By: Timothy A. Raty; Sr. Regulatory Compliance Specialist
On January 13, 2021 the Bureau of Consumer Financial Protection (“CFPB”) published on its website a “Statement Regarding the Provision of Financial Products and Services to Consumers with Limited English Proficiency” (available at: https://www.consumerfinance.gov/about-us/blog/bureau-takes-additional-steps-to-foster-an-inclusive-financial-system/#utm_source=newsletter&utm_medium=email&utm_campaign=FL&utm_content=LEP). The purpose of the Statement is to provide “principles and guidelines to inform and assist financial institutions in their decision making related to servicing LEP consumers” (Ibid. p. 10) and to provide “guidance on how financial institutions can provide access to credit in languages other than English in a manner that is beneficial to consumers, while taking steps to ensure financial institutions’ actions are compliant with the ECOA, the prohibitions against UDAAPs, and other applicable laws.” (Ibid. p. 3)
According to numbers provided by the CFPB within the Statement, approximately 25.5 million people over the age of five in the U.S. are considered to have “limited English proficiency” (another approximately 42.3 million speak a language other than English at home). Due to language differences, however, they face obstacles in obtaining capital to be used for purposes related to real estate.
Mortgage lenders can help them meet these purposes, as well as helping themselves and the industry (after all, who does not want 25.5 million new customers?). Such would be a “win-win” situation for all parties – but there has been hesitation over the years on providing expanded support for LEP consumers, due to both practical and legal issues.
The Statement attempts to mitigate the latter of these issues and is successful in some ways, but also increases some of the practical burdens as a result. The following are our takeaways from the Statement, within the scope of translated disclosures.
One of the guiding principles outlined in Section B.1 of the Statement states the following:
“Financial institutions may mitigate certain compliance risks by providing LEP consumers with clear and timely disclosures in non-English languages describing the extent and limits of any language services provided throughout the product lifecycle. In those disclosures, financial institutions may provide information about the level of non-English language support as well as communication channels through which LEP consumers can obtain additional information and ask questions.” (p. 12; emphasis in the original)
The Federal Housing Finance Agency (“FHFA”) does provide a document similar to the one described above on their website (in Chinese, English, Filipino, Korean, Spanish, and Vietnamese), but the Statement does give financial institution’s flexibility on this matter, enabling them to create their own document tailored more towards the specifics of their support for LEP consumers.
We do provide a copy of FHFA’s document (for details, see: https://compliance.docutech.com/2018/10/25/new-document-notice-to-borrowers-about-language-cx22719/) and clients who wish to provide something more tailored to their own business practices may submit their own, original disclosure for creation as a custom document (subject to system limitations).
Use of the New URLA with Language Preference Questions
One of the more surprising parts of the Statement was the following:
“Financial institutions may collect and track customer language information in a variety of ways to facilitate communication with LEP consumers in non-English languages. For example, in 2017, the Bureau issued an official approval of the final redesigned Uniform Residential Loan Application (URLA) that was to include a question to collect mortgage applicants’ language preference. Although the Federal Housing Finance Agency (FHFA) later opted to remove the language preference question from the URLA, the Bureau has not rescinded the approval, which confirms that financial institutions’ use of the URLA containing the question identifying a mortgage applicant’s language preference does not violate Regulation B sections 1002.5(b) – (d) or the ECOA. The Bureau specifically reviewed the language preference question with respect to Regulation B, section 1002.5(b) concerning requests for information about national origin and determined it to be compliant. Financial institutions can use similar questions to collect customer language preference information outside of the mortgage context. Financial institutions do not violate the ECOA or Regulation B when they collect the language preference of an applicant or borrower in a credit transaction.” (pg. 15 – 16)
While the CFPB has now confirmed that the 2017-draft version of the URLA can be used by financial institutions in compliance with Federal law, such institutions must still, as a practical matter, use the URLA which is accepted by government-sponsored entities (e.g., Federal National Mortgage Association and Federal Home Loan Mortgage Corporation), Federal agencies (e.g., the Federal Housing Administration, Department of Veteran’s Affairs, and U.S. Department of Agriculture), and investors. Such version does not include the language preference questions.
