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April 19, 2012 – The "effects test" for discrimination under the Equal Credit Opportunity Act will be applied as the Consumer Financial Protection Bureau monitors supervised institutions for potential fair lending violations, the bureau said in a compliance bulletin Tuesday.

The CFPB said it issued Bulletin 2012-04 to address recent inquiries related to compliance with fair lending requirements of the ECOA and its implementing regulation, Regulation B. It also issued an announcement that it would be actively seeking to root out fair lending violations.

"We want consumers to avoid the marketplace's silent pickpocket—discrimination," said CFPB Director Richard Cordray. "We cannot afford to tolerate practices, intentional or not, that unlawfully price out or cut off segments of the population from the credit markets. That's why the CFPB is educating consumers about their fair lending rights and pursuing lenders whose practices are discriminatory."

CFPB Bulletin 2012-04 applies to all institutions under the bureau's jurisdiction and to credit products, including mortgages, credit cards, student loans and auto loans. The CFPB also has a consumer brochure that provides tips and warning signs to help consumers identify and avoid credit discrimination.

Bulletin 2012-04 refers to a 1994 policy statement on lending discrimination issued by the Interagency Task Force on Fair Lending. The task force included representatives from 10 federal agencies, including the Justice Department, the federal financial institution regulators, including NCUA, and the Federal Trade Commission. The policy statement says the courts have recognized the following methods of providing lending discrimination under the ECOA:

• overt evidence of discrimination;
• evidence of disparate treatment; and
• evidence of disparate impact.

While NCUA is responsible for supervising fair lending compliance by credit unions, the CFPB has examination and enforcement authority over institutions with more than $10 billion in assets. That includes the nation's three largest credit unions.

The CFPB says its ECOA examination procedures, mortgage origination examination procedures and mortgage servicing examination procedures adopt and reference the interagency fair lending examination procedures, including those designed to identify evidence of disparate impact.

The effects test for disparate impact under the ECOA was detailed in a NAFCU webcast last week with attorney Rob Rutkowski (see story). This webcast will remain available for one year.