CFPB and DOJ Take Enforcement Action Against Bank Alleging Violations of ECOA

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The CFPB and DOJ announced that the filing of a joint complaint in the United States District Court for the Western District of Pennsylvania against a bank as successor in interest to a mortgage lender for violations of the Equal Credit Opportunity Act. ECOA and its implementing regulation, Regulation B, generally prohibits creditors from discriminating against loan applicants on the basis of characteristics such as race and national origin. According to the complaint, the mortgage lender allegedly charged higher prices on mortgage loans to African American and Hispanic borrowers than similarly creditworthy white borrowers between 2002 and 2008. The agencies further alleged that between 2002 and 2008, the mortgage lender gave its loan officers and brokers wide discretion to set borrowers’ rates and fees, and compensated these officers and brokers from the higher prices paid by consumers. There was no objective criteria, guidelines, instructions or procedures in place, according to the agencies. The agencies’ enforcement action is based on statistical analyses demonstrating that the practice had a discriminatory effect on over 76,000 African-American and Hispanic borrowers between 2002 and 2008; showing that on average African-American and Hispanic borrowers paid approximately $159 and $125, respectively, more than similarly-situated white borrowers. The proposed consent order requires the mortgage lender’s successor in interest to pay the $35 million in restitution to consumers. This follows a recent enforcement action against a bank holding company and its bank for violations of ECOA, in which the CFPB used similar statistical analyses to show the discriminatory effect of indirect auto lending market up practices (see December 23, 2013 Alert).

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this informational piece (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

Topics:  Banks, CFPB, DOJ, ECOA, Enforcement Actions

Published In: Consumer Protection Updates, Finance & Banking Updates, Residential Real Estate Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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