Months after the Justice Department announced its biggest fair lending settlement in history, the banking industry continues to brace itself for the fallout from a renewed government focus on fairness.
The Dodd-Frank Act extended fair lending enforcement authority to the new Consumer Financial Protection Bureau, which has its own office dedicated to fair lending issues and has the unique ability to bring such cases to court.
At the same time, the Justice Department's fair lending unit shows no signs of slowing this year, with referrals from banking regulators contributing to more than 25 open investigations and eight certified lawsuits in the first part of 2012.
"The number of referrals partly reflects what other agencies are putting into it," Eric Halperin, the Justice Department's special counsel for fair lending, told a panel at the Consumer Bankers Association conference in Austin last month. "It's not just a DOJ priority; it's really a priority that has stretched across the entire federal government."
The angst over fair lending enforcement was palpable at the CBA conference, where organizers had to bring in extra chairs to accommodate standing-room only crowds and leave extra time for questions at fair lending sessions.
Jo Ann Barefoot, a co-chairman at Treliant Risk Advisors, said banks are caught up in a "fairness revolution" — fueled by Occupy Wall Street, Elizabeth Warren, politicians, the media — that is changing the way they must approach fair lending compliance.
Barefoot, a former deputy comptroller, said compliance has long been seen as a "side issue" in banking.
"It's something that we have to get right by knowing the rules and applying them accurately," she said. "Then all of a sudden these issues of fairness — spotlighted on UDAAP [unfair, deceptive or abusive acts or practices] — are not only critical to banking, they're the headline news. They're the most important thing out there."
The Justice Department established a dedicated fair lending unit in the Civil Rights Division's housing and civil enforcement section in early 2010.
Over the past three years, the agency has received 55 referrals from regulators alleging a pattern or practice of discrimination involving race or national origin, compared with only 30 in the eight years prior to that.
It received 26 such referrals in 2010 alone — a department record — and 18 referrals in 2011, according to the attorney general's annual fair lending report to Congress last month.
"Almost every enforcement action that we've brought in the last year has been the result of a referral or some other collaboration with another federal agency or regulator," Halperin said.
The agency received 29 total referrals in 2011: 14 from the Federal Deposit Insurance Corp., seven from the Federal Reserve, four from the Office of Thrift Supervision, one from the Office of the Comptroller of the Currency, one from the Department of Housing and Urban Development, and two from the Federal Trade Commission, according to the report.
Nearly two-thirds of the referrals related to pricing discrimination based on race or national origin, while others involved marital status, age, sex, source of income, disability and familial status. Those referrals led to an unprecedented amount of fair lending enforcement in 2011, Halperin said.
The division filed eight lending-related lawsuits, and obtained eight settlements, including
