(Originally published in ABA Risk and Compliance, July/August 2023) Bill Fair and Earl Isaac created the first modern credit scoring system, the Credit Application Scoring Algorithms, in 1958, and the first FICO score was introduced in 1989. Since then, the use of credit algorithms has become ubiquitous in the lending industry. These algorithms use statistical […]
(Originally published in ABA Risk and Compliance, November/December 2023) In lending, discretion can take several forms, including exceptions and overrides. An exception is an application whose outcome is not fully consistent with credit underwriting and pricing policies. The variation can be either in the underwriting outcome, or in loan terms and conditions, such as interest […]
On November 8, 2023, the Consumer Financial Protection Bureau (“CFPB”) entered into a consent order with a major bank to resolve allegations of violations of the Equal Credit Opportunity Act (“ECOA”) and Regulation B. Among other allegations, the CFPB asserted that the lender “failed to provide applicants with an accurate and adequate statement of the […]
In September 2023, the Consumer Financial Protection Bureau (“CFPB”) released Data Point: 2022 Mortgage Market Activity and Trends (“Data Point”).[1] In the Data Point, the CFPB analyzed applications and originations reportable under the Home Mortgage Disclosure Act (“HMDA”) and summarized 2022 mortgage market activity, highlighting declines in mortgage activity and shifts in transaction types. Significant […]
Loan servicing fees are charges imposed by loan servicers to manage and administer a borrower’s loan. These fees cover a range of services, including processing payments, maintaining records, providing customer support, and handling escrow accounts for property taxes and insurance. While these services are essential for the smooth operation of the lending process and recovering […]
On May 10, 2023, the Consumer Financial Protection Bureau (“CFPB”) issued Consumer Financial Protection Circular 2023-02 (“CFPC 2023-02” or the “Circular”). In CFPC 2023-02, the CFPB considers the following question: After consumers have closed deposit accounts, if a financial institution unilaterally reopens those accounts to process a debit (i.e., withdrawal, ACH transaction, check) or deposit, […]
On April 26, 2023, both the Federal Deposit Insurance Corporation (“FDIC”)[1] and the Office of the Comptroller of the Currency (“OCC”)[2] issued additional guidance regarding overdraft and non-sufficient funds (“NSF”) transactions and fees. Both publications included a discussion of unfair, deceptive, or abusive acts and practices (“UDAAP”)[3] risks associated with “Authorize Positive, Settle Negative” (“APSN”) […]
In October 2021 the U.S. Department of Justice (DOJ) announced the launch of a new redlining enforcement initiative. Since that time, government agencies such as the Consumer Financial Protection Bureau (CFPB), the DOJ, the Federal Housing Finance Agency (FHFA), and the Federal Trade Commission (FTC) have all ramped up enforcement and supervisory activities focused on […]
