Bank of America will pay $12 million for submitting inaccurate mortgage data to the federal government under a long-standing federal law, the Consumer Financial Protection Bureau (CFPB) announced on Tuesday.
The federal agency, championed by Democrats, noted that the second-largest U.S. bank, which holds $2.4 trillion in assets, neither admitted nor denied wrongdoing in the case.
The penalty stems from claims that Bank of America loan officers neglected to ask legally required questions about the race, ethnicity, and sex of mortgage applicants.
Bill Halldin, a spokesperson for Bank of America, told The Epoch Times that some of the violations occurred within the first quarter of 2020, involving 113 loan officers, and other violations occurred in certain three-month periods spread across 2016 to 2021, involving 290 other loan officers. The bank employs over 4,500 loan officers who are not only focused on home loans, he noted.
Mr. Halldin, who noted in a statement that applicants had chosen not to provide race information, said the bank collected demographic data in 99 percent of applications during the years under review by the CFPB. Per the CFPB order, the bank received, on average, over 300,000 home loan applications per year in the relevant period.
In a statement, CFPB Director Rohit Chopra charged: “Bank of America violated a federal law that thousands of mortgage lenders have routinely followed for decades. It is illegal to report false information to federal regulators, and we will be taking additional steps to ensure that Bank of America stops breaking the law.”
The CFPB, the brainchild of Sen. Elizabeth Warren (D-Mass.), was created in 2010 in the wake of the 2008–09 financial crisis. Democrats strongly defend the federal agency as a way to keep a check on corporate power, while Republicans accuse it of overreach.
Under the 1975 Home Mortgage Disclosure Act (HMDA), lenders are mandated to disclose information about mortgages to federal regulators. The goal is to assess whether lenders are meeting the housing needs of their communities and to prevent discriminatory lending practices.
Under the regulation, lenders are mandated to ask each applicant for a covered loan about their race, ethnicity, and sex. However, applicants are not required to provide it, per the CFPB order.
Mr. Halldin said that following a single 2020 complaint, the bank conducted a review and notified the government, which prompted the CFPB’s inquiry.
“We properly collected demographic data in more than 99 percent of applications in the years reviewed by the CFPB and consistently had lower percentages of applicants not disclosing their race compared to annual industry averages,” Mr. Halldin said.
“As the CFPB notes, we took additional steps in 2020 and 2021 to enhance our monitoring and training to ensure employees ask applicants for required racial, ethnic, and gender information,” he added. “This data collection issue had no impact on applications.”
The $12 million fine imposed by the CFPB will be deposited into the agency’s victims relief fund. This fund is designed to provide restitution to individuals affected by violations of financial laws and regulations.
CFPB Faces Legitimacy Challenge in Supreme CourtBank of America has faced previous regulatory actions. In recent years, it paid over $200 million in July 2023 for various illegal practices, including charging unauthorized fees and withholding credit card rewards.
The bank also faced fines in 2022 and 2014, amounting to $225 million and $727 million, respectively, for different violations.
In 2022, the bank was ordered to refund hundreds of millions of dollars to consumers for mishandling state unemployment benefits. In 2014, the bank faced penalties for illegal and deceptive credit card marketing practices.
The CFPB itself is facing a challenge to its legitimacy in the U.S. Supreme Court.
The case centers around a funding mechanism that was created to keep the agency independent. The mechanism excluded the CFPB from the normal congressional appropriations process. Instead, it is funded via fees collected by the Federal Reserve System from member banks. Additionally, the CFPB may also request funding from Congress.
The case could have “severe repercussions” for the American economy as a whole, given “a good chunk of our economy is based on the real estate business, mortgage business,” attorney Robert Loeb, who filed the friend of the court brief with the Supreme Court, previously told The Epoch Times.
The legitimacy of the CFPB was also challenged during the Trump administration, which disputed its constitutionality.
The agency’s unusual funding mechanism was found to be unconstitutional by the U.S. Court of Appeals for the 5th Circuit in a case brought by the Community Financial Services Association (CFSA). The CFSA had sued over the agency’s rule that blocked payday lenders from trying to withdraw payments from borrowers’ bank accounts after two consecutive attempts failed for insufficient funds.
A payday loan is a short-term loan, often $500 or less, that is anticipated to be settled using the borrower’s next paycheck.
According to the appeals court, the mechanism violates the U.S. Constitution’s appropriations clause, which states, “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.”