While much attention has been paid to the “new CFPB’s” plans to make fair lending a top priority, the fair lending practices of financial institutions supervised by the federal banking agencies are also likely to face greater scrutiny under the Biden Administration.
In its Consumer Compliance Supervisory Highlights, the FDIC describes several matters involving fair lending that were identified during consumer compliance examinations conducted in 2020 and referred to the DOJ because the FDIC concluded that it had reason to believe that the creditor had engaged in a pattern or practice of discrimination. The matters consist of:
- A lending program in which the bank was originating unsecured loans thorough third party partners that operated a website through which applicants could apply for a loan directly. FDIC examiners found that the underwriting criteria included the prohibited bases of age and the receipt of public assistance.
- The use of credit-scoring models developed by a third party to offer unsecured lines of credit. One model scored younger applicants more favorably than elderly applicants and also scored applicants less favorably if their application indicated that they were on maternity leave. Another model assigned less favorable credit scores based on whether the applicant relied on public assistance income as compared to employment income.
- A policy that provided a different pricing method for married joint applicants than for unmarried joint applicants. For married applicants, the bank’s policy directed loan officers to use the highest credit score of the twoapplicants to price the loan. For unmarried applicants, loan officers were directed to use the primarily applicant’s credit score, with the primary applicant considered to be the person listed first on the credit application. FDIC examiners identified unmarried co-applicants who received less favorable pricing than similarly-situated married applicants because of the bank’s policy.