Equal Credit Opportunity Act

The Department of Justice (DOJ) announced a settlement agreement with Washington Trust Company, of Westerly (WTC) to resolve claims that WTC redlined majority Black and Hispanic neighborhoods in Rhode Island.

In its complaint against WTC, DOJ alleged that the following practices were used to discriminate against Black and Hispanic borrowers from 2016 to at least 2021:

  • WTC located and maintained all of its Rhode Island branches and loan officers outside of majority-Black and Hispanic neighborhoods (WTC designated all five counties in Rhode Island as its Community Reinvestment Act (CRA) assessment area);
  • WTC never had a branch in a majority-Black and Hispanic census tract despite the significant presence of majority-Black and Hispanic neighborhoods and census tracts throughout Rhode Island;
  • WTC did not assign a single mortgage loan officer to conduct outreach, market, advertise, or generate loans from majority-Black and Hispanic neighborhoods;
  • WTC failed to conduct outreach, marketing, and advertising of mortgage services in majority-Black and Hispanic areas;
  • WTC received only 2.4% of its mortgage loan applications from residents of, or for properties located in, majority-Black and Hispanic areas in its CRA assessment area, compared to 9.5% for its peer lenders, and on average 46.5% of the applications generated by WTC in those areas were from White applicants, compared to 25% for its peers.
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Section 1071 of Dodd-Frank amended the Equal Credit Opportunity Act to require financial institutions to collect and maintain certain data in connection with credit applications made by women- or minority-owned businesses and small businesses.  Such data includes the race, sex, and ethnicity of the principal owners of the business. 

In April 2011, the CFPB issued guidance indicating that the CFPB would not enforce Section 1071 until the CFPB issued implementing regulations. … Continue Reading

The CFPB has issued “ECOA Baseline Review Procedures” to be used by its examiners.  (The CFPB has labeled the procedures “guidance” and did not add them to its Supervision and Examination Manual.)  The procedures consist of six “baseline review modules” for examiners to use “during ECOA baseline reviews to identify and analyze risks of ECOA violations, to facilitate the identification of certain types of ECOA and Regulation B violations, and to inform fair lending prioritization decisions for future CFPB reviews.” … Continue Reading

We have previously blogged about the CFPB’s laser-like focus on the fair lending practices of banks and non-banks purchasing auto finance consumer contracts from auto dealers. See here, here, here, here, and here.

In many of our posts, we have been very critical of the Bureau’s deployment of the disparate impact theory for identifying violations of the Equal Credit Opportunity Act.… Continue Reading

The Bureau’s Mortgage Servicing Examination Procedures, released on October 13, 2011, offer a fascinating insight into the CFPB’s supervision and enforcement priorities. There’s a great deal worthy of comment in the Procedures, but here I want to highlight one aspect of them: the heavy focus on the Equal Credit Opportunity Act.… Continue Reading