office of Management and Budget and previously was a Republican Congressman from South Carolina–had long “opposed CFPB’s efforts to fight discrimination in the consumer financial marketplace even as the agency returned $400 million from discriminatory financial institutions to American families who had been overcharged or denied credit.”
NAR spokeswoman Sara Wiskerchen told Inman that NAR doesn’t plan to comment on the move.
Redfin CEO Glenn Kelman, whose high-tech brokerage has released many reports with social justice slants, said he respected the Trump’s administrations focus on improving government efficiency.
“But given the publicity about the administration’s commitment to consumer protections generally and people of color specifically, and the recent delay in enforcing Obama-era fair-housing rules, I just wish the administration had announced this change rather than having it reported after the fact by the press,” he said.
The Equal Credit Opportunity Act (ECOA) “prohibits
discrimination in any aspect of a credit transaction,” including mortgages and car loans, based on:
- race or color
- religion
- national origin
- sex
- marital status
- age
- The applicant’s receipt of income derived from any public assistance program; or
- The applicant’s exercise, in good faith, of any right under the Consumer Credit Protection Act.
OFLEO, the bureau stripped of enforcement powers, “works to ensure fair, equitable, and nondiscriminatory access to credit for all consumers,” according to the CFPB’s website.
OFLEO’s director put out a notice to lenders in 2012 that her office would use “every tool at our disposal to protect American consumers.”
Another former CFPB counsel told American Banker that the CFPB had in some ways”duplicative” resources for fair lending enforcement, with staff at both the now-diminished OFLEO and staff at the CFPB’s Offices of Supervision and Enforcement sharing the ability to probe and punish lenders for discrimination.
But now only the second team will have that responsibility, while the OFLEO will “continue to focus on advocacy, coordination, and education,” Mulvaney wrote in a memo to CFPB staff.
John Czwartacki, senior advisor to Mulvaney, said in a statement emailed to Inman that:
“The fact is, it never made sense to have two separate and duplicative supervision and enforcement functions within the same agency – one for all cases except fair lending, and the other only for fair lending cases…By announcing our intent to combine these efforts under one roof, we gain efficiency and consistency without sacrificing effectiveness.”
The move is also seen as a bid to marginalize Patrice Ficklin, the assistant director of fair lending, who has been “instrumental” in enforcing the Equal Credit Opportunity Act [ECOA] and other fair lending laws,” American Banker wrote.
Fortunately for those borrowers who believe they have been discriminated against, there are other routes to attempt to file a complaint or receive justice. Aside from the now-neutered OFLEO and the CFPB’s Offices of Supervision and Enforcement, the U.S. Federal Trade Commission also helps uphold ECOA. Prior to the creation of the CFPB in 2011, the FTC bore primary enforcement responsibility.
Housing and lending have long been areas rife with discrimination in America, and the issue continues to this day. The practice of “redlining” systematically choked off communities of color from mortgage credit, until it was banned by The Fair Housing Act in 1968. But minorities still struggle for equal access to mortgages and equal treatment by lenders.
For example, one 2015 study found a “persistent pattern of racial disparity in mortgage approvals” in greater Boston and Massachusetts, even when borrowers earned roughly the same income as whites.
In a recent case, JP Morgan Chase settled charges that it had discriminated against thousands of African and Hispanic mortgage borrowers, agreeing to shell out $55 million while denying any wrongdoing, USA Today reported.
U.S. attorney Preet Bharara of the Southern District of New York had alleged in a lawsuit that the average black or hispanic homebuyer ponied up $1,000 more than white borrowers with the same risk profile from 2006 to 2009, according to USA Today.
“Anyone who has driven through a U.S. city can see that it’s not as if Americans’ access to credit and housing is equal,” Kelman said. “The problem hasn’t been solved.”
