US Department of Justice Fair Lending Enforcement

Transcription

1 US Department of Justice Fair Lending Enforcement Daniel P. Mosteller Acting Special Litigation Counsel for Fair Lending Housing and Civil Enforcement Section, Civil Rights Division US Department of Justice

2 Keynote Speaker Daniel P. Mosteller Acting Special Litigation Counsel for Fair Lending Housing and Civil Enforcement Section, Civil Rights Division US Department of Justice 2

3 Accomplishments Since 2010: 46 cases filed or settled Obtained over $1.4 billion in relief As of March 1, the Housing & Civil Enforcement Section had: 35 open fair lending investigations Four authorized fair lending lawsuits 3

4 DISPARATE IMPACT

5 Inclusive Communities June 25, 2015 Disparate impact claims are cognizable under Sections 804(a) and 805 of the Fair Housing Act. Tex. Dep t of Hous. & Cmty. Affairs v. Inclusive Cmtys. Project, Inc., 135 S. Ct

6 Inclusive Communities [V]estiges remain today, intertwined with the country s economic and social life, of unconstitutional de jure residential segregation by race. Disparate impact helps counteract unconscious prejudices and disguised animus that escape easy classification as disparate treatment. 6

7 Inclusive Communities Court finds multiple principles of statutory interpretation that support the existence of disparate impact: 1. otherwise make unavailable language of 804(a), and the discriminate against language of 805, refer to the consequences of actions and not just to the mindset of actors amendments to the FHA came into effect against a backdrop of unanimous support in the Courts of Appeal for disparate impact under FHA. 3. Court finds it consistent with the FHA s central purpose. 7

8 Inclusive Communities [D]isparate-impact liability has always been properly limited in key respects. (emphasis added) Plaintiff must identify policies causing disparity Analogue to business necessity defense 8

9 Inclusive Communities Inclusive Communities has been interpreted to have implicitly adopted HUD s burden shifting approach and to require following HUD s Rule instead of prior circuit case law. MHANY Mgmt. v. Cnty. of Nassau, F.3d, 2016 WL , at *31 (2d Cir. Mar. 23, 2016). 9

10 Inclusive Communities and ECOA Compare FHA 805(a) ( unlawful for any person... to discriminate against any person in making available [a lending] transaction ) with ECOA 1691(a) ( unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction ). 10

11 REDLINING

12 A Persistent Fair Lending Issue Ten DOJ settlements involving allegations of redlining since Regulatory and Enforcement Agency priority Recent settlements: CPFB and U.S. v. Hudson City Savings Bank (D.N.J.) U.S. v. Eagle Bank and Trust (E.D. Mo.) 12

13 Redlining Mortgage credit discrimination based on the characteristics of the would-be borrower s neighborhood. Investigations focus on: CRA Assessment Areas Branch locations Marketing and advertising Statistical analyses 13

14 CRA Assessment Areas Regulators use a bank s delineated assessment areas in evaluating whether the institution is meeting the credit needs of its entire community. A bank s assessment area must consist generally of one or more MSAs or one or more contiguous political subdivisions such as a county or city. May not reflect illegal discrimination. 14

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16 Branch Locations Plotting the locations of a bank s branch locations provides evidence as to locations the bank intends to serve. Historical analysis of branching decisions often shows directions the bank is moving toward or away from. 16

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18 Marketing and Advertising We review past efforts in: Print media advertising Radio advertising Direct mailings We look at minority media outlets available in the relevant areas. 18

19 Statistical Analyses Identify peers that are similar to target lender. Determine extent to which peer lenders provide services in majority minority neighborhoods of market areas. Expect similar behavior from the target lender and peer lenders. 19

20 Hudson City Savings Bank Joint investigation and filing with CFPB 2009 to 2013 Failure to provide its home mortgage lending services to majority-black-and-hispanic neighborhoods on an equal basis as to predominantly white neighborhoods Major market areas NJ, NY, CT, and PA 20

21 Hudson City Savings Bank $25 million in loan subsidies (interest rates, closing costs, down payment) for previously redlined areas Two new branches in previously redlined areas $1.5 million in targeted advertising, outreach, and consumer education $750 thousand to partner with communities groups to assist residents of previously redlined areas 21

22 Hudson City Savings Bank Nondiscrimination provisions Expansion of CRA assessment areas Training and changes to bank procedures $5.5 million to CFPB Civil Penalty Fund 22

