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CFPB General Counsel Meredith Fuchs in the “Disparate Impact” Hot Seat

Posted in Auto Finance, CFPB Enforcement, Vehicle Loans

As we previously reported, the House Financial Services Committee has been interested in the specific methodology and metrics used by the CFPB in its disparate impact analysis under the Equal Credit Opportunity Act and Regulation B. On March 7, Chairman Hensarling sent a letter to Director Cordray seeking a response to the Committee’s questions, and it appears the CFPB has yet to respond to the letter. At the House Financial Services Committee meeting held yesterday, Chairman Hensarling’s first question reiterated to CFPB General Counsel Meredith Fuchs the Committee’s desire for information on this issue.

Ms. Fuchs provided nothing new.  She stated that the CFPB has been engaged in a “regular dialogue” with the Committee’s staff to go over the methodologies used for its auto finance investigation. However, when pressed by the Chairman on the specifics of the CFPB’s approach (such as the existence of any numerical thresholds that may indicate disparate impact) and whether they should be made public, Ms. Fuchs repeated the CFPB party line that its methodology varies depending on the business model of each individual institution, and that there is no “one size fits all” process. Ms. Fuchs did not commit to making the CFPB’s methodology available to the public in the future, nor did she address why Director Cordray had not responded to the Committee’s latest letter.

Most of the questions directed to Ms. Fuchs throughout the hearing focused on how the CFPB’s disparate impact analysis methodology amounted to de facto rulemaking that made it impossible for auto dealers to operate without knowing the parameters of the CFPB’s analysis. Congressman Neugebauer (R-TX) also spoke about his concern with the lack of transparency on this issue. In particular, he expressed concern that the uncertainty created by the CFPB’s de facto rulemaking is “damaging and creating an inability for some people to access some of our capital markets and get much-needed credit.”

It may be that the House Financial Services Committee has opted to let the CFPB off with a warning.  Drawing comparisons to the recent controversy surrounding the CFPB’s own internal discriminatory practices, Chairman Hensarling ended his questioning of Ms. Fuchs by stating that “you certainly create the impression that you are trying to impose a standard upon others that you are incapable of living under yourself.”

We will be blogging further about the hearing and Ms. Fuchs’ testimony, so stay tuned.