Internal memos show CFPB overestimated potential bias

Internal memos show CFPB overestimated potential bias

The Consumer Financial Protection Bureauês internal documents show that the agency knew its –disparate impact” theory could overestimate potential discrimination in auto loans. But the CFPB considered that a preferable alternative to underestimating bias. The news was reported by American Banker.

Because auto loans donêt reveal the buyerês race, the CFPB used a proxy method in its study, relying on aggregate information about surnames and zip codes. A potential problem with that method, American Banker notes, is that individual buyers who have not been discriminated against could receive refunds in a settlement. The outcome is still uncertain because very few cases have reached the point where borrowers are receiving refunds.

Internal CFPB memos were somewhat contradictory on dealer markup. Although the agency now says its aim is to abolish potential discrimination, not to eliminate dealer markup, one memo talked about –eliminating markup at many major lenders” as a way to resolve disparities in lending.