Van Hollen, Cardin Press Mulvaney on Reports of Efforts to Immobilize Office of Fair Lending
Today, U.S. Senators Chris Van Hollen and Ben Cardin (both D-Md.) sent a letter to Office of Management and Budget Director Mick Mulvaney regarding reports of recent actions taken by the Consumer Financial Protection Bureau to strip the enforcement powers of the Office of Fair Lending and Equal Opportunity (OFLEO). The OFLEO was created in response to discriminatory practices in lending that impacted minority homeowners and communities, especially in the lead-up to the financial crisis. This damage had such a significant impact on local communities that Wells Fargo agreed to a $175 million settlement in 2012 with the U.S. Department of Justice, stemming from a lawsuit that was initially brought by the City of Baltimore.
In their letter, the Senators write, "The support of the federal government is imperative as cities like Baltimore continue to grapple with the consequences of decades of discriminatory lending practices that systematically segregated and stripped wealth from communities of color.
Adding that, "In stripping the enforcement authority of an office that has vigorously pursued cases against discriminatory lenders, you are sending a signal that the CFPB may not step in to provide oversight and enforcement against racial discrimination by financial institutions."
They closed, "We urge you to change course and provide this office with all of the resources it needs to enforce fair lending laws and prevent further equity stripping from minority neighborhoods."
The full text of the letter is available below and here.
Dear Director Mulvaney,
We write with concern regarding reports that OMB Director Mulvaney intends to strip enforcement powers from the Consumer Financial Protection Bureau's (CFPB) Office of Fair Lending and Equal Opportunity (OFLEO).
The 2008 financial crisis had a disproportionately negative impact on minority homeowners and the communities they live in. In the years leading up to the crisis, African-American and Hispanic borrowers were more likely to receive subprime loans than similarly-situated white borrowers. In Baltimore, for example, Wells Fargo engaged in a pattern of discrimination against African-American and Hispanic mortgage applicants. The damage done to Baltimore as a result of Wells Fargo's actions was so significant that the City filed a lawsuit against Wells Fargo. The suit was ultimately taken up by the U.S. Department of Justice, and Wells Fargo agreed to a $175 million settlement.
Former Labor Secretary Tom Perez, then the head of the Department of Justice's Civil Rights Division, told the story of an "80-year-old African-American resident of the Baltimore area with a 714 credit score and a rock-solid credit file who received a subprime loan instead of a prime loan, and who was not told that she may have qualified for a prime loan with better terms."
The destruction and equity stripping of communities throughout our country did not have to happen, but serious enforcement gaps in the mortgage and financial markets, especially with regard to fair lending and consumer lending laws, allowed it to happen. For this reason, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 directed the CFPB to create the OFLEO with a mandate of providing "oversight and enforcement of Federal laws intended to ensure the fair, equitable, and nondiscriminatory access to credit for both individuals and communities".
Changing OFLEO's structure and splitting the office apart will harm its ability to perform its critical duties. Since its establishment, this office has played a central role in pursuing cases against discriminatory lenders.
OFLEO worked with the Department of Justice to resolve the largest redlining case in history, resulting in a $33 million settlement, and a case against a mortgage lender that discriminated against 14,000 African-American and Hispanic borrowers with regard to the assessment of brokers' fees.
The support of the federal government is imperative as cities like Baltimore continue to grapple with the consequences of decades of discriminatory lending practices that systematically segregated and stripped wealth from communities of color. The NAACP's recently released Baltimore Economic Inclusion Plan documents disparities in economic opportunity between the city's white and minority residents and illustrates the need for robust enforcement of fair lending laws at all levels of government.
As with any regulator, the actions of the CFPB affect the behavior of the entities it regulates. In stripping the enforcement authority of an office that has vigorously pursued cases against discriminatory lenders, you are sending a signal that the CFPB may not step in to provide oversight and enforcement against racial discrimination by financial institutions.
The OFLEO is an essential cop on the beat, ensuring that some of Americans' most significant financial decisions are not made more difficult on the basis of their race, ethnicity, or where they live. We urge you to change course and provide this office with all of the resources it needs to enforce fair lending laws and prevent further equity stripping from minority neighborhoods.
Sincerely,
Chris Van Hollen Benjamin L. Cardin
United States Senator United States Senator
cc: Leandra English
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