Category: Fair Lending/Anti-Discrimination

1
FDIC Economic Inclusion Summit A Good Reminder of Fair and Responsible Banking Practices
2
Financial Institutions & Services Litigation Group Highlights Key Legal Issues at MBA Conference
3
Trump has opportunity to restore balance in fair lending cases
4
A Careful Balancing Act: Second Circuit Requires Debt Collectors to Disclose When a Consumer’s Current Balance May Increase Due to Interest and Fees
5
Divided Supreme Court Affirms Dismissal of “Spousal Guarantor” ECOA Discrimination Lawsuit
6
CFPB and DOJ Take Further Action Against Indirect Auto Lenders
7
CFPB Publishes Major Changes to HDMA
8
CFPB and DOJ Continue to Pursue Indirect Auto and Redlining Claims
9
Key Takeaways From the CFPB’s and DOJ’s Redlining Settlement With Hudson City Savings Bank
10
DOJ and CFPB Settle Discriminatory Mortgage Pricing Case with Wholesale Lender

FDIC Economic Inclusion Summit A Good Reminder of Fair and Responsible Banking Practices

By Soyong Cho

Yesterday, the FDIC hosted a day-long Economic Inclusion Summit that brought together stakeholders in private industry, the government, and non-profit organizations to discuss strategies to expand credit to under-served communities. Speakers stressed the need to understand the personal and financial challenges facing low- and moderate-income (“LMI”) populations in order to more effectively design products and marketing channels to reach LMI communities. Leveraging big data and technology were identified as key factors to reducing costs and profitably serving LMI customers.

Banks are of course rated on their outreach initiatives to under-served communities under the Community Reinvestment Act (“CRA”), but profitably expanding their customer base is also good business. The FDIC’s Summit serves as a reminder of the established programs, partnerships, and networks that exist to assist banks to meet their CRA obligations. However, it is also a good reminder that banks must be sensitive to the regulatory compliance and other risks attendant with marketing to and servicing LMI communities in particular, as even the best intentions can be undermined by flawed implementation or unclear regulatory guidance. Among others, UDAAP, fair lending, and privacy issues should be considered in all phases of product development and delivery. In the coming months, K&L Gates will be hosting a series of webinars focused on the nuts and bolts of consumer protection compliance.

Financial Institutions & Services Litigation Group Highlights Key Legal Issues at MBA Conference

Members of the K&L Gates Financial Institutions & Services Litigation Group will speak on key topics at the upcoming the MBA’s Legal Issues and Regulatory Compliance Conference in Miami, FL (May 7-10).

Olivia Kelman will review the Home Mortgage Disclosure Act (HMDA) as well as other lending-related requirements of the Fair Housing Act and the Equal Credit Opportunity Act (ECOA) on Sunday afternoon (May 7).

Andrew C. Glass will address major litigation and enforcement trends, including cases heard or pending before the Supreme Court and other federal courts on Monday afternoon (May 8).

Paul F. Hancock will discuss fair lending issues affecting business models and practices, a topic of particular interest with the entrance of a new administration, on Monday afternoon (May 8). Paul also will facilitate a fair lending roundtable discussion later that same afternoon.

In addition, many of our group’s attorneys are attending the conference. We look forward to seeing you all in Miami!

Trump has opportunity to restore balance in fair lending cases

From the February 7, 2017 article in American Banker

By Paul F. Hancock

With good cause, anxiety has been expressed regarding the direction of the Department of Justice’s civil rights division under the Trump administration.

Unfortunately, the past 16 years have seen the pendulum fly first to lax civil rights enforcement and improper politicization of the division under the Bush administration, and then to overreaching under the Obama administration. Trump administration officials would be wise to seek a balance. To get there, guidance is available from the division’s longer-range history — including during years that might not seem obvious, like under the Reagan administration. Balance would benefit both the nation and the future of the division.

To read the full article, click here.

 

A Careful Balancing Act: Second Circuit Requires Debt Collectors to Disclose When a Consumer’s Current Balance May Increase Due to Interest and Fees

By Andrew C. Glass, Gregory N. Blase, Roger L. Smerage and Eric W. Lee

In Avila v. Riexinger & Associates, LLC, No. 15-1584, — F.3d —, 2016 WL 1104776 (2d Cir. Mar. 22, 2016), the Second Circuit Court of Appeals construed the scope of Section 1692e of the Fair Debt Collection Practices Act (“FDCPA”). Section 1692e prohibits debt collectors from using “any false, deceptive, or misleading representation or means in connection with the collection of any debt.” The Second Circuit held that when notifying consumers of their current account balance, Section 1692e requires debt collectors to disclose when the balance may increase due to interest and fees and identified certain safe harbor language discussed herein.

To read the full alert, click here.

