On Tuesday, the Consumer Financial Protection Bureau (CFPB) released its annual Fair Lending report. In this report, the CFPB summarizes its supervisory actions, rulemaking, guidance and other activities conducted during the 2016 calendar year. Following are some of the observations that are noted in the report related to the agency’s supervisory actions for 2016:

  • Many institutions struggle with properly assigning action codes for conditional approvals under the Home Mortgage Disclosure Act (HMDA);
  • The agency takes a generally favorable view of efforts to develop special purpose credit programs to extend credit to underserved consumer groups;
  • Examiners observed cases where institutions’ treatment of non-English-speaking consumers presented Fair Lending risk;
  • Examination teams screen for redlining examinations by identifying statistical disparities between an institution and the population and lending patterns within a particular metropolitan statistical area (MSA);
  • The agency issued Fair Lending consent orders against BancorpSouth for redlining, underwriting, pricing and overtly discriminatory policies and against Toyota Motor Credit for pricing and compensation practices in auto lending; and
  • 44 companies were sent HMDA warning letters related to potential reporting violations.

An important insight from this report that is particularly relevant to Fair Lending compliance professionals is the summary of Fair Lending priorities that the CFPB has identified for 2017. Based on its risk-based prioritization procedure, the CFPB has identified redlining, mortgage and student loan servicing and small business lending as its top priorities for 2017. This represents a degree of change from the report published last year, which indicated mortgage origination and servicing, auto finance, credit cards and small business lending as priorities.

Based on this annual report, financial institutions should evaluate their policies for consistency with Fair Lending laws and ensure that compliance management systems can sufficiently monitor for risk related to redlining, servicing and HMDA reporting. Moreover, institutions should follow the CFPB for the latest developments related to the upcoming HMDA reporting changes and the agency’s efforts towards satisfying its Dodd-Frank mandate in the area of small business lending.