of redlining. (See www.attorneygeneral.gov/taking-action/press-releases/
Interestingly, the Pennsylvania attorney general’s action does not seem to
have been instigated by an internal report, but rather by the publication of an
article in the newsletter “Reveal.” (See
www.revealnews.org/article/for-people-of-color-banks-are-shutting-the-door-to-homeownership/.) “Kept Out,” written
by two reporters for the nonprofit investigative journalism group The Center for
Investigative Reporting, used the Center’s analysis of publicly available Home
Mortgage Disclosure Act (HMDA) records to identify patterns of potential
redlining in several cities across the U.S., highlighting Philadelphia as the biggest
metropolitan area with redlining practices. The Pennsylvania attorney general’s
subsequent investigation suggests that not only state attorneys general will be
stepping in to carry out any investigations the CFPB feels disinclined to conduct,
but local community or independent nonprofit research organizations can use
publicly available HMDA or other data to put together cogent redlining cases. 13
Other states have also initiated investigations in response to the Reveal article, 14
and additional states have stepped up to conduct redlining investigations on
their own. (See “A.G. Schneiderman Secures Agreement With Evans Bank
Ending Discriminatory Mortgage Redlining in Buffalo,” September 10, 2015,
The banking industry has experienced rapid change over the last 10 years.
Dodd-Frank created new federal rules and a new federal agency. While initially a lot of attention focused on the powerful CFPB’s regulatory oversight
activities, we cannot afford to overlook the changing roles and growing authority of the states as meaningful participants in regulatory oversight and
supervision. We do not know what direction Director Kraninger will take the
Bureau. However, many states have clearly indicated that they will continue
to enforce the existing regulations aggressively, regardless of the CFPB. We
must listen and take them seriously. ■
ABOUT THE AUTHORS
SAM HOLLE JD, CRCM, is a senior consultant with Wolters Kluwer’s Regulatory
Compliance Analysis group. He is responsible for managing the compliance
aspects of the loan servicing lines of business. Mr. Holle advises the business on its development of next-generation compliance solutions. He can be
reached at email@example.com.
THERESE KIEFFER, JD, is a consultant with Wolters Kluwer’s Governance, Risk
and Compliance division, providing regulatory analysis and compliance direction to the deposit, residential lending, and commercial lines of business. She
can be reached at firstname.lastname@example.org.
1 https://www.theatlantic.com/business/archive/2017/11/mulvaney-cfpb/546917/; followed
up by Staff Memo, Jan. 23, 2018, copy found at http://src.bna.com/wdH.
3 States’ concerns about the Bureau’s direction were perhaps best captured by the remarks
of New York Department of Financial Services (DFS) Superintendent Maria T. Vullo:
“I am disappointed by the new administration’s sudden policy shift, which is clearly
intended to undermine necessary national financial services regulation and enforcement. DFS remains committed to its mission to safeguard the financial services industry
and protect New York consumers, and will continue to lead and take action to fill the
increasing number of regulatory voids created by the federal government.” Statement
by DFS Superintendent Maria T. Vullo, Regarding CFPB ’s Troublesome Policy Shift Away
from Consumer Protection. January 25, 2018 https://www.dfs.ny.gov/about/statements/
4 Senate Committee Report, p. 16, citing Comptroller Hawke’s acknowledgment to
Congress that the OCC’s preemption of state predatory lending laws was due, in part, to
the desire of the OCC “to attract additional [federal] charters, which helps to bolster the
budget of the OCC.” S. REP. NO. 111-176, 14-16 (2010). https://www.congress.gov/111/
5 U.S. Senate committee report noted the difficulty of a single agency acting as both
prudential regulator (ensuring the safety and soundness of the financial institution) and
consumer protection enforcement. Senate Committee Report, S. REP. No. 111-176, 10
6 Illinois v. CMK Investments, No. 2014-ch-04694 (Ill. Cir Ct. 2014) (Complaint
found at: http://illinoisattorneygeneral.gov/pressroom/2014_03/ALL_CREDI T_
7 State of Illinois v. Alta Colleges, No. 12-CH-01587 (Ill. Cir. Ct. 2012), UDAAP charges
added in 2014.
8 State of Miss. ex rel. Jim Hood v. Experian Information Solutions, Inc., No.1:14-cv-00243-
LG-JMR (S.D. Miss.).
9 The Senate committee on Dodd-Frank noted that minorities were disproportionately
affected by the predatory lending practices of the banks leading up to the recession, with
54% of African-Americans and 47% of Hispanics receiving high cost loans in 2007. By
contrast, 18% of non-Hispanic whites were sold high cost loans in the same year. S.
REP. NO. 111-176, 14-16 (2010). https://www.congress.gov/111/crpt/srpt176/CRPT-
10 “Indirect Auto Lending and Compliance with the Equal Credit Opportunity Act” (CFPB
11 Bureau of Consumer Financial Protection December 6 Advisory Committee Call,
discussing Tom Oscherwitz’s presentation on “Overview of Artificial Intelligence in
Financial Services,” particularly slides 20-22, addressing transparency and bias in AI.
12 “Mass. AG probes Santander for auto lending practices,” Deirdre Fernandes, Boston
Globe, December 25, 2014, https://www.bostonglobe.com/business/2014/12/25/
html?rss_id=Top-GNP (accessed November 14, 2018), leading to a $25.9 million
settlement in March of 2017: “Santander pays $25.9 million to settle subprime auto loan
probes,” Nate Raymond, Automotive News, March 29, 2017, http://www.autonews.com/
million-to-settle-subprime-auto-loan-probes (accessed November 24, 2018).
13 See, for example, the Connecticut Fair Housing Center’s suit against Liberty Bank,
filed in October 2018 (“Center & NCLC File Federal Lawsuit Accusing Liberty Bank of
Redlining,” Shannon Houston, October 4, 2018,
https://www.ctfairhousing.org/center-nclc-file-federal-lawsuit-accusing-liberty-bank-of-redlining/ (accessed November 14,
2018)), or the city of Miami’s suit against Bank of America and Wells Fargo (“Supreme
Court Rules Miami Can Sue for Predatory Lending,” Adam Liptak, May 1, 2017 https://
html (accessed November 14, 2018)).
14 These states include Washington state, Illinois, Iowa, Delaware, District of Columbia,
and Iowa. “State attorneys general probe lending disparities,” Aaron Glantz and
Emmanuel Martinez, March 13, 2018 (updated October 23, 2018), https://www.
November 14, 2018).
15 E.g., in New York, “A.G. Schneiderman Secures Agreement With Evans Bank Ending
Discriminatory Mortgage Redlining in Buffalo,” September 10, 2015, https://ag.ny.gov/
press-release/ag-schneiderman-secures-agreement-evans-bank-ending-discriminatory-mortgage-redlining (accessed November 14, 2018).
While initially a lot of attention focused on
the powerful CFPB’s regulatory oversight
activities, we cannot afford to overlook
the changing roles and growing authority
of the states as meaningful participants in
regulatory oversight and supervision.