Read the Press Release and Circular from the CFPB Here

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Treliant Takeaway:

Treliant understands the complexities of today’s emerging technologies and the pressure regarding governance, risk management, and consumer protection.  If your financial services company needs assistance with evaluating your practices, we can help.


The CFPB issued Circular 2022-03 (May 26, 2022) confirming that the Equal Credit Opportunity Act (ECOA) and Regulation B require companies to provide specific reasons for denying an application for credit or taking other adverse actions, even if the models used to make those adverse decisions are very complex.

With the rise of FinTechs and increasing pace of technology innovations, some institutions make decisions based on the outputs from complex algorithms, sometimes called “black-box” models. The more complex the algorithms and the use of alternative data may increase the risk the models’ outputs may not be fully known and thereby, making compliance with ECOA’s adverse action notice requirements difficult or nearly impossible.

The CFPB is making it clear that:

  • “Federal consumer financial protection laws and adverse action requirements should be enforced regardless of the technology used by creditors.”
  • “Creditors cannot justify noncompliance with ECOA based on the mere fact that the technology they use to evaluate credit applications is too complicated, too opaque in its decision-making, or too new.”

The stakes of having a strong governance and risk management system have never been more important than today.  Treliant can help your company navigate through these rapidly changing and challenging times.


Lorraine Faust

Lorraine Faust, a Senior Manager with Treliant, is a regulatory and compliance professional with over 25 years’ experience in the financial services industry. She has worked in small, mid-size, and large financial institutions in both internal audit and compliance. Knowledgeable in a wide range of consumer protection laws, Lorraine’s focus…