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Fair Notice on Fair Lending


Millions of Americans rely on loans and other credit products to attend college, buy cars, purchase homes, or open businesses. For many of us, access to credit makes it possible to achieve the American Dream of a better life for ourselves and our children. All too often, credit discrimination stands in the way of this access. It keeps worthy borrowers from the tools they need to reach their financial goals.

Credit discrimination is illegal. Under the Equal Credit Opportunity Act (ECOA), a creditor may not discriminate against you because of your race, color, religion, national origin, sex, marital status, or age (as long as you are old enough to enter into a contract). It is also against the law for a creditor to discriminate against you because you receive public assistance income, or because you exercise in good faith any of your rights under the Consumer Credit Protection Act.

Discrimination is not always obvious. A borrower may not realize that she has been the victim of intentional discrimination on the basis of her race or sex. Moreover, lending policies that seem evenhanded can be illegal if they have a disproportionate, negative effect on a group that is protected under ECOA, such as women or seniors. Lending practices that produce these adverse effects are said to have a “disparate impact.” They are unlawful unless they meet a legitimate business need that can’t be met by an alternative that has a less disparate impact. Discrimination that disparately impacts borrowers in violation of the law hurts consumers and can threaten the economic stability of our communities. That is why the law has long recognized this form of unlawful credit discrimination.

The Consumer Financial Protection Bureau is responsible for enforcing the Equal Credit Opportunity Act. The Office of Fair Lending and Equal Opportunity at the CFPB helps ensure that all Americans have fair, equitable, and nondiscriminatory access to credit, and we will use every tool at our disposal to protect American consumers.

Today we are giving fair notice on fair lending. We are letting both lenders and consumers know that in our examination and enforcement work, we will combat unlawful, discriminatory practices—including those that have an illegal disparate impact on protected borrowers. We will look not only at mortgage lending, but also at other types of credit including student loans, loans for cars, and credit cards.

Access to credit is critical to a successful financial future. At the CFPB, we are committed to fighting unlawful, discriminatory practices and creating a fair marketplace for all consumers.

Patrice Ficklin is the CFPB’s Assistant Director for the Office of Fair Lending and Equal Opportunity.

  • Brion McDermott

    How many consumers are discriminated against in this day and age? This is more smoke and mirrors to make themselves look important. In 27 years I never turned anyone down except for bad credit or poor qualifications. What do they think that we do in the lending community? Look for ways to not earn income?
    Why doesn’t the CFPB look for ways to reverse the Dodd-Frank bundle of paperwork pushed upon the industry and the consumer? It does nothing to assist, clarify, or further consumer understanding of the mortgage process. Bureaucrats do nothing but talk, talk, talk, and spend taxpayers hard earned money.

    • Lferraro

      I concur with this statement in it’s entirety.  I could not have said it any better.  And with all of the Dodd-Frank related regulation changes to help the consumer save money in getting a mortgage (such as the “new” Good Faith Estimate and process), what has actually happened, is that is now costs more money for the consumer to get a mortgage. 

  • Brianscrip

    Lending discrimination does occur but the Bureau is missing
    the entire point.  30 Years ago the issue
    was unfairly denying a person credit based on the fact that they were a member
    of a protected group.  The last 10 years
    the issue is unfairly approving a loan which the consumers cannot repay.  The predatory lenders do not unfairly deny
    loans they make loans at abusive terms and conditions.  Millions have lost their homes in foreclosure
    because they were given loans which they could not repay, millions more were
    unfairly charged abusive fees.  The
    bureau need only look at the vehicle subprime industry to find many examples of
    protected groups receiving loans at terms that they cannot repay.

    The Bureau has missed the boat by not stepping up and
    insuring that lenders do not approve loans at rates and terms the consumer cannot
    repay.  The ability to repay rules were
    stalled by the lobbying efforts of the mortgage banking industry.  The Bureau has yet to take any meaningful
    action to protect consumers. 

