CFPB, DOJ take action against Provident Funding for discriminatory lending

The Consumer Financial Protection Bureau and theDepartment of Justice filed a complaint againstProvident Funding Associates for charging higher broker fees on mortgage loans to African-American and Hispanic borrowers.

The lender could potentially pay $9 million in damages if the court accepts the order.

Provident allegedly violated the Equal Credit Opportunity Act by charging African-American and Hispanic borrowers more in total broker fees than white borrowers based on their race and national origin and not based on their credit risk.

Between 2006 and 2011, Provident made over 450,000 mortgage loans, and during this time period, Provident’s practice was to set a risk-based interest rate and then allow brokers to charge a higher rate to consumers. Provident would then pay the brokers some of the increased interest revenue from the higher rates. Provident’s mortgage brokers also had discretion to charge borrowers higher fees, unrelated to an applicant’s creditworthiness or the terms of the loan.

Read on.

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