Mulvaney Weakens Office that Fights Lending Discrimination

In late January, Mick Mulvaney took away the ability of the Consumer Financial Protection Bureau’s (CFPB) Office of Fair Lending and Equal Opportunity to supervise institutions and enforce laws to stop lending discrimination. Under previous CFPB Director Richard Cordray, the fair-lending office had won record court settlements for consumers who experienced illegal discrimination in the housing, auto loan, and credit card markets. The office had helped bring justice, accountability, and protection for consumers in these and other financial markets.

Recent investigative reports provide further evidence of present-day persistent and pernicious discrimination by lenders against people of color and the need to vigilantly enforce fair lending laws.

Additional Background

The fair-lending office will be moved to the “office of the director, where staffers will be focused on ‘advocacy, coordination and education,’ according to an email Mulvaney sent them this week. They will no longer have responsibility for enforcement and day-to-day oversight of companies, he wrote.” [Renae Merle, “Trump administration strips consumer watchdog office of enforcement powers in lending discrimination cases,” The Washington Post, 02/01/18.]

While the move “sounds like a mere consolidation of the organizational chart, it makes very little sense unless the goal is to neuter fair-lending enforcement. The OEOF [Office of Equal Opportunity and Fairness] is a personnel office, overseeing ‘equal employment opportunity and diversity and inclusion’ among agency employees. It does no enforcement at all.” [David Dayen, “After Boasting About Lowering Black Unemployment, Donald Trump Undermines the Federal Unit Defending Against Housing Discrimination,” The Intercept, 02/01/18.]

The office had “headed up some of the CFPB’s most high-profile cases, including a 2015 settlement against Hudson City Savings Bank, a New Jersey-based bank accused of racially discriminating against minority mortgage borrowers. The bank was required to provide $25 million in loan subsidies in what the CFPB called the country’s largest settlement in a redlining case…. In 2013, it led the CFPB case that resulted in Ally Financial, one of the nation’s largest automobile lenders, paying $98 million to settle charges that it systematically allowed minorities to be charged more for car loans than whites. Ally was accused of discriminating by charging 235,000 minority borrowers higher rates. On average, black, Hispanic and Asian American customers paid between $200 and just over $300 more for auto loans than whites who were equally creditworthy, federal officials charged. Then-Attorney General Eric H. Holder Jr. called the decision the ‘largest-ever settlement in an auto-loan discrimination case.’” [Renae Merle, “Trump administration strips consumer watchdog office of enforcement powers in lending discrimination cases,” The Washington Post, 02/01/18.]

More than 100,000 were “allegedly discriminated against when the bank excluded them from debt relief offers because they lived in Puerto Rico or asked to receive communications in Spanish. That makes this the largest credit card discrimination settlement yet, according to the Justice Department.” [Blake Ellis, “GE Capital to refund $225 million to customers,” CNN Money, 06/20/14.]

“Fifty years after the federal Fair Housing Act banned racial discrimination in lending, African Americans and Latinos continue to be routinely denied conventional mortgage loans at rates far higher than their white counterparts. This modern-day redlining persisted in 61 metro areas even when controlling for applicants’ income, loan amount and neighborhood, according to millions of Home Mortgage Disclosure Act records analyzed by Reveal from The Center for Investigative Reporting.” [Aaron Glantz and Emmanuel Martinez, “Kept out: How banks block people of color from homeownership,” Associated Press, 02/15/18.]

Using a “secret shopper” method “modeled after one long used in the housing market,” the National Fair Housing Alliance tests found non-white borrowers faced a discriminatory markup from auto lenders. “Pooled together, the tests show that non-whites would have paid an average of $26,168 in total borrowing costs, which was $657 or 3% more than offered to the white testers. The difference is not great, but the NFHA researchers said the sharply better credit profiles of the non-white shoppers should have resulted in significantly lower borrowing costs for them.” [Jim DuPlessis, “Tests find bias persists in auto lending,” Credit Union Times, 01/11/18.]

Image attribution: Gage Skidmore