The Consumer Financial Bureau’s Bias Shakedown

I wait for one of my friends on the Left to explain why they support this kind of “executive behavior”? [Which I’m sure they must support…]
How does the Consumer Financial Protection Bureau figure out when employers unintentionally discriminate against minorities? The bureau’s lawyers know, or maybe they’re making it up as they go along. Whatever it is, they’re not telling Congress or employers.

That’s the conclusion from a letter that Texas Republican Jeb Hensarling sent earlier this month to financial bureau director Richard Cordray. The Congressman reveals a nine-month, bipartisan effort to get the bureau to explain how it calculates disparate impact, a legal theory that purports to show discrimination through statistics without having to prove intent or bias in any particular case. The Obama Administration has used disparate impact to threaten employers with lawsuits and cow them into monetary settlements without ever going to court.

Mr. Hensarling’s concern is with companies that make car loans through auto dealerships. In March 2013 the financial bureau ruled that these lenders are subject to disparate impact under the 1974 Equal Credit Opportunity Act (ECOA). The agency didn’t clarify how it would find such discrimination, and no wonder.

ECOA explicitly prohibits lenders from collecting information on race, gender or ethnicity. The only way the bureau could prove discrimination would be to guess by using proxy measures, such as a surname. So is a Mr. Smith living in Atlanta black or white?

In May 13 House Democrats asked the bureau to explain its “method” of identifying “different groups of consumers.” Several weeks later, the agency responded that it was “committed to being open and transparent in all appropriate circumstances,”  [ very enlightening, wouldn’t you say?] but didn’t disclose much else. In June 35 House Republicans asked for similar information. The bureau gave them the run-around.

In October, the Senate weighed in when 11 Democrats and 11 Republicans asked for “complete details concerning the statistical methodology the Bureau employs to determine whether disparate impact is present in an auto creditor’s portfolio.” A few days later, the bureau responded that it makes “case-by-case assessments of whether to pursue supervisory or enforcement activity in response to statistically significant disparities.”  [ Ah, the added clarity is breath-taking!] That non-answer left employers scratching their heads and worried about lawsuits.

Then in December Ally Bank coughed up $98 million to settle bureau allegations of discrimination in auto lending. Banking sources tell us there are numerous similar investigations pending, which is no surprise. A government charge of racism is publicly damaging even without proof, and a lender can’t fight the charges if it doesn’t know which practices the bureau thinks are illegal.

All of which underscores the degree to which the financial bureau is accountable to no one but a White House that has shown its own disdain for the rule of law. [I wonder when anyone besides a few on the Right will think this important!] The House voted 232-182 late last month to subject the bureau to Congressional funding and to remove its director in favor of a five-member commission. Mr. Cordray and the White House know that Senate Democrats will block it, so they will continue to extort cash from lenders to settle claims whose legality they never have to explain, much less prove.

The Consumer Financial Bureau’s Bias Shakedown –


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