    • Guns

      Brian,what you are missing is lenders guarantee all loans sold and repurchase them if they don’t perform.
      Most of the problems arise when a borrower becomes a speculater .
      They take a 500.000 loan with with a low starting rate with the idea of turning the property for a large profit .
      This was encouraged by your government as if you reject a loan for income or credit your forced to make loans as to not discriminate.
      Example 500.000 loan 20percent down balance 400.000 foreclosed 3 years estimated cost 60.000 460.000 loss property sold 58.000 net loss 402.000 .
      Real dollars lost applicants lied on application walk away because people like you have no concept oft reality.
      These people and the elected officials created the problem not greedy lenders and still are stealing our equity and our way of life.
      Continue to vote if you even do for the destroyers of america ,get your facts straight!

  • Ed

    We do not use government backed money to make loans. We work very hard at underwriting, servicing, and collecting loans so they do not go bad. We are more than willing to make loans to anyone who we believe can and will repay us because successful loans are the way we make money. Race, creed, color, have never entered into it for us, yet we seem to be paying for the sins of those banks and credit unions who sinned out of fear of the CRA and the regulators demanding they make loans that made no sense. Jimmy Carter created the CRA, the Clintons fanned it, and Barney Frank pour gasoline on it. When it all hit the fan, Dodd and Frank helped to “fix” the very mess they made so that no one would think the politicians were responsible for starting the whole thing. Were there greedy MLOs? Yes. Were there greedy banks? Yes. Were less greedy, or maybe not greedy, banks that bowed to the pressures of CRA? Yes. The question is, who started it? Who made it possible to make no doc loans with government backed money in the first place?

    While all of this was going on, our loan volume dropped tremendously because our rates were higher (so was our cost of funds), and we wouldn’t buy loans with 5% (or less) down  payments because it didn’t make any sense from an underwriting point of view, and we wouldn’t buy anything with a greater than 38% debt to income ratio. Of course, our loans did perform better.

    Frankly, we don’t need the government telling us to do what we already do, and we don’t need them adding to our costs of existence by telling us that when we make a $50,000.00 loan that we can’t charge our actual costs of closing unless we want to be labeled as anti consumer. We don’t need them to restrict our interest rates on these low dollar loans either, because our costs of origination and service are actually higher on that $50,000.00 loan than they are on someone else’s $250,000.00 loan. Given their cost of funds, their spread on their 4% loan generates many more dollars than our spread does when our consumer rate is 12% by a substantial amount. Yet changes that resulted from the Dodd-Frank Act again put us in a quandary of either losing money on loans, not making them, or risk the consequences of “high cost” – “high risk” – or “predatory” take your pick.

    They want Fair Lending and Equal Opportunity? Who do they think we make loans to? It certainly isn’t the affluent who come to us wanting to borrow $10,000.00 to buy a $12,000.00 home. The Dodd-Frank Act is destroying the opportunity to purchase affordable homes, and it appears the CFPB wants to add to that burden with unneeded compliance requirements.

    To top it all off, we have called and emailed in vain to try to get clarifications on a number of issues to the only email addresses and the only phone numbers we could find, only to be ignored.

  • Altec000

    He hum ho.  More BS from some government beaurocrate trying to justify her government appointment and agencies existence. How exactly are people being discriminated against in this day and age? This is NOT 1960.

    Reverse Frank-Dodd and those under served communities will be able to once again obtain mortgage funding from competitive sources ready willing and able to assist.

  • joyful

    Lol! Case closed.
    The five comments that I just read before this one are concrete proof  and evidence for conviction that the CFPB is not only a necessity it is a protection for those who really do not have any defense nor funds to ever hire a lawyer or go to court. Only the wealthy have access to justice in court. They have always known this.
    The CFPB is powerful enough to stand up to such heartless and mean spirited financial organizations who have behaved ruthlessly and lawlessly, and who now cry crocodile tears! They are very good at finger pointing!

    • Anonymous

      Are you kidding?  Most of the above comments are dead on.  Instead of just spouting rhetoric, you should come visit your local community bank and sit through an entire mortgage loan process from application to closing.  Then you tell me if you still feel the same about the community bank’s function and see for yourself the additional harm that has been created (and will be created) by the additional regulatory burden on both BANKS and you the consumer.

  • Warezz blog

    From all discussion I drew one conclusion that to the young man is very difficult in the modern world without existence of big money in a pocket.

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