CFPB and DOJ order mortgage company to pay over $22 million for discrimination in advertising and marketing | Goodwin
On July 27, 2022, the Consumer Financial Protection Bureau (CFPB) and the US Department of Justice (DOJ) filed a complaint and proposed consent order in federal district court alleging that a mortgage company intentionally discriminated against families living in majority-minority neighborhoods around Philadelphia in violation of the Fair Housing Act (FHA), Equal Credit Opportunity Act (ECOA), and of the Consumer Financial Protection Act of 2010 (CFPA). The consent order, if made by the court, would require the mortgage company to pay $18.4 million into a loan subsidy program designed to increase non-discriminatory access to credit, a penalty of 4 million to the CFPB for the Victim Relief Fund and an additional $2 million. million to finance advertisements targeting demarcated areas. The attorneys general of Pennsylvania, New Jersey and Delaware also reached concurrent agreements with the mortgage company and its real estate services subsidiary.
In their complaint, the CFPB and DOJ allege that the mortgage company delineated majority-minority neighborhoods through its marketing, sales and advertising practices. For example, the complaint alleges that only white individuals were depicted in the mortgage company’s fifteen direct mail campaigns between 2015 and May 2018. Additionally, the complaint alleges that the mortgage company’s flyers were overwhelmingly focused in majority-white neighborhoods, and its online ads appeared for listings of homes overwhelmingly in majority-white neighborhoods. As a result, the mortgage company’s marketing campaigns and advertisements discouraged and ignored minority mortgage applicants, as evidenced by its application data; only 12% of the company’s mortgage applications came from majority-minority neighborhoods, even though more than a quarter of Philadelphia-area neighborhoods are majority-minority, and in neighborhoods with more than 80% minority, more than half of the applications generated were from white applicants. The complaint also alleges that the mortgage company’s loan officers worked in 53 different offices in the Philadelphia area, and that only two of those offices were not in majority-white neighborhoods.
The CFPB and DOJ lawsuit is part of a renewed coordinated effort by federal agencies to prioritize enforcement action for Fair Lending violations. In the past year specifically, for example, the DOJ has deployed an initiative to identify and combat redlining, and the CFPB has announcement that in its oversight operations, it will closely examine the advertising practices of financial institutions to ensure that companies are testing and appropriately eliminating unlawful discrimination.