A&B ABstract: On January 13, 2021, the Consumer Financial Protection Bureau (“CFPB”) issued a Statement encouraging financial institutions to expand access to financial products and services for consumers with limited English proficiency (“LEP”). The CFPB considers a consumer to have LEP if the person has a limited ability to read, write, speak, or understand English.
The Statement provides guidance to financial institutions for providing access to credit in languages other than English while remaining compliant with the Equal Credit Opportunity Act (“ECOA”), the Dodd-Frank Act prohibition on unfair or deceptive acts and practices (“UDAPs”), and other applicable laws. The CFPB issued the Statement following a request for information (“RFI”) on ECOA, in which the CFPB sought information from the industry that would enable it “to understand the challenges specific to serving LEP consumers. The industry comments received in response to the RFI, which expressed uncertainty with how best to meet the needs of LEP consumers, prompted the CFPB to issue the Statement as guidance for financial institutions that recognize the importance of providing financial products and services to LEP consumers but are cautious of running afoul of statutes and regulations. As such, the Statement outlines the following compliance principles and guidelines that encourage financial institutions to expand access to products and services for LEP consumers: (1) promoting access to financial products for all consumers; (2) facilitating compliance by providing clear rules of the road; and (3) educating and empower consumers to make better informed financial decisions.
Guiding principles for serving LEP consumers
The CFPB encourages financial institutions to better serve LEP consumers by applying the following principles and guidelines:
- Pilot programs. Financial institutions may use phased approaches for rolling out LEP-consumer-focused products and services, to serve LEP consumers incrementally while managing risks and taking steps to ensure compliance with applicable laws.
- Compliance approaches. Financial institutions may consider developing a variety of compliance approaches related to the provision of products and services to LEP consumers. These approaches may depend on the size, complexity, and risk profile of an institution. Ultimately, differences in financial institutions, and the ways they choose to serve LEP consumers, may require different compliance solutions.
- Disclosures to mitigate risk. Financial institutions may mitigate certain compliance risks by providing LEP consumers with clear and timely disclosures in non-English languages describing the extent and limits of any language services provided throughout the product lifecycle. In those disclosures, financial institutions may provide information about the level of non-English language support as well as communication channels through which LEP consumers can obtain additional information and ask questions.
- Special-purpose credit programs. Financial institutions may wish to consider extending credit pursuant to a special-purpose credit program (“SPCP”) that complies with ECOA and Regulation B, to increase access to credit for certain underserved LEP consumers. As discussed in the CFPB’s recent Advisory Opinion on SPCPs, financial institutions may consider a prohibited basis characteristic such as race or national origin in certain circumstances to help meet the credit needs of underserved communities. Of course, financial institutions may responsibly serve LEP consumers without the use of SPCPs.
Guidelines for developing compliance solutions when serving LEP consumers
The CFPB lays out the following key considerations and compliance management system (“CMS”) guidelines to mitigate ECOA, UDAAP, and other legal risks when making threshold determinations and other decisions related to serving LEP consumers.
Key considerations include:
- Language selection. In determining whether to provide non-English language services to LEP consumers and in which language(s), financial institutions may consider documented and verifiable information, such as the stated language preferences of its current customers or U.S. Census Bureau demographic or language data. While a nationwide institution might focus on serving Spanish-speaking consumers, a regional institution might choose to align its language services with local demographics.
- Product and service selection. In making product and service selections, financial institutions may consider a variety of factors, including the extent to which LEP consumers use particular products, including any existing customer data on what services LEP consumers use most frequently, as well as the availability of non-English language services. Further, in determining when in the product lifecycle to offer these services, financial institutions should consider those activities and communications, whether verbal or written, that significantly impact consumers (i.e., convey essential information about credit terms and conditions or about borrower obligations and rights, including those related to delinquency and default servicing, loss mitigation, and debt collection). Finally, in making product and service selections, financial institutions should review relevant policies, procedures, and practices for features that may pose heightened risk of unlawful discrimination, including distinctions in product offerings or terms related to prohibited bases or proxies for prohibited bases.
- Language preference collection and tracking. Financial institutions may choose to collect and track customer language preferences (such as requesting an applicant’s language preference on a loan application form), provided that such information is not used to exclude LEP consumers or in any other way that violates applicable law. Financial institutions that choose to collect and track this information should monitor how the information is used by the institution to ensure compliance with applicable law.
- Translated documents. Certain federal and state laws required financial institutions to provide consumers with translated documents. Where the translation of documents is not already legally mandated, financial institutions may assess whether and to what extent to provide translated documents to consumers, with particular attention to those documents that significantly impact consumers. However, financial institutions that choose to provide translated documents to LEP consumers must ensure the accuracy of such translations.
The Statement also addresses CMS guidelines, whether LEP-specific or integrated into the financial institution’s broader fair lending, UDAAP, and/or consumer compliance program, including with respect to:
- Documentation of decisions. Financial institutions providing products and services in non-English languages should document decisions related to the selection of languages, products, and services. This documentation may include anything that the financial institution considers in making the decision, including operational limitations; cost estimates; or any other information that would allow a regulator to understand the decision-making process.
- Monitoring. Financial institutions should assess the quality of customer assistance provided in non-English languages, including by assessing whether personnel receive the same training, convey the same information, and have the same authority as other customer service personnel. In addition, financial institutions should consider monitoring or conducting regular fair lending and UDAAP-related assessments to assess whether any populations are missing or excluded, and whether marketing materials and disclosures are designed to ensure accurate understanding by LEP consumers.
- Fair lending testing. Financial institutions should conduct regular statistical analysis of loan-level data to determine the existence of any potential disparities on a prohibited basis in underwriting, pricing, or other aspects of the credit transaction.
- Third-party vendor oversight. Financial institutions that contract with service providers to underwrite or price products to LEP consumers should implement a service provider oversight program to ensure that such products do not violate fair lending, UDAP, and other applicable laws.
Given the above, the Statement provides helpful guidelines to financial institutions who are considering expanding their products and services to LEP consumers yet are struggling with balancing the various legal requirements and practical considerations. Yet, as the CFPB recently clarified in a final rule, such supervisory guidance does not have the force and effect of law and cannot form the basis of an enforcement action or issue supervisory criticism. Indeed, the Statement itself notes that it does not mandate any particular approach to serving LEP consumers and should not be interpreted to relieve institutions from their obligation to comply with applicable laws. Still, the CFPB notes that supervisory guidance, such as this Statement, carries more weight than its Compliance Aids, which the CFPB uses merely for providing “practical suggestions” to compliance professionals, industry stakeholders, and the public on existing rules and statutes.