CFPB’s Jeffrey Langer Lends Perspective on Marketplace Lending

On April 12, CFPB Assistant Director for Installment Lending and Collections Markets Jeffrey Langer delivered remarks at the San Francisco LendIt USA Conference on the marketplace lending industry. Langer began his remarks by summarizing the CFPB’s Project Catalyst initiative, which was designed to support and encourage consumer-friendly innovation pertaining to financial products and services, such as marketplace lending. Langer, referencing the CFPB’s recently released consumer bulletin on online marketplace lending, commented that marketplace lending is a “young” industry with both potential benefits and potential risks. For example, Langer explained that marketplace lenders may be able to offer consumers faster and more convenient methods of obtaining credit, and may also have fewer overhead costs to pass along to consumers as compared to brick-and-mortar institutions. However, Langer also expressed concerns about the industry’s agility in changing markets, opining that, “[i]t is unclear whether marketplace lenders’ have adequate loan servicing infrastructure or the ability to scale infrastructure quickly and effectively in the event of [an economic] downturn.” According to Langer, “it is simply too soon to know whether marketplace lending will be able to realize its potential as a means of delivering credit at a lower cost to consumers (and small businesses) who have the ability to repay the loans they obtain or whether the marketplace lending business model will prove unable to sustain itself through a full business cycle.” Langer additionally noted that marketplace lenders could face fair lending risk as a result of introducing new types of data and/or analytics in making credit decisions.

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HUD Reaches $2.8 Million Settlement Over Redlining Allegations

On February 29, HUD announced an agreement with a Kansas City-based bank over its alleged redlining practices against African-American mortgage applicants. Two fair housing organizations (Complainants) filed separate complaints with HUD in October 2015 alleging that the bank engaged in discriminatory acts and violated the Fair Housing Act. According to Complainants, the bank’s “lack of market penetration in African-American communities made residential real estate products less available to persons based on race.” Complainants further alleged that the bank “designated their service area, or assessment area, in a way that excluded areas of high African-American concentration, which resulted in making residential real estate products less available to persons based on race” – a practice generally referred to as redlining. The agreement requires that the bank must, during the three-year agreement period: (i) allocate $75,000 in subsidy funds to provide discounts on home purchase loans to majority African-American census tracts in the Kansas City area; and (ii) originate $2.5 million in mortgage loans in African-American neighborhoods. Read more…

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House Passes Bills that Impact CFPB Mortgage and Auto Lending Policies

On November 18, the U.S. House of Representatives passed by voice vote H.R. 1210 and H.R. 1737, both of which will affect CFPB policies governing the mortgage and auto lending industries. The “Portfolio Lending and Mortgage Access Act” – H.R. 1210 – would amend the Truth in Lending Act to create a safe harbor from certain requirements for depository institutions making residential mortgage loans held in portfolios. Specifically, the bill permits loans that appear on a depository institution’s balance sheet to be treated as a Qualified Mortgage subject to certain limitations, thus permitting such loans to fall under the Ability-to-Repay Rule’s safe harbor provisions. The “Reforming CFPB Indirect Auto Finance Guidance Act” – H.R. 1737 – would invalidate CFPB Bulletin 2013-02, which provides guidance to indirect auto lenders regarding compliance with federal fair lending laws.

In anticipation of the two bills passing the House, the White House released two separate statements voicing the Administration’s opposition to both.

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New York AG Settles with Community Bank over Redlining Allegations

On September 10, New York Attorney General Eric Schneiderman announced a settlement agreement with a New York-based community bank to resolve allegations that the bank engaged in discriminatory mortgage lending practices by excluding potential borrowers who resided in predominantly African-American neighborhoods in the Buffalo area. Under terms of the agreement, the bank agreed to revise its consumer and commercial lending policies to eliminate minimum mortgage amount requirements, provide fair lending training, to expand its lending footprint into previously excluded areas, and to establish an $825,000 fund to promote new homeownership and affordable housing opportunities.

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CFPB Publishes Eighth Edition of Supervisory Highlights

On June 23, the CFPB published its eighth edition of Supervisory Highlights, covering supervisory activities from January 2015 through April 2015. The latest edition identifies issues with dual-tracking at mortgage servicers and the need for improved quality control measures at consumer reporting agencies. The report also provided supervisory observations related to debt collection, student loan servicing, mortgage origination and servicing, and fair lending. Notably, the report reveals that non-public supervisory actions and self-reported violations at banks and nonbanks in the areas of mortgage origination, fair lending, mortgage servicing, deposits, payday lending, and debt collection resulted in $11.6 million in remediation to more than 80,000 consumers during the first four months of 2015.

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