 

Divided Supreme Court Affirms Dismissal of “Spousal Guarantor” ECOA Discrimination Lawsuit

By Andrew C. Glass, Roger L. Smerage and Olivia Kelman

On March 22, 2016, the United States Supreme Court issued its first 4-4 split decision since the passing of Justice Antonin Scalia. In Hawkins v. Community Bank of Raymore, No. 14-520 (U.S. Mar. 22, 2016), the Court reviewed whether the Federal Reserve Board (“FRB”) exceeded its authority when it amended Regulation B, implementing the Equal Credit Opportunity Act (“ECOA”), to cover loan “guarantors” as loan “applicants.” In a per curiam opinion, the Court affirmed the determination of the United States Court of Appeals for the Eighth Circuit that (1) the plain language of ECOA excludes loan guarantors from the definition of loan applicants authorized to bring an antidiscrimination suit under the statute, and thus (2) the FRB’s conflicting amendment was not entitled to deference to be afforded to regulations that interpret silent or ambiguous statutory provisions. Yet, the Court’s even split means that Hawkins will be binding precedent only in the Eighth Circuit and not nationwide.

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CFPB and DOJ Take Further Action Against Indirect Auto Lenders

Following an investigation by the Consumer Financial Protection Bureau (“CFPB”) and the Department of Justice (“DOJ”), a captive indirect auto lender agreed on February 2, 2016, to change its pricing policies and compensation systems to limit dealer discretion and financial incentives to mark up interest rates for auto purchases.

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CFPB Publishes Major Changes to HDMA

By: Melanie Brody, Christopher Shelton

Today, the Consumer Financial Protection Bureau issued a final rule that makes significant amendments to its Home Mortgage Disclosure Act (“HMDA”) regulations.  The final rule is available here.

At 797 double-spaced pages, the final rule is almost half the length of the TILA-RESPA Integrated Disclosure rule, which came into effect earlier this month.  Institutions will have to devote significant attention to digesting and implementing all the new HMDA requirements.  The new requirements come into effect in three phases, starting in January 2018, January 2019, and January 2020.

K&L Gates will be circulating a client alert shortly, followed by a webinar, to help institutions navigate this complex final rule.

CFPB and DOJ Continue to Pursue Indirect Auto and Redlining Claims

By: Melanie Brody, Christa Bieker

The Department of Justice (“DOJ” or the “Department”) and the Consumer Financial Protection Bureau (“CFPB” or the “Bureau”) are increasingly pursuing lenders suspected of discriminatory lending practices. Last week, the DOJ and the CFPB announced two settlements with lenders resolving alleged violations of the Equal Credit Opportunity Act (“ECOA”) and the Fair Housing Act. These announcements come only days after the DOJ and the CFPB announced a consent order with Hudson City Savings Bank resolving allegations of racial redlining.

On September 28, the CFPB and the DOJ announced a consent order with Cincinnati-based Fifth Third Bank (“Fifth Third”) resolving allegations that Fifth Third’s indirect auto-lending pricing policies discriminated against African American and Hispanic borrowers. Although the CFPB does not have oversight over car dealers, the Bureau is able to investigate the auto loans that lenders like Fifth Third make through dealers. Coordinated investigations into Fifth Third’s indirect auto-lending business led the Bureau and the Department to conclude that African American and Hispanic borrowers paid approximately 35 or 36 basis points more, respectively, in dealer markups than similarly situated non-Hispanic white borrowers, which resulted in African American and Hispanic borrowers paying an average of $200 more for their car loans.

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Key Takeaways From the CFPB’s and DOJ’s Redlining Settlement With Hudson City Savings Bank

By: Melanie Brody, Anjali Garg

On Thursday, September 24, 2015, the CFPB and DOJ filed a complaint and proposed consent order against Hudson City Savings Bank (“Hudson City”) alleging violations of the Equal Credit Opportunity Act and Fair Housing Act. The complaint alleges that Hudson City discriminated against Black and Hispanic borrowers by redlining majority-Black-and-Hispanic neighborhoods (defined in the consent order as a census tract in which more than 50 percent of the residents are identified in the 2010 U.S. Census as either “Black or African American” or “Hispanic or Latino”) in its residential mortgage lending in New York, New Jersey, and Pennsylvania. The complaint alleges that Hudson City engaged in redlining through its (1) location of branches and loan officers, (2) exclusion of Black and Hispanic census tracts from its Community Reinvestment Act (“CRA”) assessment area, (3) use of brokers outside of majority Black and Hispanic neighborhoods, (4) marketing directed at neighborhoods with relatively few minority residents, and (5) exclusion of residents from majority-minority counties from discounted home improvement loans for borrowers with low to moderate incomes.

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DOJ and CFPB Settle Discriminatory Mortgage Pricing Case with Wholesale Lender

By: Melanie Brody, Anjali Garg

On May 28, 2015, the DOJ and the CFPB filed a complaint and proposed consent order against Provident Funding Associates (Provident) alleging that the mortgage lender violated the Fair Housing Act and ECOA by charging African American and Hispanic borrowers higher broker fees than it charged white borrowers. To resolve these claims, Provident will pay $9 million to approximately 14,000 borrowers who allegedly paid higher interest rates and/or fees for mortgages between 2006–2011. The agencies did not impose a civil money penalty against Provident.

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