23 Success Stories REDLINING

24 First American Bank: Distribution of HMDA Loans 24

25 Midwest BankCentre Opened branch in town with no bank branches After one year, hundreds of checking and savings accounts opened Fewer people relying on fringe lenders Bank proactively opening another branch in majorityminority neighborhood 25

26 INDIRECT AUTO LENDING

27 Joint DOJ-CFPB Effort Opened a series of investigations Different types of indirect auto lenders Several of the largest auto lenders in the United States Looked at markup disparities for: African-American, Hispanic, and Asian/Pacific Islander borrowers 27

28 Which Parties to Auto Lending Transaction Are Covered? Lender that funds the loan: Direct lenders Indirect lenders Independent financial institutions Captive lenders Individual dealership that arranges loan Individual dealership that funds the loan 28

29 Data Analysis Auto loan applications may not include race or ethnicity information. BISG method calculates race or ethnicity based on Census surname information and neighborhood data. Comparable proxies used in voting, employment, and policing contexts. 29

30 Dealer Markup Key terms: Buy rate Contract rate Markup, a/k/a dealer reserve Caps 30

31 DOJ s Dealer Markup Cases U.S. v. Ally Financial Inc. (Dec. 2013) U.S. v. Evergreen Bank Group (May 2015) U.S. v. American Honda Finance Corp. (July 2015) U.S. v. Fifth Third Bank (Sept. 2015) U.S. v. Toyota Motor Credit Corp. (Feb. 2016) 31

32 DOJ s Dealer Markup Cases Complaints allege lenders charged minority borrowers higher interest rate markups on indirect auto loans. Lenders granted dealers broad and subjective discretion by lenders to mark up buy rate, subject to caps. Lenders did not conduct sufficient monitoring to detect race or national origin disparities. 32

33 Range of Remedies Enhanced Compliance Monitoring System Non-discretionary compensation Lower caps 33

34 Toyota Motor Credit Corp. Joint investigation with CFPB CFPB entered into parallel consent order in its administrative process 34

35 Toyota Motor Credit Corp. Statistical disparities: African-Americans: 27 bps Asian/Pacific Islanders: 18 bps Corresponds to discriminatory payments over term of loan from over $100 to over $

36 Toyota Motor Credit Corp. $19.9 million settlement fund. Administered jointly with CFPB. Agencies direct damage calculations. Up to $2 million more for current victims. Toyota must reduce the amount of discretion it gives to dealers to mark up interest rates to 100/125 bps. 36

37 SERVICEMEMBERS CIVIL RELIEF ACT

38 Basic SCRA Protections Applying to Consumer Lending 6% Interest Cap Repossession Protection Auto Lease Terminations Mortgage Foreclosure Protection Default Judgments Stay of Proceedings Other protections cover issues outside of consumer lending (storage liens, life insurance, health insurance, taxes, etc.) 38

39 How Do I know if Somebody is Protected? Status may be obtained instantly at Defense Manpower Data Center (DMDC) 39

40 SCRA Portion of National Mortgage Settlement (D.D.C. Mar. 2012) Involved the nation s five largest mortgage servicers at the time. Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, and Ally Financial f/k/a GMAC Full review back to January 1, 2006 for foreclosures and January 1, 2008 for 6% interest rate requests Includes judicial and non-judicial foreclosures 40

41 SCRA Portion of National Mortgage Settlement (D.D.C. Mar. 2012) September 2015 announcement: 2,413 servicemembers and their co-borrowers are eligible to receive over $311 million for illegal foreclosures. 41

42 SCRA Portion of National Mortgage Settlement (D.D.C. Mar. 2012) Payments overseen by DOJ Minimum payments per servicemember: $125,000 for a wrongful foreclosure Excess interest charged + greater of 3x that amount or $500 for a wrongful interest rate cap denial 42

43 Success Stories SCRA

44 SPC Joshua Davis, USA At basic training; car was repossessed without court order. Complained to Army Legal Assistance. Complaint resulted in DOJ investigation Settlement with Santander Consumer, USA $9 million for 1,100 affected servicemembers 44

45 AF Servicemember One call from Davis-Monthan AFB to DOJ DOJ investigation Credit card company had not been lowering active duty servicemember card rates to 6% Settlement with Capital One, N.A. $12 million for affected servicemembers 45

46 Want More Information? Full text of statutes Annual ECOA Reports to Congress Principal DAAG Vanita Gupta s speeches All press releases

47 QUESTIONS

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