CFPB: Banks Effectively Managing ECOA Compliance Risk in Small Biz Lending

The Consumer Financial Protection Bureau today issued a “Supervisory Highlights” report focusing on recent examiner observations of several bank products or business lines, including auto loan servicing, credit cards, debt collection, mortgage servicing, payday lending, and for the first time, small business lending.

With respect to small business lending, the CFPB found that the financial institutions it examined were effectively managing the risks of violations under the Equal Credit Opportunity Act, and that boards and management teams were generally maintaining active oversight over the institutions’ compliance management framework. Exams revealed, however, that banks are collecting only limited data on small business lending decisions, which the bureau noted could affect their ability to effectively monitor and test for ECOA violations.

The bureau also flagged several issues related to mortgage servicing, including delays in converting trial modifications to permanent modifications, charging consumers amounts other than those stated in their loan modification agreement, initiation of foreclosures after borrowers accepted a loss mitigation offer, and misrepresentations around foreclosure sales.