We Listened So You Don’t Have To: The 2015 Interagency Fair Lending Hot Topics Webinar
Written by Elizabeth M. Young LaBerge, Regulatory Compliance Counsel
A lot happened on Thursday, October 15th. FinCEN issued the second edition of SAR Stats. The CFPB issued the new HMDA rule, which Brandy discussed in a blog post last week. NCUA finalized its risk-based capital rule, which, thankfully, Alicia is spoon-feeding to us in bite-size chunks via her RBC blog series which will continue on Friday.
In much less dramatic but still useful news, on October 15th the Interagency Fair Lending Hot Topics Webinar was held. The webinar was attended by the CFPB, the Federal Reserve Board, NCUA, the FDIC, the OCC, the DOJ and HUD. At the webinar, the CFPB very briefly discussed the red flags it looks for with regard to redlining. It then very thoroughly discussed its recent Consent Order against Hudson City Savings Bank due to redlining.
The OCC briefly discussed fair lending concerns surrounding OREO disposal. HUD discussed the high number of complaints it continues to receive in connection to the underwriting treatment received by women while on maternity leave. The DOJ presented a veritable parade of enforcement actions regarding auto lending.
The most useful presentation came from Jamie Goodson, Director of the Division of Consumer Compliance Policy and Outreach in the Office of Consumer Protection at NCUA. Her presentation contained some cogent reminders for credit unions about NCUA's expectations regarding fair lending policies. She provided some concrete, occasionally-missed information that should be included in CU's fair lending policies and some suggestions to ensure policies are sufficiently drafted and maintained.
Occasionally-Missed Information
Most fair lending policies clearly prohibit discrimination on the bases of race, religion, national origin, sex, marital status and age. However, NCUA's presentation indicated that not all policies also explicitly prohibit discrimination on the basis of receipt of public assistance income or the exercise of any right under the Consumer Credit Protection Act (CCPA), both of which are prohibited bases mentioned in the ECOA. The presentation indicated that beyond simply including these two prohibited bases in the list, it may be necessary to provide further information to help employees comply with the policy.
The receipt of public assistance income is a prohibited basis, regardless of whether all or only part of the applicant's income comes from public assistance. The receipt of public assistance can only be considered as a pertinent element of creditworthiness under a judgmental system of evaluation, as defined by 12 C.F.R. 1002.2(t). During the presentation, NCUA recommended that a policy might list several common types of income that is public assistance, to aid employees in complying. For example, a policy might list benefits or income from the following programs: Supplemental Nutrition Assistance Program, Rent Supplement, Rental Housing Assistance, Supplemental Security Income, Unemployment Benefits, Temporary Assistance to Needy Families, and any other program income or benefits which may be commonly encountered.
A fair lending policy should also prohibit discrimination on the basis of an applicant's good faith exercise of their rights under the CCPA, or any state law upon which the CFPB has granted an exemption. This is a stated prohibited basis in the ECOA and NCUA indicated it should be included in a fair lending policy. An exercise of rights under the CCPA could include action under TILA, the Fair Credit Billing Act, the Consumer Leading Act, FCRA, FDCPA, EFT Act, or the ECOA itself.
Suggestions for Drafting and Maintaining Policies
Beyond the above substance, NCUA also recommended that policies be drafted carefully and fully. Specifically, the presentation used an example of a policy that stated employment income would be considered, when the credit union indicated what was meant and understood by employees was that income would be considered. Also, the presentation recommended that a fair lending policy address considerations beyond loan underwriting, including marketing, product development, forms and any other area where fair lending concerns may appear.
If you are interested in hearing all 90 minutes of the presentation, the webinar is archived and still available on the Consumer Compliance Outlook website here. Slides to the webinar, which are pretty thorough, can be viewed here.