On December 6, the Consumer Financial Protection Bureau (CFPB or Bureau) and the U.S. Department of Justice (DOJ) announced a Memorandum of Understanding (MOU) to coordinate enforcement of the federal fair lending laws, including the Equal Credit Opportunity Act (ECOA). Simultaneously, the CFPB issued its first annual Fair Lending Report to Congress as required by the Dodd-Frank Act, which describes the Bureau’s efforts to build its Office of Fair Lending and Equal Opportunity and reviews its fair lending accomplishments. Together, these initiatives demonstrate that the CFPB and DOJ are continuing to work together closely to aggressively enforce the federal fair lending laws.
Memorandum of Understanding Regarding Fair Lending Coordination
The new MOU supplements an existing Information Sharing Agreement Regarding Fair Lending Investigations among the DOJ, the U.S. Department of Housing and Urban Development, and the Federal Trade Commission, which allows these fair lending enforcement agencies to share confidential information related to fair lending investigations, screening procedures, and investigative techniques. It also follows a general cooperation MOU that the DOJ and CFPB entered into earlier this year.
The new MOU focuses on information sharing and referral of matters alleging ECOA violations, but also governs the agencies’ referral processes for other fair lending-related laws and joint fair lending investigations.
Referral of ECOA Violations to DOJ: The MOU explains the circumstances under which the CFPB will refer potential ECOA violations to the DOJ for further investigation or prosecution. Consistent with the established practice of the prudential federal bank regulators, the MOU requires the CFPB to refer to the DOJ all matters where it has “reason to believe” that one or more creditors has engaged in a pattern or practice of lending discrimination. The CFPB may also refer to DOJ any violation of Section 701(a) of ECOA, including a recommendation that a civil action be commenced if the CFPB cannot obtain compliance from the financial institution.
Following referral, the DOJ has 60 days to determine whether to proceed with its own investigation. Within that period, the CFPB may not unilaterally commence its own action with regard to the referred violation(s). Even if exigent circumstances arise during the 60-day review period, the CFPB must first consult with the DOJ before taking independent action. Read more…