Nevertheless, the last two sentences of the cited paragraph above do seem to indicate that institutions have flexibility in requesting this information from the consumer (albeit the sentences are written within the context of non-mortgage loan transactions), so it may be possible to provide borrowers with the language preference questions via a separate document from the URLA (such as an addendum).
Currently, we are not planning to make such a document, but may re-consider this based upon demand.
One of the more helpful (yet inconsequential) parts of the Statement is the following regarding translated documents:
“If the translation of documents is not legally mandated, financial institutions may assess whether and to what extent to provide translated documents to consumers. Financial institutions may conduct these assessments and document the related decisions consistent with the guidelines provided . . . Financial institutions that choose to provide translated documents to LEP consumers, must ensure the accuracy of those translations and should seek to prioritize communications and activities that most significantly impact consumers.” (pg. 16 – 17)
The helpful part of this guidance is that it allows financial institutions the flexibility in determining which disclosures to translate, which are not required by law to be translated. Prior to this guidance, ambiguity existed as to whether there would be legal issues if only some (rather than all) of the disclosures provided should be translated.
The inconsequential part of this guidance is the requirement that the translation should be “accurate.” Scrupulous institutions have always translated documents with the goal of ensuring “accuracy” in the translation, but the problem has always been in determining what constitutes accuracy.
Languages are not directly interchangeable. Many a time a language will have a word without a correspondent in another language. The same word, phrase, or sentence can be translated several different ways, none of which will be an 100% match of the original. In such cases, are such translations considered “accurate” or not?
Footnote 49 of the Statement (which accompanies the “accurate” clause) does reference some of the resources provided by the CFPB and FHFA for translating common mortgage terms – but these glossaries do not provide all the necessary terms involved in the disclosures (e.g., both glossaries translate “Step rate mortgage” into Spanish, but fail to provide a translation for “Step Rate” – which is a key disclosure for step rate mortgages on the Integrated Disclosures). The terms may also change from how it is listed in these glossaries, depending on how the word is used within any given sentence.
The CFPB does stress that financial institutions must provide translated documents if required by law (p. 16) and that their own (and the FHFA’s) translated documents may be used freely (p. 17). Details about State-specific translation requirements can be found on our website (https://compliance.docutech.com/2011/05/30/foreign-language-mortgage-disclosures/), as well as details about our support for FHFA’s “Notice to Borrowers about Language” (https://compliance.docutech.com/2018/10/25/new-document-notice-to-borrowers-about-language-cx22719/).
While the Statement addresses some legal issues, it does not address some of the practical issues financial institutions face with LEP consumer support (which is to be expected, since the CFPB’s concern is the enforcement of the laws they are tasked with, not programming problems). Support for non-Latin letters and non-Arabic numbers, the onus of translating dynamic text (whether on the “front-end” by data inputted into a loan origination system or on the “back-end” after the data has been exported into a document vendor’s software), left-right alignment of words, uniformity of terms used on documents meant to enable consumers to shop for the best loan (e.g., the Loan Estimate), etc. are still problems to be worked out (and there’s still the remaining question of what the standard is for determining that a translation is “accurate”).
An additional, practical burden has been added by “encouraging” financial institutions to develop a compliance management system centered around LEP consumer support (or incorporating a subsystem into an institution’s currently existing CMS). This burden, however, is necessary in order to demonstrate that, in its structuring and maintenance of LEP consumer support, an institution is not running afoul of ECOA and UDAAP requirements (e.g., unfairly discriminating based on race or national origin, by providing documentation showing the rational basis for why it is, say, providing support for the Spanish language but not for the Finnish language).
Altogether, the Statement does provide re-assurances that financial institutions do have flexibilities in providing bona fide support for LEP consumers, without running afoul of major Federal laws. It still leaves some issues unresolved, which will eventually have to be addressed.
The Statement also signals that the CFPB is expecting institutions to “step up” in their support for LEP consumers: “The Dodd-Frank Act emphasizes the Bureau’s role in ensuring ‘fair, equitable, and nondiscriminatory access to credit.’ Consistent with that purpose, the Bureau encourages financial institutions to promote access to financial products and services for all consumers by better serving LEP consumers.” (p. 3)
Practical issues still existing, legal issues somewhat mitigated, institutions will need to focus more on finding solutions to these issues, not only because regulators are, but also because there are 25.5 million potential customers to engage with.