On January 13, 2021, the Bureau issued a guidance statement regarding the provision of financial products and services to consumers with limited English proficiency (the Statement). In the Statement, the Bureau defines a consumer with “limited English proficiency” or a “limited English proficient” (LEP) consumer as a person who has a limited ability to read, write, speak, or understand English.
Noting that LEP consumers have considerable credit needs but often encounter language access issues that make it difficult for them to participate in the consumer financial marketplace, the Bureau issued its Statement to encourage financial institutions to promote access to credit by better serving LEP consumers. Financial institutions and other interested parties have been anticipating this guidance for some time. LEP was one of the topics that received the most comments in response to the Bureau’s ECOA RFI, with many commenters calling for the Bureau to issue guidance to reduce regulatory uncertainty and provide lenders with flexibility to proactively reach out to LEP consumers in their preferred language. Many financial service providers expressed a desire to offer financial products and services to LEP consumers, but concern about how to do so in compliance with applicable regulations, including UDAAP and ECOA. Two of the biggest questions revolved around challenges that arise in making (1) language selection (in which language or languages to provide products and services), and (2) product and lifecycle selections (which products and services should be offered in non-English languages and at what stages of the product lifecycle).
The Statement offers guidance in two main parts. Section B.1 provides five general principles for financial institutions to consider. Section B.2 provides guidelines for implementing those principles and developing compliance solutions.
The guiding principles of section B.1 are:
- The Bureau encourages financial institutions to better serve LEP consumers while ensuring compliance with relevant Federal, State, and other legal requirements.
- Financial institutions that wish to implement pilot programs or other phased approaches for rolling out LEP-consumer-focused products and services may consider doing so in a manner consistent with the guidelines in section B.2.
- Financial institutions may consider developing a variety of compliance approaches related to the provision of products and services to LEP consumers consistent with the guidelines in section B.2.
- Financial institutions may mitigate certain compliance risks by providing LEP consumers with clear and timely disclosures in non-English languages describing the extent and limits of any language services provided throughout the product lifecycle.
- Financial institutions may wish to consider extending credit pursuant to a legally compliant special purpose credit program (SPCP) to increase access to credit for certain underserved LEP consumers.
The guidelines and key considerations of section B.2 include the following key considerations:
Language selection. The Bureau noted that RFI commenters pointed out that because there are over 350 languages spoken in the United States, it would be unrealistic and cost prohibitive for any financial institution to fulfill all the credit needs of all customers in all languages. Accordingly, the Statement provides that financial institutions are permitted to consider documented and verifiable information such as Census Bureau data or the stated language preferences of its customers in determining whether to offer non-English language services and in which language or languages to do so. The Bureau is not mandating any particular approach, but says it has previously noted that nationwide institutions largely choose to focus on serving Spanish-speaking consumers, while regional institutions typically align with local demographics.
Product and service selection. In terms of product and service selection, financial institutions are free to consider things like the extent to which LEP consumers use particular products as well as the availability of non-English language services. They may also consider which activities and communications have the most significant impact on consumers; for example, verbal or written communications conveying essential information about credit terms and conditions.
Language preference collection and tracking. The Bureau specifically states that financial institutions do not violate ECOA or Regulation B when they collect an applicant’s language preference in a credit transaction. The Bureau notes that in the mortgage context, it previously issued an official approval of the final redesigned Uniform Residential Loan Application (URLA), which was to include a question about language preference. Even though FHFA opted to remove that question from the URLA, the Bureau confirms in the Statement that institutions may use that question without violating Regulation B or ECOA. The Bureau cautions that language preference information should not be used in a discriminatory way, such as by excluding consumers from offers they would have otherwise been provided.
Translated documents. Certain federal and state laws require the provision of translated documents under certain circumstances, and the Statement reminds financial institutions that nothing in the Statement alters the applicability of those requirements. But where a translation is not legally mandated, financial institutions are free to assess whether to provide translated documents. If they choose to do so, however, they must ensure the accuracy of those translations. This is obviously a big concern for many institutions, but the Bureau notes that several federal financial regulatory agencies have published resources to draw from, including glossaries of financial terms, for example. The Statement again suggests that financial institutions should seek to prioritize communications and activities that have the most significant impact on consumers. The Bureau indicated its commitment to providing more translated documents in the future.
Section B.2 also discusses certain generally applicable compliance management system (CMS) guidelines. Strong compliance management systems will affirmatively consider how to serve LEP consumers. The Statement offers some specific detail about components that can be included to mitigate fair lending and other risks.
Documentation of decisions. The Statement encourages financial institutions to document its decision making in the selection of language, products, and services.
Monitoring. Financial institutions should consider assessing the quality of customer assistance provided in non-English languages, and should monitor or conduct regular assessments of their advertising and marketing.
Fair lending testing. The Bureau encourages lenders to engage in regular statistical analysis of loan-level data for potential disparities on a prohibited basis in underwriting, pricing or other aspects of the credit transaction.
Third-party vendor oversight. Financial institutions are responsible for ensuring that their third-party service providers offering products or services on its behalf to LEP consumers do not violate applicable laws. Accordingly, they should implement an oversight program, with particular attention paid to third parties who participate in underwriting or pricing decisions.
Serving LEP consumers is a complicated area with many challenges, but the Statement tries to achieve the right balance by offering compliance principles and guidelines that encourage financial institutions to assist LEP consumers, without being overly prescriptive.