In an extraordinary announcement yesterday, the US Consumer Financial Protection Bureau (CFPB or Bureau) unveiled a broad expansion of its supervisory procedures to include examining supervised entities for discriminatory conduct that the agency alleges could constitute unfair practices in violation of the Dodd-Frank Act. Going forward, it appears that every exam for unfair, deceptive or abusive acts or practices (UDAAP) is likely to include an assessment of a company’s antidiscrimination programs as applied to all aspects of all consumer financial products or services, regardless of whether that company extends any credit or would otherwise be subject to the Equal Credit Opportunity Act (ECOA). In recent months, the Bureau has been laser focused on issues of fair lending and racial equity in the consumer credit market, including redlining, pricing and algorithmic bias, among others. With this change, the CFPB will be broadening its racial equity focus to cover every aspect of the consumer financial services sector.
Continue Reading CFPB Announces It Will Seek to Extend ECOA-Like Antidiscrimination Provisions Broadly to All Consumer Finance Activities

The Consumer Financial Protection Bureau (“CFPB”) has issued its first No-Action Letter (“No-Action Letter” or “Letter”) in response to a request from Upstart Network, Inc. (“Upstart”). The No-Action Letter means that CFPB staff currently has no intention of recommending enforcement or supervisory action against Upstart. This decision is limited to the application of the Equal Credit Opportunity Act (“ECOA”) and its implementing regulation, Regulation B, to Upstart’s automated model for underwriting applicants for unsecured, non-revolving credit (“automated model”).

Upstart is an online lending platform that, working with a bank partner, uses alternative data to facilitate credit and pricing decisions for consumers with limited credit or work history. In addition to relying on traditional credit information, Upstart uses non-traditional sources of information to evaluate a consumer’s creditworthiness. For instance, Upstart might look at an applicant’s educational information, such as school attended and degree obtained, and the applicant’s employment to determine financial capacity and ability to repay. Upstart submitted a Request for No-Action Letter (“Request”) in relation to its automated model to the CFPB pursuant to the agency’s no-action letter policy.

According to the CFPB, the no-action letter policy is intended to facilitate consumer-friendly innovations where regulatory uncertainty may exist for certain emerging products or services. In practice, however, the process has presented significant challenges for companies that might seek to benefit from it.
Continue Reading CFPB Issues No-Action Letter to Alternative Credit Lending Platform

It appears that the Consumer Financial Protection Bureau’s (CFPB) controversial indirect auto initiative may be over.  Before the holidays, the CFPB issued a blog post setting forth its fair lending priorities for 2017.  It identified those priorities as Redlining, Mortgage and Student Loan Servicing, and Small Business Lending.  Not only was indirect auto lending not listed, but the CFPB appeared to go out of its way to indicate it was moving away from this issue.  
Continue Reading Is the CFPB’s Indirect Auto Initiative Over?