Banking and Finance Law Daily CFPB reports credit invisibility, mortgage shopping problems, fair lending efforts
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Wednesday, February 13, 2019

CFPB reports credit invisibility, mortgage shopping problems, fair lending efforts

By Andrew A. Turner, J.D.

Going forward, the CFPB will endeavor to insure that the marketplace is innovating in ways that enhance consumer choice.

In presenting the Consumer Financial Protection Bureau’s semi-annual report to Congress, Director Kathy Kraninger looked ahead to taking actions to "promote financial education, monitor and encourage innovation in financial technologies, and remain watchful for financial scams targeting seniors and other consumers." Looking at issues facing consumers and actions undertaken by the CFPB to protect them, the report cited credit invisibility and mortgage shopping as two significant problems in obtaining consumer financial products or services. It also highlighted the CFPB’s fair lending efforts.

In response to difficulties for consumers to access if they lack a credit record for use by credit scoring models, the CFPB examined the relationship between geography and credit invisibility.

The research found that credit invisibility among adults 25 and older is concentrated in rural and highly urban geographies. Lack of internet access appears to have a stronger relationship to credit invisibility than does the presence of a bank branch.

Although mortgage interest rates and loan terms can vary considerably across lenders, many homebuyers do not comparison shop for their mortgages To examine whether encouraging mortgage shopping benefits consumers, the Bureau published a series of research briefs on homebuying and mortgage shopping. The study "provided suggestive evidence that encouraging shopping may reduce the cost of consumers’ mortgages."

Fair lending supervision. The report also analyzed the efforts of the Bureau to fulfill its fair lending mission. For exam reports issued by Fair Lending Supervision during the reporting period (April 1, 2018, to Sept. 30, 2018), the most frequently cited violations of Equal Credit Opportunity Act (Regulation B) and Home Mortgage Disclosure Act (Regulation C) requirements were:

  • failure by a financial institution to collect and accurately report data regarding applications for covered loans that it receives, originates, or purchases in a calendar year, or, failure to collect and accurately report data regarding certain requests under a preapproval program in a calendar year;
  • improperly requesting information about an applicant’s source of income;
  • improperly considering age or whether income is derived from any public assistance program;
  • failure to provide notice to the applicant 30 days after receiving a completed application concerning the creditor’s approval of, counteroffer or adverse action on the application; failure to provide appropriate notice to the applicant 30 days after taking adverse action on an incomplete application; failure to provide sufficient information in an adverse action notification, including the specific reasons for the action taken; and
  • failure to preserve records of actions taken on an application or of incompleteness.

In addition, the report analyzed complaints about consumer financial products or services that the CFPB received and assessed significant actions by state attorneys general or state regulators relating to federal consumer financial law. Supervisory and enforcement activities of the Bureau were listed, along with significant rules and initiatives.

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