The First Amendment to the U.S. Constitution guarantees the free exercise of religion. Many of our nation’s laws, like the Equal Credit Opportunity Act, protect individuals from discrimination based on their religious beliefs.
The Consumer Financial Protection Bureau is concerned that some financial companies are unlawfully considering religion when making decisions on financial products. The Equal Credit Opportunity Act does not simply cover products for family or household use – it also covers other financial products, like small business loans.
We conduct examinations of financial institutions to ensure they are complying with consumer financial protection laws. We recently reported that our examiners found that lenders violated fair lending law by improperly inquiring about small business applicants’ religious affiliation and by considering an applicant’s religious affiliation in the credit decision.
For religious institutions applying for small business loans, lenders utilized questionnaires which contained explicit inquiries about the applicant’s religious affiliation. CFPB examiners determined that lenders also denied credit to applicants identified as a religious institution because the applicants did not respond to the questionnaire.
In response to these findings, lenders updated the questionnaires to ensure compliance with fair lending laws. In addition, lenders also identified affected applicants and provided an offer for each identified applicant to reapply for a small business loan.
Remember, religious discrimination can take many forms. For example, if a lender penalizes a borrower for being religious or for practicing a certain religion, this would be discriminatory. Similarly, if a lender penalizes a borrower for not practicing a certain religion, this would also violate the law.
We’re particularly concerned about how financial institutions might be making use of artificial intelligence and other algorithmic decision tools. For example, let’s say a lender uses third-party data to analyze geolocation data to power their credit decision tools. If the algorithm leads to an applicant getting penalized for attending religious services on a regular basis this could lead to sanctions under fair lending laws.
We plan to more closely monitor the use of algorithmic decision tools, given that they are often “black boxes” with little transparency. Institutions will face consequences for this type of robo-discrimination.
If your family is concerned about potential religious discrimination, submit a complaint with the CFPB and we’ll work to get a response. If your business has had such an experience, you can Tell Your Story to the CFPB. You may also wish to speak with a lawyer, and you may also qualify for free legal services in your community, if you need additional help and legal advice.