All in Fair Lending

On June 28, 2019, the CFPB released their annual report on fair lending.  Coming just seven months after the last annual report to congress (12/4/18), this annual report to Congress describes the Bureau’s fair lending activities in innovation, outreach, prioritization, guidance and rulemaking, supervision, and enforcement for calendar year 2018.  This is the first report released under new CFPB Director, Kathleen Kraninger.

NOTE: The 2018 CFPB fair lending report to Congress will be included in our 2Q 2019 Regulatory Update program, which will be released in July of 2019, covering all of the regulatory changes that a compliance professional needs to be aware of from the activity that occurred during the 2nd Q of 2019.

Redlining & Branching Networks

In this Compliance Clip (video), Adam takes a look how a financial institution’s branching network could have an impact on redlining risk. The clip provides two visual maps as Adam reviews what redlining would look like visually, when it comes to a branching network.

Can a Lender Have Denial Authority?

In this Compliance Clip (video), Adam answers a question regarding lender "denial authority. Specifically, the question relates to whether a lender’s “denial authority” can be greater than their authority to approve loans. In his answer, Adam explains where one should look for the answer and provides some concerns to consider.

Fair lending continues to be one of the highest risk areas for any creditor.  Deficiencies can result in significant penalties, fines, and other enforcement actions.  Therefore, each creditor must understand the different types of fair lending violations that could be cited during a fair lending audit or compliance examination.  In other words, if a creditor if familiar with what an examiner will be looking for, they will be more likely to self-identify and correct the issue before it becomes a significant exam violation.

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.

On 12/3/18, the Federal Reserve, FDIC, OCC, NCUA, CFPB and Department of Justice hosted a joint webinar on fair lending hot topics.  The webinar covered a number of topics including redlining, examination scoping, pricing risks, marital status discrimination, disability and maternity leave discrimination, a HMDA update, and a question and answer session.  Overall, the webinar did….

When a financial institution denies an application, Regulation B sets forth several requirements that must be met.  Among other things, financial institutions are required to notify an applicant of the denial and (as applicable) provide the applicant with a “statement of specific reasons” for denial.  One of the biggest challenges in providing the specific reasons for denial is determining which adverse action reasons should be listed on the denial notice. As Regulation B does not explain what reasons should be used, financial institutions benefit from creating an Adverse Action Reasons Chart. This article provides a sample adverse action chart that could be used by financial institutions.

Compliance requirements for CD secured loans are not typically a huge topic of discussion for compliance seminar speakers or article authors.  That said, one of our members suggested this topic (you know who you are!), and I think it is a great topic to write on from the perspective of CD secured loans, rather than just bringing up these loans when discussing applicable regulations (which is usually the way it happens). The truth is that most financial institutions (and regulators) just…

As compliance professionals, we have an opportunity to impact future rules and regulations by providing comments to proposed rulemakings.  This opportunity is actually built into the rulemaking process, and I can tell you from reading many final rules over the years that comments are at least considered and often addressed in final rules.  The truth is that comments can make a difference and, right now, we all have an opportunity to provide feedback (comment) regarding how disparate impact is evaluated under the Fair Housing Act.