CFPB Says its UDAAP Authority Includes Ability to Review for Discrimination; Updates UDAAP Exam Procedure

On March 16, 2022, the Consumer Financial Protection Bureau (CFPB) announced that it will use its supervisory operations to evaluate discrimination in all consumer finance markets including credit, servicing, collections, consumer reporting, payments, remittances, and deposits. 

Acknowledging this is new territory and an expansion of its supervisory authority,  CFPB Director Rohit Chopra stated, "we will be expanding our anti-discrimination efforts to combat discriminatory practices across the board in consumer finance.”  Though fair lending laws may not apply to these markets, according to the CFPB, since discrimination meets the definition of "unfairness" it has the authority to make a determination regarding discrimination and disparate impacts to consumers. As such, the CFPB will use its authority to ensure companies are appropriately testing for and eliminating discrimination.

To meet its newly expanded efforts, the CFPB updated the UDAAP exam manual. The exam manual, which notes that consumers can be harmed whether or not discrimination is intentional, requires examiners to look at a covered entities process for assessing risks and discriminatory outcomes, including documentation of customer demographics and the impact of products and fees on different demographic groups. The CFPB will also use its authority to look at how companies test and monitor their decision-making processes for unfair discrimination.

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