Read the updated CFPB Supervision and Examination Manual

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Treliant Takeaway:

Treliant knows fairness and consumer protection.  If your financial services company needs assistance with evaluating risk and risk management systems with respect to UDAAP or discrimination, we can help.


On March 16, 2022, the Consumer Financial Protection Bureau (CFPB) updated its examination procedures for Unfair, Deceptive, or Abusive Acts and Practices (UDAAPs). The revisions incorporate anti-discrimination principles into UDAAP examinations, even in cases where fair lending laws, such as the Equal Credit Opportunity Act (ECOA) or the Fair Housing Act (FHA), may not apply. In announcing the changes, CFPB Director Rohit Chopra stated, “When a person is denied access to a bank account because of their religion or race, this is unambiguously unfair. We will be expanding our anti-discrimination efforts to combat discriminatory practices across the board in consumer finance.”

The new introduction to UDAAP examination manual notes that the examination procedures provide general guidance on “understanding the interplay between unfair, deceptive, or abusive acts and practices and other consumer protection and antidiscrimination statutes.” Other changes to reflect consideration of discriminatory effects are embedded throughout the UDAAP examination procedures. Examples of incorporation of discrimination from the examination manual are quoted below.

  • Unfair Acts or Practices
    • Foregone monetary benefits or denial of access to products or services, like that which may result from discriminatory behavior, may also cause substantial injury.
    • Nevertheless, in certain circumstances, such as unreasonable debt collection harassment or discriminatory conduct, emotional impacts or dignitary harms may amount to or contribute to substantial injury.
    • Consumers cannot reasonably avoid discrimination.
  • Relationship to Other Laws
    • A discriminatory act or practice is not shielded from the possibility of being unfair, deceptive or abusive even when fair lending laws do not apply to the conduct. For example, not allowing African-American consumers to open deposit accounts, or subjecting African-American consumers to different requirements to open deposit accounts, may be an unfair practice even in those instances when ECOA does not apply to this type of transaction.
  • Document Review
    • Information collected, retained or used regarding customer demographics, including the demographics of customers using various products or services, and the breakdown of consumer demographics for various product uses, fees, revenue sources and costs, or the impacts of various products and services on specific demographics.
    • Any demographic research or analysis relating to marketing or advertising of consumer financial products or services.
  • Management and Policy-Related Examination Procedures
    • The entity has a process to prevent discrimination in relation to all aspects of consumer financial products or services the entity offers or provides, which includes the evaluation of all policies, procedures and processes for discrimination prior to implementation or making changes, and continued monitoring for discrimination after implementation.
    • The entity’s compliance program includes an established process for periodic analysis and monitoring of all decision-making processes used in connection with consumer financial products or services, and a process to take corrective action to address any potential UDAAP concerns related to their use, including discrimination.
    • The entity has appropriate training for customer service personnel to prevent discrimination.
    • The entity improperly gives inferior terms to one customer demographic as compared to other customer demographics.
    • The entity improperly offers or provides more products or services to one customer demographic as compared to other customer demographics.
    • Customer service representatives improperly treat customers of certain demographics worse or provide extra assistance or exceptions to customers of certain demographics.
    • The entity engages in targeted advertising or marketing in a discriminatory way.
    • The entity uses decision-making processes in its eligibility determinations, underwriting, pricing, servicing or collections that result in discrimination.
    • The entity fails to evaluate and make necessary adjustments and corrections to prevent discrimination.
  • Transaction-Related Examination Procedures
    • Marketing or advertising do not improperly target or exclude consumers on a discriminatory basis, including through digital advertising.
    • The entity offers products and services to consumers in a manner that prevents discrimination.
    • The entity has a process to take prompt corrective action if the decision-making processes it uses produce deficiencies or discriminatory results.
    • The entity ensures that employees and third party contractors refrain from engaging in servicing or collection practices that lead to differential treatment or disproportionately adverse impacts on a discriminatory basis.

In addition to the enhanced focus on discrimination, the new procedures explicitly call out digital advertising in the transaction-related examination procedures. The message is clear: UDAAP supervision and enforcement will be stringent, focused on discrimination in both credit and non-credit financial products and services, and inclusive of digital channels. Financial services companies should prepare now for heightened scrutiny.