As more and more examiners are expecting fair lending training for the Board of Directors, it is important to ensure that training efforts meet the needs of directors of the Board. Well effective board training can be similar to training for other employees of the financial institution, it is important to understand several unique factors necessary for effective director training. The following three tips can be used for providing fair lending training to the Board of Directors.
Director Training Tip 1: Keep It Brief
Though fair lending can be one of the highest risk compliance areas for a bank or credit union, it’s still only a small fraction of the total areas of oversight required by a director. Therefore, it is important that any board training is as efficient as possible.
In other words, fair lending training for the board needs to be brief.
Brief in time, but not necessarily brief in content. Board meetings typically run fairly long anyway, and adding a full hour of training on one compliance topic like fair lending is just not always an option - or even reasonable.
Each financial institution should consider a number of factors in determining the appropriate length of time to conduct a fairly new training. For example, the first time a director is ever exposed to fair lending rules and regulations, the organization may want to provide comprehensive training that takes an hour or more. Ongoing refresher training, however, does not need to be as comprehensive and generally only needs to focus on key areas, emerging trends, or areas that have not been recently covered.
As a general rule, an average amount of time for annual fair lending director training would probably range in the amount of 15 to 25 minutes. It is important to keep in mind that the content provided is more important than the time spent on training, though director training should be designed in the most effective and efficient way possible in order to respect the valuable time of the Board.
Director Training Tip 2: Focus on Key Content
The next consideration when designing fair lending training for the Board of Directors is to focus on key content that should be included in the training. Training content will generally include those things that are core elements of fair lending such as reviewing fair lending laws, explaining discrimination, and providing examples of fair lending problems.
The first content consideration when designing fair lending training for the Board of Directors is to explain a background of the laws that govern fair lending. To do this, a financial institution should provide an overview of both the Equal Credit Opportunity Act (ECOA) as well as the Fair Housing Act (FHA). Having an appropriate understanding of applicable laws will ensure that directors are able to have effective oversight of the fair lending function of the organization.
The second consideration for content is to discuss the different types of discrimination. The first place to start with this is to explain the three different types of discrimination recognized by the courts. In doing this, a financial institution can provide practical examples to help the Board of Directors comprehend the three different types of discrimination.
Finally, one of the best ways to assist Directors in understanding their responsibilities for fair lending oversight is to provide practical examples of deficiencies and violations. These examples could be either 1) issues previously identified within the financial institution or 2) issues discovered by regulators at other financial institutions. Providing examples of fines and penalties other organizations have been subject to help to provide directors an understanding of the applicable risks involved with fair lending.
Director Training Tip 3: Consider Using an Outside Curriculum
The last consideration when designing fair lending training for the Board of Directors is to consider using an established curriculum. Even though fair lending training may only last (ideally) 15 to 25 minutes, it can take hours upon hours - and possibly even weeks - to create the training. The truth is that creating effective and efficient training from scratch is a very, very time consuming process.
In fact, one of the biggest challenges in creating director training to being able to decide what should not be included in the training. In a topic like fair lending, a presenter could easily spend several hours teaching a Board about fair lending laws, risks, common violations, and a director’s role in managing fair lending risk. The challenge, of course, is being able to decide what elements must be included in training and what elements should be avoided.
Due to this, many compliance professionals find that using an outside curriculum saves a significant amount of time (and energy) compared to creating fair lending training for the board from scratch.
Bonus Tip: Review Our Curriculum for BOD Training
If you are charged with creating and presenting fair lending training to your board, here is a final tip: take a look at the curriculum we use in our board fair lending training. The thought behind this is that you might be able to use our outline as a starting place for designing your own training.
The curriculum to our fair lending training for the Board program can be found here.