CFPB Alert on Discrimination Involving Religion

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The Consumer Financial Protection Bureau (CFPB) recently posted a blog article concerning recent findings that some lenders had violated fair lending law by inquiring about small business applicants' religious affiliation and by consider an applicant's affiliation in the credit decision.

For religious institutions applying for small business loans, lenders utilized questionnaires which contained explicit inquiries about the applicant’s religious affiliation. CFPB examiners determined that lenders also denied credit to applicants identified as a religious institution because the applicants did not respond to the questionnaire.

In response to these findings, lenders updated the questionnaires to ensure compliance with fair lending laws. In addition, lenders also identified affected applicants and provided an offer for each identified applicant to reapply for a small business loan.

The article also expressed concern about how financial institutions might be making use of artificial intelligence and other algorithmic decision tools, and how a lender might use third-party data to analyze geolocation data to power their credit decision tools. If the algorithm leads to an applicant getting penalized for attending religious services on a regular basis, this could lead to sanctions under fair lending laws for engaging in such "robo-discrimination."

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