CFPB Expands Its Authority to Examine for Discrimination
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Key Takeaways
- On March 16, 2022, the Consumer Financial Protection Bureau (“CFPB”) announced that it would combat perceived discrimination in the consumer financial marketplace by expanding its authority to target unfair, deceptive or abusive acts or practices (“UDAAPs”). The CFPB updated its exam manual for UDAAPs to provide guidance for examiners on determining whether if an entity has “unfairly discriminated” against consumers.
- While the Equal Credit Opportunity Act (“ECOA”) prohibits discriminatory lending practices and may be enforced by the CFPB and private plaintiffs, this new expansion of the CFPB’s authority will allow the Bureau to examine for discrimination across all consumer products and consumer finance markets, and not just extensions of credit.
- In particular, the CFPB noted that that it will closely examine financial institutions’ decision-making in advertising, pricing and other areas, as well as their use of algorithms and artificial intelligence (“AI”) models, for any discriminatory practices that could form the basis of potential UDAAP violations.