“The idea that the banks will continue to argue quite openly that they want to protect their ability to discriminate against people based on race is truly outrageous and I applaud the CFPB for saying, not on their watch.” 

December 3, 2022 - Washington, D.C. — At a hearing of the Senate Banking, Housing, and Urban Affairs Committee, U.S. Senator Elizabeth Warren (D-Mass.) asked Janai Nelson, President and Director-Counsel of the NAACP Legal Defense and Educational Fund, and Marc Morial, President and CEO of the National Urban League, about the importance of the Consumer Financial Protection Bureau’s (CFPB) authority under the Dodd-Frank Act to root out unfair practices against consumers by banks and financial institutions. After the CFPB updated its examination guidance to consider discriminatory conduct as “unfair, deceptive, or abusive acts or practices” (UDAAPs) in March 2022, the Chamber of Commerce and other big bank lobbyists filed a lawsuit to protect financial institutions’ ability to discriminate against people based on religion, race, and sex.  

Transcript: Hearing, “Fairness in Financial Services: Racism and Discrimination in Banking.”
U.S. Senate Committee on Banking, Housing, and Urban Affairs
Thursday, December 1, 2022

Senator Elizabeth Warren: Thank you, Mr. Chairman.

The 2008 financial crisis was triggered by big banks and other financial institutions targeting communities of color with predatory mortgage loans. 

So to ensure that that never happens again, Congress made it illegal under the Dodd-Frank Act for any company offering consumer financial products to engage in, and I’m going to read the language, “unfair, deceptive, or abusive acts or practices,” or UDAAPs as they are known with the acronym. Congress also created the Consumer Financial Protection Bureau and put it in charge of enforcing these laws.

Under Dodd-Frank, a bank commits an unfair practice if three conditions have been met: 

• First, that the practice in question would likely cause substantial injury to the consumer;
• Second, consumers couldn’t reasonably avoid that injury;
• And third, the injury is not outweighed by other benefits to consumers or competition.

I want to talk through what that unfairness standard means in practice.

Ms. Nelson, you’re an expert on civil rights law, so let me run through an example with you. Say somebody walks into a bank wearing a cross around their neck and the bank teller takes one look at them, refuses to help, and tells them to leave, maybe even calls the police to kick them out. Ms. Nelson, do you think that situation would cause the consumer substantial injury? First element.

Ms. Janai Nelson, President and Director-Counsel, NAACP Legal Defense and Educational Fund, Inc.: Absolutely.

Senator Warren: Do you think the consumer could reasonably have avoided the injury? 

Ms. Nelson: I don’t see any way they could.

Senator Warren: Okay. And do you think there might be some public or economic benefit to the bank teller doing what they did that should outweigh? 

Ms. Nelson: No.

Senator Warren: Okay, good. Alright so we’ve gone through the test that Congress wrote into Dodd-Frank to define unfair practices. Ms. Nelson, would you conclude that this bank, if it met these three tests, may have violated Dodd-Frank by unfairly discriminating against a customer on the basis of their religion, and that regulators should probably take a closer look at this bank? 

Ms. Nelson: Yes they should.

Senator Warren: Okay good. And if the bank can’t do this because of someone’s religion, do you think the bank should be able to do it because of someone’s race? 

Ms. Nelson: Absolutely not.

Senator Warren: Alright. I agree, and that’s why I’m very glad that the CFPB is cracking down on discriminatory and other potentially unfair practices under the law when it updated its examination procedures earlier this year. This ensures that the CFPB examiners are doing what Congress told them to do: root out unfair practices against consumers – whether the unfairness is because of their religion, their race, or their sex.

And yet, the United States Chamber of Commerce and other lobbyists for big banks have come out in full-force to claim that CFPB examiners investigating potentially unfair discriminatory practices amounts to – in their words – “abuse.” Now, listen to that again:  the bankers claim that the CFPB is engaging in “abuse” of the big banks if it stops those banks from discriminating against customers based solely on race.  Wow.  

Over and over, the banks have been caught red-handed discriminating against consumers. My colleagues were just talking about it. 

• In 2011, Bank of America agreed to pay $335 million for charging Black and Latino customers higher rates on mortgages. 
• In 2012, JPMorgan Chase got caught doing the same thing and paid $55 million in penalties. 
• In 2017, Wells Fargo got caught doing the same thing and agreed to pay $175 million. 

Mr. Morial, your organization has been on the frontlines protecting consumers against unfair practices. Can you tell us a little about the impact cases like these have on customers?

Mr. Marc H. Morial, President and CEO, National Urban League: Thank you very much Senator Warren and thank you for your leadership. Settlements are never effective to help people recover the wealth that they’ve been stripped of and settlements alone do not form – I think – an effective deterrent to future discrimination and a continuation of the practices which led to the lawsuits. 

You and I both know, and this committee knows, that when the financial crisis took place, the taxpayers of this nation rode in on their stallions and rescued these banks because of the thought that if they did become destabilized, the broader economic impact would be severe. So at that time, the idea of the CFPB was that there needed to be a stronger methodology and enforcement arm to prevent the recurrence of the kinds of practices that brought us to fall of 2008, which was a tragic moment for this nation. 

I testified before this very Banking Committee in 2010 on that crisis and on the need for CFPB and on the fact that a false narrative had been created by the financial services industry that it was lending to Black and brown people that caused the crisis. And in this committee, with statistics and charts and graphs, that theory, that narrative, was debunked. 

And so, once again, we have to push back against any notion that CFPB somehow is going to negatively impact the availability and access to capital for Black and brown communities. Such an argument is preposterous and disrespectful to the long history of this nation in trying to overcome systemic discrimination. So, CFPB is an essential, very important agency and for those that don’t support it, give me something better. But having nothing is not an option.

Senator Warren: Alright, thank you very much. I appreciate your longtime work in this and I appreciate your strong voice in this. You know, the idea that the banks will continue to argue quite openly that they want to protect their ability to discriminate against people based on race is truly outrageous and I applaud the CFPB for saying, not on their watch. Not going to happen. Thank you.

Source: Senator Elizabeth Warren