The Bureau of Consumer Financial Protection (the “BCFP”) has published a revised 2018 Glossary of English-Spanish Financial Terms (the “Glossary”). Originally published in 2015, the Glossary is intended to provide “a uniform translation of common financial terms to assist consumers with limited English proficiency (“LEP”).” Using terms compiled from other entities, including the Federal Housing Finance Agency, Department of Housing and Urban Development, Internal Revenue Service, Department of Justice, Federal Deposit Insurance Corporation, Federal Trade Commission, Social Security Administration, Freddie Mac, Fannie Mae, General Services Administration, and National Association of Hispanic Real Estate Professionals, the updated Glossary now contains over 1,500 consumer financial terms translated from English to Spanish.

The expanded Glossary thus continues to be a useful tool for financial institutions conducting Spanish-language translations, but such entities should exercise caution in overreliance on the Glossary, since the definitions may not fit all situations encountered by a creditor, and the BCFP has noted that the Glossary does not constitute “guidance.” (We have previously described the pitfalls of translating U.S. consumer protection concepts to foreign languages without expertise because the concepts may be unfamiliar to, vary by the geographic location of, or otherwise lack meaning to the applicable LEP consumer.) We nevertheless welcome all additional clarity and guidance of this manner that the BCFP might provide to financial institutions seeking to serve LEP consumers.

Although the CFPB’s leadership transition rightfully remains top of mind for many of our readers, we wanted to recap two developments related to serving consumers who are Limited English Proficient (LEP). In the days before Director Cordray’s resignation, the CFPB officially approved Fannie Mae and Freddie Mac’s final redesigned Uniform Residential Loan Application (URLA), which added a question about mortgage applicants’ language preference. The CFPB also released a report entitled “Spotlight on serving limited English proficiency consumers.” The report discusses how financial institutions can support access to financial products and services and promote financial literacy for LEP consumers.

Official approval of URLA under Regulation B

The Federal Housing Finance Agency recently directed Fannie Mae and Freddie Mac to add a question about mortgage applicants’ language preference to the URLA. The CFPB has issued an official approval of the final redesigned URLA under Regulation B of the Equal Credit Opportunity Act. It determined that the use of the URLA will not expose creditors to civil liability under the provisions of Regulation B that limit creditors’ inquiries about applicants’ race, color, religion, national origin, or sex. (Although the notice states that the CFPB focused on national origin in reviewing the language preference question, its technical determination covers these other types of information as well.) You can read about the CFPB’s initial approval of the redesigned URLA in September 2016 here.

Report on serving LEP consumers

The CFPB’s report primarily summarizes five practices for serving LEP consumers based on interviews with representatives from “several” financial institutions of various sizes and trade associations as well as the CFPB’s “broader understanding of the market.”

  1. Assessment of language needs based on Census Bureau demographic data or customer-provided language elections (such as on the URLA) and use of such information to build out capabilities to serve Spanish-speaking consumers or other LEP consumers in an institution’s footprint by, for example, branch hiring or in-language servicing for particular product lines.
  2. A centralized point of contact for internal technical assistance to employees at larger institutions. The point of contact may annually review processes and procedures for using non-English languages; evaluate which areas of business would most benefit from LEP services; develop quality control mechanisms; and establish translation and interpretation policies.
  3. Translation and interpretation systems at larger institutions that help ensure consistency and accuracy, including third-party interpreters. Institutions reported that they translate for meaning (rather than word-for-word), use back-translation (involving taking a translated document and having another party translate it back to English) and use bilingual glossaries.
  4. Human capital investments in foreign language fluency and cultural competency, including through hiring and training. Institutions that rely on contractors for translation services often retain some language experts on staff for quality control purposes.
  5. Interactions with LEP consumers in their preferred language take the form of verbal interpretations via phone and the ability to select a language setting for digital services like ATMs, websites and mobile applications, as well as other communications. Most institutions told the CFPB that their written contracts were available only in English, although some institutions provide translations of certain documents, including monthly statements and privacy notices.

The report also identifies a number of challenges financial institutions face in serving LEP consumers, such as the limited number of certified financial interpreters and translators (particularly for languages other than Spanish), the inconsistent translation of terms across the financial services industry, and preparing written materials at a reading level accessible to the average U.S. adult.

Importantly, the report notes that its purpose is to raise awareness about the issues that LEP consumers face in accessing financial products and services and share information about how financial institutions interact with LEP consumers. The report states that the practices described are not intended to be comprehensive or representative of the industry as a whole, nor does it constitute an endorsement of specific practices by the CFPB. (The CFPB also provided some guidance on serving LEP consumers in its Fall 2016 Supervisory Highlights, which we blogged about here.) Given that the report was issued prior to Director Cordray’s resignation, it remains to be seen how the “new” CFPB will approach issues of financial access and literacy among the LEP population.

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.

