Warren, Brown call on GAO to investigate CFPB's fair lending oversight

Sens. Elizabeth Warren, D-Mass., and Sherrod Brown, D-Ohio, are asking the Government Accountability Office to open an investigation into the Consumer Financial Protection Bureau’s oversight and enforcement of fair-lending laws.

The two sent a letter Wednesday to Comptroller General Gene Dodaro “raising grave concerns about whether the bureau is fulfilling its statutory obligations.”

Their letter came a day after an American Banker article that noted the CFPB's lack of enforcement activity surrounding fair-lending issues. The agency has filed just one enforcement action related to those issues in the past two years, while making no referrals to the Department of Justice for violations of the Equal Credit Opportunity Act.

Christopher Goodney/Bloomberg

The letter cited a GAO report in 2009 that found federal oversight of fair-lending laws was “inconsistent, fragmented, and resulted in relatively few fair lending cases." It also noted that lax fair-lending oversight contributed to the financial crisis.

“Federal agencies’ failure to effectively enforce fair lending laws enabled predatory lending practices that targeted racial and ethnic minorities, fueled the foreclosure crisis, and stripped wealth from black and Latino homeowners,” the letter said.

The CFPB was more active in fair-lending enforcement under the Obama administration. The CFPB made 40 lending discrimination referrals to the Justice Department since 2011, peaking at 15 in 2014 but dropping to just two in 2017.

The senators listed five specific questions for the GAO to examine, including the “overall effectiveness” of the bureau’s oversight and enforcement of fair-lending laws. The lawmakers asked whether decisions by CFPB Director Kathy Kraninger and former acting Director Mick Mulvaney affected the agency’s effectiveness to enforce equal opportunity law. That statute prohibits credit discrimination on the basis of race, color, religion, national origin, sex, marital status, age, or because a person gets public assistance.

Lawmakers also want GAO to determine whether actions taken by Mulvaney to move the CFPB’s Office of Fair Lending to a separate division and strip it of its supervisory and enforcement duties were based on “indifference, neglect, improper political influence or made over the objections of career bureau staff."

The lawmakers also questioned Kraninger’s efforts to roll back expanded HMDA data points by asking the GAO to determine the effect on oversight of fair- lending laws “if those data points are rescinded.”

Additionally, the two lawmakers wrote that the CFPB has “provided zero restitution to victims of discrimination” in two years.

In June, the bureau fined Freedom Mortgage, a Mount Laurel, N.J., mortgage lender, $1.75 million to settle allegations that it violated the Home Mortgage Disclosure Act. That consent order involved data reporting violations. The bureau also referred two cases involving a pattern or practice of alleged discrimination to the Department of Justice, the letter said.