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Fair Lending Fireworks: 3 Trends in the Hottest Area of Compliance

By: Harrison Shaw on July 3rd, 2019

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Fair Lending Fireworks: 3 Trends in the Hottest Area of Compliance

CRA  |  Fair Lending  |  Redlining  |  Credit Unions  |  Banks

The Independence Day holiday is coming up! As we prepare to celebrate the U-S-of-A tomorrow, we wanted to have a little fun with compliance today.

In this post, you'll learn what is sparking fireworks in Fair Lending compliance this year. This is the future of Fair Lending compliance and enforcement! Especially after the recent enforcement action, this is news you'll want to know.

As the 4th of July holiday approaches, we're looking forward to all of the parades, cookouts with friends and family, and of course, the fireworks! There are plenty of fireworks in the compliance world, too, particularly in Fair Lending.

Learn the three trends in Fair Lending compliance that are making sparks in the banking compliance world!

From Fair Lending enforcement actions to Red(lining), white, and blue, this is the news to know this week!

1. Fair Lending Enforcement Fireworks

As we wrote about last week, recent Fair Lending enforcement activities are making waves in the industry. Just last month, there were two enforcement-related activities, including a $1.75M Consent Order with a mortgage company.

Free Fair Lending Compliance Checklist

 

On June 28, the CFPB released their annual Fair Lending report to Congress. It outlined some of their key priorities for the the future, as well as what was accomplished last year. In this report, they also noted that although the CFPB did open and continue some Fair Lending-related investigations, it didn't bring any enforcement actions.

"Under my leadership, the Bureau will continue to vigorously enforce fair lending laws in our jurisdiction, and will stand on guard against unlawful discrimination in credit. In addition to that core work, the Bureau will continue to explore cutting-edge fair lending issues including how consumer-friendly innovation can increase access to credit to all consumers—and especially unbanked and underbanked consumers and their communities."

- Kathleen Kraninger, Director of the CFPB, in the Fair Lending Report to Congress

After the CFPB filed no Fair Lending enforcement activities in 2018, and referred zero ECOA violations to the Department of Justice, these two enforcement activities in June could signal changes in enforcement priorities and approaches.

To learn more about the $1.75M consent order for filing inaccurate HMDA data, check out last week's blog!

We will be monitoring this closely to keep you in the loop on potential changes to enforcement approaches.

2. Digital Marketing and Advertising = Blue, White, and Redlining Risk!

Digital marketing is a key area of focus for regulators at every level. In particular, they are focusing on the potential for digital advertisements to present Redlining risk.

You've probably heard this called "digital redlining" or something similar. This concept of digital redlining is also often discussed in the context of social media megalith Facebook's advertising practices.

What is Digital Redlining?

Digital Redlining is the act of providing unequal access to or terms of credit to residents of an area where applicant resides or will reside, or the area where the property to be mortgaged is located, using digital media.

In fact, New York's Governor Cuomo ordered a probe into Facebook's advertising platform to investigate potential housing discrimination on Monday.

Despite the frequent focus on Facebook, Fair Lending risk could exist in any advertising platform that allows targeting based on geography, demographics, or any other prohibited basis characteristic.

As you consider your digital marketing program, and how it relates to your Fair Lending risk, consider the following:

  • How are you targeting your digital advertisements? 
  • Are you actively documenting your risk?
  • Do you have a written social media policy? What about a policy outlining employee social media use?
  • Do you know all of your social media vendors and digital advertisers? Do they understand Fair Lending and the potential risks?
  • Are you analyzing your ads after the campaign finishes to identify any potential risks?

digital-redlining-fair-lending-compliance

3. Regulatory Changes are Sparking Risks

There are a lot of regulatory changes either in progress or just released. The future of Fair Lending is likely to look pretty different over the next few months and years.

Here is a quick overview of recent regulatory changes that impact Fair Lending compliance and risk management:

  • The Regulation CC Final Rule just released. Reg. CC provides guidelines for the availability of funds and collection of checks.
  • HUD is working to update a cornerstone of Fair Lending compliance, the Fair Housing Act (FHA). The CFPB is likely to follow their lead, according to some industry experts.
  • The Fair Debt Collection Practices Act (FDCPA) will be updated after 40+ years!
  • There is likely to be a Joint Notice of Proposed Rulemaking for CRA compliance by the end of the year! CRA modernization? It's still on the horizon.

As you can see, there are serious fireworks in Fair Lending compliance!

The future of Fair Lending compliance is uncertain, but one thing is for sure: it's not going to get any less important! Even as enforcement activities have slowed, the requirements have become more challenging (looking at you, HMDA changes), and public attention has also increased.

Know that we're here to help you manage your Fair Lending compliance and your risk with data analysis software and custom consulting! To learn more about our Fair Lending solutions, click here.

In the meantime, get this absolutely free Fair Lending compliance checklist! It's a high-level overview of some of the key elements your Fair Lending compliance program needs to have.

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About Harrison Shaw

After graduating from Clemson University, I moved to Charlotte, NC, where I live now with my fiance and our dog. My favorite part of my job is building relationships and getting to know people - it's energizing to hear from new folks all over the US. Outside of work, I enjoy doing anything outdoors, from competitive rock climbing to backpacking, mountain biking, fly fishing, etc. On a recent backpacking trip through the Nantahala National Forest, I came (literally) face-to-face with a black bear in the dead of night.