Discriminatory conduct that violates the federal prohibition against unfair practices – as well as decision-making in advertising, pricing, and other areas to which federal consumer protection laws may not directly apply – will be closely scrutinized by the federal consumer financial protection agency, it said in a release Wednesday.
The Consumer Financial Protection Bureau (CFPB) said the effort is aimed at ensuring companies are appropriately testing for and eliminating illegal discrimination. The bureau said that in its view, discrimination or improper exclusion can trigger liability under the ban on unfair, deceptive, and abusive acts and practices (UDAAP). The effort will be undertaken through changes to supervisory operations of the agency, the bureau said.
In conjunction with the new approach, the CFPB said it published an updated exam manual Wednesday for evaluating UDAAP. The updates, the bureau said, notes that discrimination may meet the criteria for “unfairness” by causing substantial harm to consumers that they cannot reasonably avoid, where that harm is not outweighed by countervailing benefits to consumers or competition.
“Consumers can be harmed by discrimination regardless of whether it is intentional,” CFPB said. “Discrimination can be unfair in cases where the conduct may also be covered by ECOA [Equal Credit Opportunity Act], as well as in instances where ECOA does not apply. For example, denying access to a checking account because the individual is of a particular race could be an unfair practice even in those instances where ECOA may not apply.”
The bureau added that it will examine for discrimination in all consumer finance markets, including credit, servicing, collections, consumer reporting, payments, remittances, and deposits. “CFPB examiners will require supervised companies to show their processes for assessing risks and discriminatory outcomes, including documentation of customer demographics and the impact of products and fees on different demographic groups,” the CFPB said.
The agency will also look at how companies test and monitor their decision-making processes for unfair discrimination, as well as discrimination under ECOA, it said.