Today, November 28, 2023, the CFPB issued a consent order fining a large national bank $12 million for failing to collect and report race and ethnicity information under HMDA.  The consent order covers 2016 through 2023.  The CFPB alleges that the bank’s loan officers failed to ask applicants for their race and ethnicity information, and instead recorded that the applicant chose not to provide the information, which the bank reported.  The consent order notes that the bank self-reported the existence of this issue to the government in 2020. 

As you know, HMDA requires financial institutions to collect and report the race, ethnicity, and sex of applicants for mortgage loans, but allows applicants to decline to provide the information.  The consent order notes that HMDA requires financial institutions to request each applicant’s race, ethnicity, and sex, and record and report “information not provided” only if the applicant chooses not to provide the information in response to the request.  As Appendix B of Regulation C states regarding the race, ethnicity, and sex information, “you must ask the applicant for this information…whether the application is taken in person, by mail or telephone, or on the internet,” and that “for applications taken by telephone, you must state the information in the collection form orally.” 

The consent order states that the bank, in 2013, made attempts to train and monitor for this issue after noting that its rate of applicants not providing this HMDA information was high.  The consent order alleges that in 2016, the bank’s monthly monitoring still showed that several offices and loan officers had information-not-provided rates three to four times the bank’s average, but the bank discontinued its monitoring.  In addition, the consent order alleges that in 2020, the bank found that over 400 loan officers recorded that applicants chose not to provide their race and ethnicity information on 100% of applications over a three-month period.  The consent order also alleges that the loan officers were not asking applicants for their race, ethnicity, or sex, and instead were “wrongly recording on applications that the applicants chose not to provide the information.”  The consent order states that the bank restarted a training and monitoring program in 2020, but some loan officers continued this practice into 2023.  As noted above, the consent order fines the bank $12 million and also contains very specific requirements for the bank’s policies and procedures to address this issue. 

This is another indication, like the recent consent order against a large non-depository mortgage company for HMDA inaccuracies (which we wrote about here), that the CFPB is focused on HMDA as part of its fair lending enforcement.  Many financial institutions may also face this same compliance problem, and in light of this consent order, it may be prudent to conduct a HMDA data review and training if necessary.  This consent order also raises a persistent question we receive from clients regarding whether they should self-report compliance violations.  It is notable that self-reporting in this instance resulted in a $12 million civil money penalty.  Although this may not be a substantial sum for a very large national bank, this order, as well as previous CFPB orders, show that self-reporting does not preclude the CFPB from imposing a civil money penalty and onerous corrective actions.  This, among other factors, should be considered before self-reporting to the CFPB or another regulatory agency.

You can find the CFPB’s press release here. 

If you would like to discuss the issues in this post, please email me at rich@garrishorn.com.