In December, the CFPB issued its Fall 2021 Supervisory Highlights which gives us a glimpse at noteworthy items identified in exams from January – June 2021. One area that caught our attention was regarding religious discrimination.
As you are likely aware, the purpose of Regulation B …
is to promote the availability of credit to all creditworthy applicants without regard to race, color, religion, national origin, sex, marital status, or age (provided the applicant has the capacity to contract); to the fact that all or part of the applicant’s income derives from a public assistance program; or to the fact that the applicant has in good faith exercised any right under the Consumer Credit Protection Act…
In the particular case mentioned, examiners found lenders were using a questionnaire that specifically asked about the applicant’s religion in connection with small business loan applications. These inquiries were then used in the credit decision, as an applicant who did not respond to the questionnaire was denied.
Religious discrimination can obviously be an issue but it’s one that we don’t see cited by examiners very often. Thus, we felt it was important to bring this to your attention. The CFPB obviously thinks it’s a big deal as well because they followed up with a Bureau Blog article on January 14th related to this finding.
The blog also addressed the CFPB’s concerns related to artificial intelligence, which is something they’ve also otherwise touched on recently. The blog states:
We’re particularly concerned about how financial institutions might be making use of artificial intelligence and other algorithmic decision tools. For example, let’s say a lender uses third-party data to analyze geolocation data to power their credit decision tools. If the algorithm leads to an applicant getting penalized for attending religious services on a regular basis this could lead to sanctions under fair lending laws.
We plan to more closely monitor the use of algorithmic decision tools, given that they are often “black boxes” with little transparency. Institutions will face consequences for this type of robo-discrimination.
Fair Lending is a big deal and applies to both the consumer and commercial lending spaces. The CFPB hasn’t been shy about where they stand and has put out several warning shots in the past year. If you need a refresher, be sure to check out our webinar, All About Fair Lending, which is available now OnDemand.
Diane joined Banker’s Compliance Consulting with over 10 years of compliance experience and over 15 years of experience within the financial industry. Diane is a Certified Regulatory Compliance Manager (CRCM) and has a Bachelor’s Degree in Sociology with a concentration in Criminal Justice. She is a graduate of the Schools of Banking Compliance School and has participated in various other training opportunities throughout her career. Diane understands firsthand the struggles banks face in building and maintaining successful compliance programs. Her experience and common sense approach to consumer compliance is a great asset to our clients.
Diane and her husband have two kids who keep them busy. She enjoys running and other sports and is a big Bugs Bunny fan! She’s a bit crazy in that she does enjoy reading some of these regulations and she’s a “crazy cat lady!” Her cat tales are hilarious!