CFPB’s New Approach to Discrimination: Invoking UDAAP

The CFPB earlier this year claimed a new tool to prevent discrimination in financial services by examining institutions for conduct that, while potentially falling outside the ambit of traditional fair lending laws, was nonetheless “unfair.” To the uninitiated, the change seemed semantic. To providers and consumers of financial services and products, it is potentially seismic.

Symposium presenters:

• Michael Calhoun, president of the Center for Responsible Lending

• Kitty Ryan, senior vice president at the American Bankers Association

• John Coleman, partner, Buckley LLP

• Moderator: Jerry Buckley, partner and co-founder of Buckley LLP

Defining conduct as unfair, deceptive, or abusive triggers liability under the Consumer Financial Protection Act, a broad statute that could reach well beyond the traditional lending realm covered by the Equal Credit Opportunity Act. In fact, the CFPB paired its announcement with revised examination procedures for assessing UDAAP compliance and a separate blog post by its enforcement and supervision heads explaining that they were “cracking down on discrimination in the financial sector.” They said the new procedures would guide examiners to look “beyond discrimination directly connected to fair lending laws” and “to review any policies or practices that exclude individuals from products and services, or offer products or services with different terms, in an unfairly discriminatory manner.”

The bureau’s full-court press on this new initiative left some meaningful questions unanswered. Please join us for a symposium that attempts to steer the conversation to a shared understanding of the bureau’s expectations, and how institutions can meet them. The discussion will explore the legal and policy questions raised by the CFPB’s adoption of a theory of “unfair discrimination.” The panelists will cover how the CFPB’s UDAAP authority interacts with laws enacted specifically to prevent discriminatory conduct, the legal support for the CFPB’s new theory, and the specific steps institutions should consider taking to ensure compliance with it. Indications that the Federal Trade Commission could adopt a similar theory of “unfair discrimination” make this a timely and relevant discussion for companies within and without the financial services industry.