The new federal agency tasked with protecting consumers from predatory and misleading lending practices on the part of financial institutions is now working to ensure that potential borrowers have greater protections from discriminatory lending as well.
The federal Consumer Financial Protection Bureau is now making greater attempts to make sure consumers have access to credit regardless of their personal circumstances, according to U.S. News and World Report. In a speech earlier this week, CFPB director Richard Cordray noted that discriminatory lending is not always intentional, but can still have an adverse effect on Americans' access to credit they may otherwise be able to qualify for. However, a crucial part of rooting out discriminatory lending practices is borrowers recognizing them, because the agency may not always be in a position to spot them itself.
"Whether they are applying for an auto loan, student loan, or home loan, consumers need to know their rights and they need to know what red flags to look for that may indicate their rights are being violated," Cordray said, according to the news agency. "We want consumers to be able to recognize when they may be victims of discrimination … This subtle but powerful form of discrimination creates damages that are no less direct than the kind of overt and blatant discrimination that, we hope and assume, is increasingly a relic of a bygone era."
Cordray noted that one example of discriminatory lending that is quite common is the application of lending fees to borrowers in certain demographics – such as African-Americans and women – that can be higher than those faced by their white or male counterparts, the report said. This often happens without malice, as loan officers simply have the ability to use their own discretion when setting these fees. However, they can have a significant negative effect on borrowers nonetheless. Some experts estimate that these disparities led to minority communities being hit harder by the financial crisis, as African-Americans saw household median incomes dip 50 percent between 2005 and 2009, and Hispanic families lost 66 percent of median wealth.
As a means of helping to educate consumers on the financial issues posed by discriminatory lending practices, the CFPB is making greater efforts to highlight borrowers' rights under the Equal Credit Opportunity Act, and is giving tips to identify warning signs for discrimination on its website, the report said.
Groups applaud CFPB efforts
Initiatives to step up education and reduce the amount of credit discrimination nationwide has earned plaudits from consumer advocates, the report said. One researcher from the Center for Responsible Lending told the agency that the organization has found minority communities are disproportionately targeted with expensive loan products that put borrowers in dire financial straits.
Consumers who want the best available loan terms will need to make sure their credit ratings are as good as they possibly can be. One way to ensure this is by regularly checking their credit reports and working with a credit repair agency to clear up any unfair markings.