August 3, 2020
In the midst of our country’s national conversation on how to put a stop to racial inequality and achieve fair treatment across our society, the agency I run—the Consumer Financial Protection Bureau—is playing a lead role in this conversation as it relates to fair treatment and equitable access to credit. As important as conversations are, actions matter more. Under my leadership, the CFPB is taking steps to help create real and sustainable changes in our financial system so that African Americans and other minorities have equal opportunities to build wealth and close the economic divide.
What is the Bureau doing? There are many laws already on the books that prohibit credit discrimination. But many questions remain as to how to interpret and apply these laws to achieve the goals of fair lending, including preventing credit discrimination and expanding access to credit. Identifying and resolving these questions will provide needed clarity to advance these important goals. To help do so, the Bureau issued a Request for Information (or RFI) on the principal law that prohibits lending discrimination—the Equal Credit Opportunity Act or ECOA. The RFI asks the public for views on topics like the whether the CFPB should clarify the law so financial regulations can provide better protection for consumers with limited English proficiency, such as many Spanish speakers. The RFI also asks whether the CFPB should clarify the law so that lenders are not chilled from affirmatively advertising credit products to traditionally disadvantaged groups and communities, such as African Americans. The RFI asks these important questions and many more. Tell us what you think. If you do, the CFPB will listen and, where appropriate, we will act.
Another way the public helps inform our work is through the submission of complaints related to their experience in the financial marketplace. Our consumer complaint system is a resource for consumers to submit their experiences and concerns with financial product or service providers directly to us. We then work with the company to get a response to the consumer. These complaints are used by our examiners to help identify and spot cases of discrimination and fair lending violations. We encourage consumers to continue to use the complaint system to help inform our work on fair lending violations. Our complaint portal is easily accessible on our website: www.consumerfinance.gov/complaint.
Clear standards help protect African Americans and other minorities, but the CFPB must back them up with action to make sure lenders and others follow the law. We back them up through examining what lenders do to comply with the law. We also back them up with enforcement when we find they aren’t complying. For example, the Bureau recently filed a lawsuit alleging a lender had violated ECOA by discouraging African Americans from applying for loans through its advertising. The Bureau also announced a settlement last year with a mortgage corporation that violated the Home Mortgage Disclosure Act (HMDA) and Regulation C by intentionally submitting years of mortgage-loan data that contained errors in the fields of race, ethnicity, and sex.
To further strengthen our fair lending enforcement, we asked Congress for the legislative authority to compensate whistleblowers who can provide information allowing us to take swift action against companies for violating the law. The Consumer Financial Protection Bureau has seen that whistleblowers can be key sources of information in its enforcement of fair lending laws in particular, and I appreciate that U.S. Senator Cortez-Masto introduced legislation on this issue in June. While discriminatory practices can be challenging and time consuming to uncover in an examination or investigation, having an employee with first-hand knowledge come forward helps the Bureau identify and address violations of our fair lending laws. We will continue to monitor the marketplace to ensure that companies extend credit without discriminating on race or other prohibited bases, and bring action against those who do.
And, finally, through our education efforts, we are developing and publishing financial education information and skill building tools that empower consumers with accurate information on their rights in the financial marketplace. This includes topics such as the steps to homebuying, and guidance on savings, credit cards, auto loans, debt collection, and paying for higher education. At the beginning of this year, I asked Bureau staff to look at disparities relating to student loan outcomes. Data shows that African American college students have a post-secondary education completion rate of 40 percent as compared to 54 percent for Hispanics, 64 percent for whites and 74 percent for Asians. Taking out student loans yet not completing a degree means students have all of the downside of debt without the increased earning potential. Furthermore, research has found an 11 percentage point Black-White gap in student loan defaults, even after controlling for many factors like college selectivity, degree completion, GPA, job status, and income. The Bureau will use our resources to better understand and help address the causes of these differences.
We have a lot of work ahead of us. The Consumer Financial Protection Bureau is committed to ensuring that financial companies know they have a responsibility to treat consumers fairly and to eliminate discrimination.
Thank you, Kathleen L. Kraninger
Consumer Financial Protection Bureau