CFPB Cracks Down on Lending Discrimination, Redlining
The Consumer Financial Protection Bureau and the Department of Justice have joined forces in a fight against redlining, an undesirable process that has been prohibited in America since 1975. With redlining, lenders charge minorities more money for certain products based on their geographic area, or they ban groups of people from purchasing their products altogether.
Recently, the CFPB discovered an increase in the occurrence of redlining after the financial crisis forced lenders to adjust their approval strategies. The CFPB and the Department of Justice have begun warning lenders about the potential for discriminatory lending practices, after using a new screening strategy to identify signs of redlining.
In an April 23rd speech, Patrice Ficklin, the CFPB’s assistant director of fair lending, remarked on redlining in the modern world, saying, “It is biblical that there’s nothing new under the sun and I often think everything old is new again. So it’s funny to still be talking about redlining here in 2015 and yet here we are.”
The CFPB has not yet taken action against lenders purely for redlining practices, but they did reveal that redlining and underwriting were two of the key focuses in 2014 in the April 2015 Fair Lending Report of the Consumer Financial Protection Bureau. In that report, the bureau said there were “several open investigations of potential redlining” that had been issued by the end of last year.
The CFPB and the Department of Justice are working closely together to ensure redlining does not become a common practice in America, some 40 years after it was officially banned. While the process is most often seen in the mortgage lending sector, investigators are watching for indications of discriminatory lending with any financial product.