On January 17, 2025, the CFPB filed a complaint against an Illinois-based non-depository mortgage lender for allegedly engaging in discriminatory practices. The CFPB alleges the lender engaged in improper redlining by deliberately excluding certain neighborhoods from its services based on the racial and ethnic composition of those areas, in violation of the Equal Credit Opportunity Act (ECOA).
The CFPB claims the lender violated ECOA by engaging in a pattern of discriminatory conduct against applicants on the basis of race or nationality. Specifically, the CFPB alleges the lender:
- Concentrated office locations and marketing efforts in majority-white neighborhoods. The CFPB alleges the lender intentionally avoided locating offices and marketing its services in majority-Black and Hispanic neighborhoods in the Chicago and Boston metropolitan areas.
- Discouraged prospective minority applicants. The lender allegedly engaged in practices that discouraged borrowers from applying for mortgage loans to purchase properties in majority-Black and Hispanic neighborhoods.
- Failed to maintain sufficient training and compliance monitoring. The lender’s employees allegedly received little to no training on fair lender laws and regulations. The lender also allegedly failed to adequately monitor employee conduct for compliance with fair lender laws and did not perform any internal analyses to monitor for redlining.
The CFPB asserts that these actions resulted in a disproportionately low number or mortgage applications and loan originations from majority-Black and Hispanic neighborhoods.
To address these alleged violations, the CFPB is seeking a court order that would:
- Ban the lender from engaging in mortgage lending for five years. This would prohibit the lender from engaging in any residential mortgage lending activities or receiving compensation for any such mortgage lending activities.
- Impose a $1.5 million civil penalty. The penalty would be deposited into the CFPB’s victims relief fund to provide financial relief to harmed consumers.
Putting It Into Practice: This action is the latest of a flurry of redlining settlements by federal regulators in advance of the administration change (previously discussed here and here). It remains to be seen how the Trump Administration will approach ECOA enforcement. Lenders should nonetheless ensure their fair lender compliance protocols align with federal regulators’ standards and expectations.