Approximately 22 percent of U.S. residents over the age of 5 speak a language other than English at home.1 Of those persons, approximately 37.6 percent have limited English proficiency (LEP), meaning they have a limited ability to speak, read, write, or understand English.2
LEP consumers have experienced substantial barriers in the consumer financial marketplace. Whether these barriers take the form of financial disclosures, written documents solely available in English, or the lack of bilingual employees or interpretation services at financial institutions, these consumers remain underserved.
Over the last several years, the Consumer Financial Protection Bureau (CFPB) has engaged with stakeholders on fair lending compliance and access to credit in order to gain insight, inform policy decisions, and promote changes that target and benefit this large segment of the U.S. population.
Most recently, on January 13, 2021, the CFPB published a Statement Regarding the Provision of Financial Products and Services to Consumers with Limited English Proficiency. The Statement "outlines compliance principles and guidelines to encourage financial institutions to expand access to products and services for LEP consumers."3
The Statement is split into two parts. The first provides guiding principles for financial institutions to consider in serving LEP consumers. The second provides guidelines financial institutions can use to implement the guiding principles and develop compliance solutions. We summarize each part below.
1. Guiding Principles for Servicing LEP Consumers
The Statement outlines five general principles financial institutions should use in serving LEP consumers:
- (1) Financial institutions should seek to better serve LEP consumers, while complying with state, federal, and other legal requirements. The CFPB recognizes that legal uncertainty discourages financial institutions from serving LEP consumers in a language other than English, and the Statement is meant to assist efforts to comply with the Dodd-Frank Act, the Equal Credit Opportunity Act (ECOA), and other applicable laws.
- (2) Pilot programs or other phased approaches for LEP-consumer-focused products and services consistent with the guidelines (summarized below) may allow financial institutions to serve LEP consumers while managing compliance risks.
- (3) Compliance approaches may vary depending on the size, complexity, and risk profile of the financial institution.
- (4) Certain compliance risks may be mitigated with clear and timely disclosures in non-English languages that describe the extent and limits of language services provided throughout the product lifecycle.
- (5) Access to credit for certain LEP consumers may be increased by extending credit pursuant to a legally compliant special purpose credit program.
2. Guidelines to Implement Principles and Develop Compliance Solutions
The Statement provides financial institutions with key considerations and compliance management system (CMS) guidelines targeted at mitigating ECOA, Unfair, Deceptive, or Abusive Acts or Practices (UDAAP), and other legal risks.
Key considerations for financial institutions include:
- Language selection: When determining in which language to provide non-English language services to LEP consumers, financial institutions may consider documented and verifiable information, such as the stated preference of customers or U.S. Census Bureau demographic or language data.
- Product and service selection: When determining which products and services to offer in another language, financial institutions may consider various factors, such as the extent LEP consumers use certain products, the availability of language services, and any heightened risk of unlawful discrimination.
Certain points in the product lifecycle may impact consumers more (e.g., communication (whether oral or written) that conveys essential information about credit terms and conditions or the borrower's rights and obligations, including debt collection, delinquency, and loss mitigation).
- Language preference collection and tracking: Financial institutions do not violate ECOA or Regulation B when they collect the language preference of an applicant or borrower in a credit transaction.4
However, compliance risk does arise from the use of this data (e.g., exclusion of consumers who have non-English preferences from offers provided to similarly situated consumers without those language preferences).
- Translated documents: Certain state and federal laws may mandate consumers be provided translated documents under certain circumstances. If a financial institution is not legally mandated to do so, the financial institution may assess whether and to what extent to do so.
If the financial institution opts to provide translated documents, the financial institution must ensure the accuracy of translations and prioritize communications or activities that most significantly impact consumers.5
A strong compliance management system can mitigate fair lending and other risks if it considers how to serve LEP consumers in a compliant manner. The Statement notes a financial institution may develop an LEP-specific CMS or affirmatively integrate LEP considerations into their broader consumer compliance CMS.
The Statement focuses on CMS components regarding the following:
- Documentation of decisions: Financial institutions are encouraged to document decisions related to the selection of languages, products, and services. Documentation includes considerations, infrastructure, systems, or other operational limitations, cost estimates, and anything else which would be helpful for a regulator to understand a financial institution's process for decision-making.
- Monitoring: Financial institutions are encouraged to regularly monitor services provided in languages other than English, including any changes, with an eye toward fair lending and UDAAP risk. This would include conducting regular fair lending and UDAAP-related assessments of advertising, marketing, promotional, disclosure, and other materials.
- Fair lending testing: Financial institutions with well-developed CMS would conduct regular statistical analysis of loan-level data for disparities in aspects of the credit transaction on a prohibited basis, such as underwriting or pricing.
- Third-party vendor oversight: When a financial institution contracts with a third-party vendor to provide products or services to LEP consumers, the institution should implement an oversight program to incorporate a review of fair lending, UDAAP, and other applicable laws. The CFPB stresses particular attention on those third-party vendors that participate in underwriting or pricing.
Time will tell how this Statement will influence financial institutions in taking action to better serve LEP consumers.
1 Statement Regarding the Provision of Financial Products and Services to Consumers with Limited English Proficiency, available at page 23.
4 As explained in the Statement, the CFPB confirmed this in connection with language preference questions developed for the mortgage industry. See Statement, page 15. In November 2017, in response to feedback from industry stakeholders, government-sponsored enterprises Fannie Mae and Freddie Mac (GSEs) updated their redesigned Uniform Residential Loan Application (Form 1003, or URLA) to include a question regarding mortgage applicants' language preference.
redesigned Uniform Residential Loan Application (Form 1003, or URLA) to include a question regarding mortgage applicants' language preference.
At the GSEs' request, and as explained in the Statement, the CFPB approved the question as compliant with ECOA and Regulation B. The GSEs would have required mortgage lenders using the redesigned URLA to implement it (and corresponding data mapping) by February 2020. In June 2019, after industry pushback, the Federal Housing Finance Agency, conservator of the GSEs, directed the GSEs to remove the question from the redesigned URLA.
The GSEs announced they would (i) redesign the URLA, (ii) push back the February 2020 compliance date, and (iii) develop a voluntary consumer information form, not part of the actual URLA form, to collect language preference information. The re-redesigned URLA, effective as of January 1, 2021, does not include the language preference question, or the voluntary form. Development of the voluntary form was delayed due to COVID-19. See August 25, 2020 UMDP GSE URLA/ULAD FAQs at Question 19.
Nonetheless, as the Statement points out, the CFPB has not rescinded its approval of the language preference question as compliant with ECOA and Regulation B.
5 Financial institutions may use translated documents provided by the CFPB or other government agencies. The CFPB plans to provide more translated documents in the future.