The Consumer Financial Protection Bureau and the Justice Department announced last week that they are investigating PNC Financial Services' mortgage lending. The probe into the Pittsburgh-based bank's mortgage pricing is causing some to worry that regulators are preparing to investigate other large banks for alleged loan discrimination.
The announcement marked the first time the CFPB, created under the 2010 Dodd-Frank Act, has publicly pursued a bank using the controversial legal theory of "disparate impact", which is to cite a bank for discrimination if a policy, product or practice has an adverse impact on a protected class.
"All of this may be taken away from regulators in the future depending on the Supreme Court's decision," said Michael Mierzewski, a partner at Arnold & Porter. Until then, "I think the regulators would like to take advantage of this as much as they can before the Supreme Court rules."
The Justice Department has "made it very clear that it will use the theory of disparate impact in enforcement actions," said Kramer, a former deputy superintendent of banks for the New York State Banking Department. As a regulator "in the early 2000s, we used it through our enforcement because we believed it was an effective, appropriate tool to use when examining and monitoring lenders."
Regulators have started using disparate impact more since then, particularly since the CFPB's formation three years ago.
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