All in Fair Lending

Companies Using Black-Box Credit Models Not Exempt from ECOA

Adam Witmer
Regulatory Update, Fair Lending, Adverse Action

On May 26, 2022, the CFPB confirmed that federal anti-discrimination law requires companies to explain to applicants the specific reasons for denying an application for credit or taking other adverse actions, even if the creditor is relying on credit models using complex algorithms. The CFPB published a Consumer Financial Protection Circular to remind the public, including those responsible for enforcing federal consumer financial protection law, of creditors’ adverse action notice requirements under the ECOA.

VIDEO: Discrimination Based on Religion

VIDEO: Discrimination Based on Religion

Adam Witmer
Fair Lending

In this Compliance Clip, Adam discusses one of the topics that is included in our Spring 2022 Quarterly Compliance Update, that is - the CFPB found lenders discriminating against applicants based on religious beliefs. While discrimination based on religion has long been prohibited, Adam explains that release by the CFPB show us a trend in fair lending that all financial institutions should be ready for. In addition, the CFPB also expressed its concern about digital redlining, a topic that Adam also talked about in another Compliance Clip. A transcript of this video is now available.

CFPB Outlines Options to Prevent Algorithmic Bias in Home Valuations

Adam Witmer
Regulatory Update, Fair Lending

On 2/23/2022, the CFPB outlined options to ensure that computer models used to help determine home valuations are accurate and fair. The options will now be reviewed to determine their potential impact on small businesses. According to the CFPB’s release, automated valuation models can pose fair lending risks to homebuyers and homeowners. The CFPB is particularly concerned that without proper safeguards, flawed versions of these models could digitally redline certain neighborhoods and further embed and perpetuate historical lending, wealth, and home value disparities.

Interagency Statement on Special Purpose Credit Programs Under the ECOA and Reg B

Adam Witmer
Regulatory Update, Regulation B, Fair Lending

On 2/22/2022, the FRB, FDIC, NCUA, OCC, CFPB, HUD, the DOJ, and the FHFA issued an interagency statement to remind creditors of the ability under the Equal Credit Opportunity Act (ECOA) and Regulation B to establish special purpose credit programs to meet the credit needs of specified classes of persons. The statement focuses on the special purpose credit options under ECOA and Regulation B, which have been publicly committed by many financial institutions to better serve underserved communities.

What is Digital Redlining in Lending?

Adam Witmer
Fair Lending

In case you missed it, this article is a version of the Compliance Tip Tuesday email we sent you earlier this week. “We have all heard of redlining, but what is digital redlining and how can we look for it in our financial institutions? This article is going to discuss digital redlining and provide some questions we can ask to uncover digital redlining risk in our organizations.”

VIDEO: Digital Redlining

VIDEO: Digital Redlining

Adam Witmer
Fair Lending

In this Compliance Clip (video), Adam talks about digital redlining. This is currently a hot topic as the regulators have been focusing their efforts on enforcing fair lending and redlining is one of the things they have been looking into. In this video, Adam describes how digital redlining often relates to disparate impact. A transcript of this video is now available.

CFPB: It’s Illegal to Penalize Borrowers Based on Religion

Adam Witmer
Regulatory Update, Fair Lending

On 1/14/2022, the CFPB issued an article regarding discrimination based on their religious beliefs. The blog post, authored by Lorelei Salas, emphasizes that it is illegal to penalize borrowers for being religious. In the blog post, the CFPB also expressed its concern about how financial institutions might be making use of artificial intelligence and other algorithmic decision tools such as uses third-party data to analyze geolocation data to power their credit decision tools.

VIDEO: Credit Report Fees and Fair Lending

VIDEO: Credit Report Fees and Fair Lending

Adam Witmer
Fair Lending, Regulation B

In this Compliance Clip (video), Adam talks about how credit report fees can relate to fair lending. In particular, Adam describes how differences in credit report charges may lead to a fair lending violation under Regulation B. While this has been a known issue for decades, it seems this topic has resurfaced a bit, so feel free to share this with anyone on your lending team.

VIDEO: What is Fair Lending

VIDEO: What is Fair Lending

Adam Witmer
Fair Lending

In this Compliance Clip (video), Adam briefly explains what is fair lending and differences between the two main fair lending laws, Fair Housing Act (FHA) and Equal Credit Opportunity Act (ECOA). This video is actually an introduction to the program Fair Lending for Lenders which is available at our store. This video provides a lot of valuable information into understanding what fair lending is so feel free to share this video to your lending team.

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