The CFPB recently released a report regarding the use of Mobile Financial Services by underserved populations, including low-income, unbanked, underbanked, and economically vulnerable consumers. The report does not contain any findings or specific recommendations; rather, it is a summary of public comments received in response to the Request for Information issued in June 2014 by the Bureau’s Office of Financial Empowerment. While the report is lengthy, it contains some “key takeaways” in the executive summary and is a worthwhile read for those interested in a well-informed survey of the potential opportunities and risks mobile financial services present for the underserved.

The report does a good job of outlining the potential for mobile devices to improve financial planning and budgeting as well as reduce overspending and overdraft fees. It highlights some of the potential benefits offered specifically by the mobile ecosystem, including real-time payments capability and short message service (SMS) and push messaging alerts relating to consumers’ transactions, account balances, and fraud.

The report also draws attention to some of the risks presented by use and reliance on mobile financial services. For example, the report notes the costs involved in providing mobile financial services – both to financial services providers and to consumers. Despite the high percentages of underserved consumers with access to mobile phones and smartphones, as documented in the report, digital access remains a concern. The report also discusses how the mobile channel can present barriers to access for certain individuals, such as Limited English Proficiency (LEP) individuals and individuals with disabilities.

Given its focus on the underserved, it would have been helpful for the report to have included some discussion of lending products and potential fair lending risks presented by the use and proliferation of mobile financial services. Also, an international perspective would have been valuable, as there may be important lessons to be learned from the high usage of mobile financial services by the underserved in the developing world.

On November 16, 2015, Ballard Spahr attorneys conducted a webinar “Look Before You LEP – Getting Ahead of the CFPB’s Push to Deal with Limited English Proficiency (LEP) Customers,” which focused on the issues that institutions should consider when taking steps to serve LEP consumers. We also recently conducted a webinar in which we discussed digital accessibility for individuals with disabilities and Americans with Disabilities Act (ADA) enforcement in the mobile channel as emerging issues for financial services providers.

On September 17, I had the opportunity to speak on a panel at the American Bar Association’s Consumer Financial Services Committee meeting in Chicago (which was held as a part of the ABA Business Law Section Annual Meeting), covering the topic of how financial institutions can serve consumers with limited English proficiency (LEP). I was joined on the panel by representatives from the CFPB (Frank Vespa-Papaleo from the Office of Fair Lending), consumer advocacy groups, and financial institutions.

The topic produced a fascinating, but ultimately very unclear, discussion, and revealed the numerous quandaries that financial institutions face when trying to serve LEP consumers. Here are just a few of them:

  • In the past, there has been regulatory enforcement activity based on the idea that if a financial institution markets or originates a product in a non-English language, it must then service all aspects of that product in that language. This would suggest to financial institutions that they should carefully avoid marketing or originating products in any language other than English, but the CFPB and other regulators appear to want financial institutions to make credit more available to LEP communities by marketing and originating in non-English languages. Unless lenders are prepared to offer the entire servicing experience (including interactions with service providers) in a non-English language, however, complying with the CFPB’s goals in this area could create enforcement exposure.
  • There is also a strong tension between the regulatory desire to communicate in non-English languages and UDAAP issues. As readers of this blog know, it is difficult enough to ensure that communications to consumers in English are clear and understandable. If phone scripts, letters, disclosures and other documents are translated into another language, they may not be as clear or understandable to non-English speakers, because some concepts (especially legal concepts, or words used in particular U.S. laws or regulations) may get “lost in translation.” But if financial institutions volunteer to translate such documents, they may face UDAAP liability if the translations are later alleged to be incomplete or unclear to non-English speakers. The CFPB is offering translations of some documents it creates (for example, the Home Buying Information Booklet, announced on September 21, 2015), but in the absence of “official” translations of other documents, financial institutions are left to guess if their translations will be viewed as adequate.
  • It is also impossible, as a practical matter, for financial institutions to transition all communications and all products into another language simultaneously. If institutions adopt a phased approach, converting certain products or certain “most critical” communications to a non-English language first, they are subject to attack based on claims of “steering” LEP consumers into certain products, or failing to translate a document that a regulator later decides should have been made available from the outset.

I believe that the historical enforcement activity in this area, coupled with the CFPB’s very aggressive focus on fair lending issues, is inhibiting progress in making financial products available to LEP consumers. To relieve the paralysis that the current regulatory environment is creating, the CFPB should establish a road map that gives financial institutions guidance about how to serve LEP consumers without taking the UDAAP and fair lending risks discussed above (in addition to many others). The Bureau’s guidance could promote progress in this area by establishing guidelines for what documents should be translated first; by prescribing an acceptable transition period in which not all portions of a consumer’s experience would have to be in a non-English language; and by pledging that the Bureau will not pursue enforcement actions for UDAAP or fair lending issues based on partially-transitioned products or translations using a particular method. The status quo, however, in which the Bureau expects financial institutions to try to make difficult and risky judgment calls in the face of seemingly contradictory regulatory commandments, is not only unfair to financial institutions, but unfair to LEP consumers, whose access to financial services is being diminished because of the fear of regulatory enforcement.