DOJ’s Settlement with Meta Highlights Regulators’ Increased Focus on Digital Redlining via Social Media Marketing

Those that do not heed the recent warnings from the federal level about Fair Lending do so at their peril. As an example of the lengths regulators are willing to go to enforce Fair Lending in all aspects of the mortgage industry, the Department of Justice (DOJ) recently entered into a settlement agreement with Meta (formerly known as Facebook) over allegations of discriminatory advertising. Given Meta’s size and status as a non-mortgage-related company, regulators clearly mean business regarding Fair Lending enforcement, including on social media. To better understand how Fair Lending and social media intersect, let us examine the details of the DOJ’s complaint against Meta. 

According to the DOJ’s announcement about the settlement, the main complaint alleged that Meta’s digital advertising system allowed housing-related companies to target and deliver ads to Facebook users based on race, color, religion, sex, disability, familial status, and national origin. As these characteristics fall under the classes protected by the Fair Housing Act (FHA), Meta was aiding and abetting housing discrimination via its digital advertising channels. 

Also of note in the DOJ’s complaint against Meta were the allegations of both disparate treatment and disparate impact. Per the complaint, “…Meta is liable for disparate treatment because it intentionally classifies users on the basis of FHA-protected characteristics and designs algorithms that rely on users’ FHA-protected characteristics. The department further alleges that Meta is liable for disparate impact discrimination because the operation of its algorithms affects Facebook users differently on the basis of their membership in protected classes.” 

This serves as a prime example of a practice with which the DOJ, the Consumer Financial Protection Bureau (CFPB) and other regulators have been deeply concerned as of late – digital redlining. Most recently, the CFPB has issued consent orders against Trident Mortgage and Trustmark National Bank for similar practices, and more are likely to arise given the “Combatting Redlining Initiative” spearheaded by the CFPB, the DOJ and the Office of the Comptroller of the Currency (OCC). 

So what does this mean for mortgage lenders and financial institutions? Here are some best practices to help ensure your digital marketing and advertising efforts on social media comply with Fair Lending requirements: 

• Fair Lending MUST be incorporated into existing compliance management systems, and social media MUST be included in the CMS’s scope of coverage. 
• All corporate and company-affiliated social media accounts (e.g., LO profiles/pages) should be monitored for compliance with all mortgage-related rules and regulations, including Fair Lending. 
• Tread carefully, if at all, when it comes to targeted marketing.  

• Ensure all copy, design and images used for both paid or unpaid content are as inclusive as possible. 
• Do not use FHA-protected classes to differentiate marketing or advertising materials UNLESS it is to encourage applications for credit from those classes, as allowed by the Equal Credit Opportunity Act (ECOA). 
• Track all marketing and advertising metrics/reach, and take action immediately if evidence shows that protected classes have been excluded or were not being reached through existing efforts. 

As fickle as regulators’ focus can seem at times, all signs show that the fixation on Fair Lending is here to stay and that no activity is too far removed from the loan origination process to escape regulators’ attention. Thus, mortgage lenders and financial institutions must ensure Fair Lending compliance permeates all aspects of their mortgage operations, including social media, marketing, and advertising.