Serving consumers with limited English proficiency (“LEP Consumers”) is one of the most challenging issues facing financial institutions today. The logistical challenges of ensuring accurate translations, dealing with dialects, and having non-English compliance and monitoring resources have been coupled with a great deal of uncertainty about regulatory risks from serving LEP consumers. In the past, we have been critical of the CFPB on this issue, because it was simultaneously urging financial institutions to provide more services in non-English languages, but was failing to provide any guidance about how this could be accomplished without raising either fair lending or UDAAP risks.
In particular, we have been concerned about two big issues (among others): (1) the worry that by advertising or marketing a financial product in another language, a financial institution would be viewed as committing a UDAAP violation by failing to service the product entirely in that other language; and (2) in the servicing context, what types of communications and documents should a financial institution provide in non-English languages, assuming it has to translate some first, and leave others for later? These two issues have impeded progress in serving LEP consumers because the lack of regulatory guidance has caused many financial institutions to avoid acting in this area altogether, out of fear of the potential regulatory consequences.
Last week, however, the CFPB provided some guidance in the Fall 2016 Supervisory Highlights that, in our view, makes the path forward a little clearer and (seemingly) a little safer for financial institutions. That guidance addresses both of the two big issues we identified above:
With regard to marketing and advertising in non-English languages, the Bureau noted a series of practices related to LEP consumers “that did not result in any adverse supervisory or enforcement action.” One of those was “[m]arketing and servicing of loans in languages other than English.” The Bureau did not provide any detail about what the marketing looked like, or what disclosures were made, but this statement in Supervisory Highlights at least opens the door to an understanding that it may be permissible for financial institutions to market their products in non-English languages without the entire product being serviced in Spanish.
Importantly, a bit further down in this discussion, the CFPB notes that in some examinations, it required financial institutions to provide “clear and timely disclosures to prospective consumers describing the extent and limits of any language services provided throughout the product lifecycle. Institutions were not required to provide Spanish language services to address this risk beyond the Spanish language services they were already providing.”
This suggests that the path to advertising and marketing in non-English languages is one that contains a clear disclosure about what parts of the product experience are — and are not — available in the other language. Intuitively, this makes sense, since the worry was that by marketing in another language, a financial institution would imply that the entire product would be serviced in that other language. A disclosure could correct that implication and allow consumers to decide for themselves if they can handle the level of non-English support available with the product. But it is nice to see the CFPB seemingly agreeing with this path forward. (Interestingly, this disclosure concept is one that Fannie Mae had adopted earlier this year in its Spanish-language versions of origination documents).
The discussion of non-English servicing in the latest Supervisory Highlights also seems to provide a bit more guidance to financial institutions on which parts of the servicing operation are good candidates for prioritizing. In particular, the CFPB highlights telephone (customer service) support with QA monitoring/testing, monthly statements, “payment assistance forms” (which we interpret as a reference to loss mitigation documents), and other “communications and activities that most significantly impact consumers (e.g., loss mitigation and/or default servicing).”
The discussion of LEP issues also contains a warning about steering, highlighting the risks of making some products available in non-English languages, while others are available only in English. This is no surprise to us, as we have always considered this one of the risks in this area, but the Bureau notes that disclosure may help resolve this problem too — it recites that some financial institutions were required to “revise their marketing materials to notify consumers in Spanish of the availability of other credit card products.”
All in all, we thought that the CFPB’s most recent LEP guidance was a big step in the right direction. Financial institutions, in our experience, want to serve LEP consumers, but the fear of regulatory consequences has greatly retarded progress in doing so. The more guidance the CFPB provides, and the more concrete it is, the more industry will feel itself free to serve LEP consumers. We also hope that the CFPB’s views will be influential on courts and state agencies that might be called upon to examine LEP issues, and who might impede progress by asking that service to LEP consumers be “too perfect, too quickly,” which will only slow down progress in this area.
Although the discussion of LEP issues in the Fall 2016 Supervisory Highlights is helpful, we believe that further and more specific guidance is needed, especially with regard to advertising and marketing. This is because, although the CFPB noted that marketing products in non-English languages was encountered by examination teams, and was deemed not to violate any law, that observation was not accompanied by any details about the advertising, and came with the caveat that the observations were valid only under the unspecified “facts and circumstances of the reviews.” What this means is that financial institutions will still be guessing about how to follow the CFPB’s guidance on this issue, and requiring that that sort of guesswork serves neither consumer nor industry.