CFPB To Implement Laws Protecting Minority-Lending In The US
27 Feb 2020
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- The decision has come as a result of a lawsuit filed by an advocacy group called Democracy Forward against the CFPB.
- Previous data has revealed possible discriminatory practices against women and minority business owners during the lending process.
- The CFPB would now develop a framework to outline rules that would govern the collection and reporting of data pertaining to lending to businesses with owners who are women or people of minority backgrounds.
- Democracy Forward believes improved data reporting will pave way for analysts to develop a better understanding of obstacles faced by women, minorities, and small business owners when it comes to accessing credit.
According to a statement by an advocacy group called Democracy Forward
, based in Washington, the Consumer Financial Protection Bureau (CFPB) in the US, as a result of a lawsuit filed by the group, would be enforcing requirements for data collection which would tackle discriminatory practices observed in lending. The lawsuit was originally filed back in May 2019 and had claimed that the CFPB had not properly adhered to anti-discrimination laws introduced after the financial crisis of 2008 which had made it necessary for the agency to collect and report data pertaining to lending that had been done to businesses that were owned by women, minorities, and other small businesses. As per the details contained in the settlement that has been filed in the Northern District of California at a US District Court, it has been agreed by the CFPB to develop an outline for a propositional rule by September that would govern the collection of such data, as well as to set-up a panel composed of small business advocates that would contribute to the entire process. This is one of the rare instances when consumer groups like Democracy Forward have emerged victorious in a fight to keep numerous laws pertaining to fair lending intact. Many of these laws specifically pertain to the protection of minority groups in the lending process, and also students and veterans. According to the group, these laws have come under threat under the current Trump administration. Back in November of last year, Kathy Kraninger, who is the director of the CFPB, held a symposium
focused on exploring the ways lenders could be encouraged to improve and increase data disclosure practices pertaining to lending done to small businesses. At the symposium, Kraninger had also declared her support for the aim that the law meant to achieve. In 2014, data revealed by the National Community Reinvestment Coalition had highlighted that major obstacles existed when it came to lending to small businesses, especially those owned by women or minorities. According to this data, firms owned by women were 15%-20% less likely to be approved compared to those with male owners, and only 17% of the firms owned by minorities were able to get a loan approved compared to 23% of those owned by non-minorities. Democracy Forward believes that improved reporting of data could enable experts to analyze the obstacles faced by such groups, which can then be addressed by policymakers. During the Obama-led government, the CFPB had created the Consumer Advisory Board and tasked it with the objective to start an assessment of how the anti-discriminatory rule could be drafted and then enforced, instead of implementing the rule immediately. This Board was ultimately dismantled by Mick Mulvaney, who became the interim director of the CFPB and is now the acting chief of staff for POTUS. The lawsuit was filed by Democracy Forward on behalf of two businesswomen, the California Reinvestment Coalition, and also the National Association for Latino Community Asset Builders. Although the joint settlement agreement has been submitted in Court, it has yet to receive final approval by the same, according to Democracy Forward.