All in Regulation B

Comparative vs Overt Disparate Treatment

Adam Witmer
Fair Lending, Regulation B

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.

3 Tips for Fair Lending Training for the Board

Adam Witmer
Fair Lending, Regulation B

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.

Adverse Action Reasons Chart

Adam Witmer
Regulation B, Fair Lending

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.

Denial Reasons of Excessive Obligations & Insufficient Income

Denial Reasons of Excessive Obligations & Insufficient Income

Adam Witmer
Adverse Action, Regulation B

This Compliance Clip (video) discusses the difference between two denial reasons found on most adverse action notices: 1) Excessive Obligations in Relationship to Income and 2) Insufficient Income for the Amount of Credit Requested. Adam discusses why most denial forms have these two different, but distinct debt-to-income (DTI) options and explains the best practice for when to use each reason - which might not be what you think.

Using a Credit Score Disclosure in Lieu of the Adverse Action Notice

Using a Credit Score Disclosure in Lieu of the Adverse Action Notice

Adam Witmer
Adverse Action, FCRA, Regulation B

This Compliance Clip (video) answers the question of whether the FCRA pieces of the AA Notice must be completed every time, or if creditors can combine certain FCRA disclosures with the AA Notice. Adam attempts a new approach to adding a bit of humor to a mundane compliance topic and fails terribly. He makes a promise to never attempt this approach again (unless he is asked).

Demographic Information for HMDA & Regulation B

Demographic Information for HMDA & Regulation B

Adam Witmer
HMDA, Regulation B

What's the difference between government monitoring information and demographic information? This Compliance Clip (video) explains the differences in information collection under Regulation B and HMDA while also explaining when a bank must comply with one rule or the other for collecting information. In an attempt to make things easier to understand, Adam provides a number of common exemptions for collecting the GMI/DI information.

Excessive Obligations vs Insufficient Income

Adam Witmer
Adverse Action, Compliance Management, Regulation B

Over the years, I have seen many financial institutions struggle with the adverse action notice requirements under Regulation B, especially in regards to what denial reasons should be listed on the adverse action notice.  This is particularly true when an applicant is denied for a reason relating to income and the applicant’s debt-to-income (DTI) ratio as most adverse action notice vendors provide two similar, but different, options relating to income: excessive obligations in relation to income and insufficient income for the amount of credit requested.  

Regulation B 30 Day Rule

Adam Witmer
Adverse Action, Regulation B

When a financial institution receives a request for a loan, they are required to respond to that applicant within a certain amount of time to advise them of their credit decision.  That time, however, can vary based on the specific situation and/or financial institution, which has left many compliance professionals confused as to what actually is required. Therefore, let’s take a quick look at the rules and break down what they mean.

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