Expectations For CFPB's Fair Lending Agenda Under Biden
By David Ogden, Karin Dryhurst and Franca Harris Gutierrez (February 23, 2021)
It is clear just a few weeks into the Biden administration that fair lendi ng
and racial equity will return as a central focus of regulators under
President Joe Biden.
Biden issued a memorandum his first week in office directing the U.S.
Department of Housing and Urban Development to reassess Trump -era
fair housing rules.[1] And Acting Consumer Financial Protection Bureau
Director Dave Uejio recently wrote that "fair lending enforcement is a top
priority and will be emphasized accordingly."[2]
We expect that focus will reflect a renewed interest in the promise and
risk of new technologies. Patrice Ficklin, head of the CFPB's fair lendin g
office, previously noted the need to monitor the growing market for data -
driven lending.[3]
The CFPB under President Barack Obama appointee Director Richard
Cordray issued a public request for information regarding the use of
alternative data and modeling in the credit process. Th e ROI recognized
the potential for new models to provide underserved communities access
to credit, while noting that models may result in discrimination.
In 2017, the bureau issued a no-action letter to Upstart Network Inc. in
the interest of making credit more accessible, after it worked to assess
whether its models resulted in disparities.[4]
If confirmed as CFPB director, Rohit Chopra can be expected to pick up
where Cordray left off, as previewed by Uejio.
In addition, Biden's nominees for the U.S. Department of Justice suggest a
focus on advancing civil rights issues, to include fair lending and acces s to
credit. For example, Biden nominated Vanita Gupta — head of
the Leadership Conference on Civil and Human Rights and fo rmer head of
the Civil Rights Division — for associate attorney general.
Legal Background on Fair Lending
The principal fair lending statutes are the Equal Credit Opportunity Act,[ 5] which prohibits
discrimination in the extension of credit, and the Fair Housing Act,[6] w hich specifically
prohibits discrimination in housing-related lending .
Liability under these statutes may attach under one of two theories: (1) disparat e
treatment, which requires showing that the defendant had a discriminatory intent or m otive,
and (2) disparate impact, which involves facially neutral policies th at have an alleged
discriminatory effect.
The U.S. Supreme Court held that disparate impact claims are acti onable under the FHA in
its 2015 decision in Texas Department of Housing & Community Affai rs v. The Inclusive
Communities Project Inc.[7]
David Ogden
Karin Dryhurst
Franca Harris
Gutierrez
