Provident Funding Associates, L.P.
Enforcement, Mortgages, Fair Lending, Home Mortgage Disclosure Act (HMDA)
In May 2015, the CFPB with the Department of Justice (DOJ) filed a lawsuit against Provident Funding Associates, a private mortgage lender, for allegedly charging “minorities higher fees and interest rates.” The CFPB alleged that Provident “gave some pricing discretion to its brokers, resulting in them discriminating against 14,000 African American and Hispanic borrowers.” CFPB ordered Provident “pay $9 million into a fund that will compensate affected consumers.”
“California-based_Provident_was cited largely because of the pricing structure it uses with its brokers, which allowed them to raise the interest rate and broker fees beyond a price based on the applicant’s creditworthiness. Authorities said that_Provident_set a ‘risk-based interest rate’ — like a baseline interest rate set on the wholesale mortgage -and then brokers were allowed to raise that rate before it was offered to the consumer._Provident_would then give a portion of the revenue from that higher rate as payment to the broker.
“In addition to the higher interest rates,_Provident_gave brokers discretion to charge higher fees to consumers that were unrelated to the borrower’s creditworthiness. This resulted in African Americans and Hispanics being charged higher fees than white applicants, authorities said. The named practices occurred between 2006 and 2011.”
“The company has agreed to pay $9 million into a fund that will compensate affected consumers. The order also calls for_Provident_to pay for an independent administrator to contact the consumers and distribute the payments from the fund.” [Rachel Witkowski, “CFPB, DOJ Hit Provident Brokers Over Pricing Discretion,” National Mortgage News, 05/28/15]
Inactive or Resolved