The CFPB has announced that it will use UDAAP to target discriminatory conduct. CFPB examiners are being directed to apply the Consumer Financial Protection Act’s unfairness standard to conduct considered to be discriminatory if it is not covered by the Equal Credit Opportunity Act.
The CFPB has broad authority in protecting consumer from unfair, deceptive, or abusive acts and practices. The CFPA defines an act or practice as “unfair” if (1) it causes or is likely to cause substantial injury to customers, (2) the injury is not reasonably avoidable by consumers, and (3) the injury is not outweighed by countervailing benefits to consumers in competition.
In its official press release, the CFPB states:
"The CFPB will examine for discrimination in all consumer finance markets, including credit, servicing, collections, consumer reporting, payments, remittances, and deposits. CFPB examiners will require supervised companies to show their processes for assessing risks and discriminatory outcomes, including documentation of customer demographics and the impact of products and fees on different demographic groups. CFPB examiners will look at how companies test and monitor their decision-making processes for unfair discrimination, as well as discrimination under ECOA."
For an updated exam manual for evaluating UDAAPs, please follow the link below: