Fair Lending Webinar Offers Fresh Insight Into Regulators’ Views
On November 16, representatives from each of the prudential banking regulators along with DOJ, HUD, and NCUA hosted the 2017 Interagency Fair Lending Hot Topics. We participated in the event and afterwards discussed some of the most significant developments. The webinar contained several important updates on issues such as HMDA, consumer loans, and fair lending programs, among other topics. A few of the key takeaways are discussed below.
The CFPB’s Eric Wang, Deputy Fair Lending Director of the CFPB’s Office of Fair Lending, addressed the widely criticized changes to the HMDA data reporting for which HMDA reporters must now collect and report 48 data elements (up from 23) and 110 data fields (up from 39). Wang stated that the CFPB’s initial role will be “diagnostic and corrective” rather than punitive, and that the agency will look for banks that have made good faith efforts to comply through implementation plans and policies and procedures. Specifically, he confirmed that banks will have to resubmit LAR files only where the error rates of individual fields exceed applicable thresholds rather than overall error rate calculations. Further, the new data resubmission guidelines include error tolerances for certain data fields.
Fair Lending Programs and Consumer Loans
The FRB’s Katrina Blodgett, Counsel in the Fair Lending Enforcement Section of the Division of Consumer and Community Affairs, reiterated that their risk-focused supervision approach expects a bank to tailor its compliance management system with the level of pricing discretion of that bank’s consumer loan program. Particularly, banks should clearly define the scope of discretion a loan officer has to waive, reduce, or increase fees, and should consider the use of rate sheets to track all exception variables. Rate sheets should be reviewed annually. Finally, a bank should be certain to conduct fair lending monitoring programs on a portfolio-wide basis, and should limit an analysis to individual branches only if the bank’s policies and procedures differ from branch to branch.