Fair Lending Basics
Download MP3Training should be not only for those
in the lending department, but managers,
anybody who deals with any aspect of
lending, but also credit union management
and board members, because they have
responsibility for policies and procedures
and what happens in the credit union.
Hey everyone, this is Mark with a special
Archive episode of With Flying Colors.
I hope you enjoy.
Do you wanna maximize
your success with NCUA?
Join Mark Trico as he shares with
you the insider's view on passing
your exam with flying colors.
The With Flying Colors Podcast
is sponsored by Credit Union
Exam Solutions by Mark Trico.
If you would like to work directly with
the Credit Union Exam Solutions team and
receive support to optimize your results
with NCUA, so you save time and money,
visit us@marktrico.com to find out more.
Hey everyone, this is Mark TriCal.
Thank you for joining me for this
episode of With Flying Colors.
I'm excited today that I am joined by
Joe Goldberg, a member of my team and the
team here at Credit Union Exam Solutions.
Joe, welcome.
Hi, Mark.
Thanks for having me.
You bet.
My pleasure.
So, Joe, for people who aren't familiar
with what you did at NCUA and perhaps
before NCUA as it relates to credit
unions, why don't you share that with us?
The real short version is I graduated
from law school in 1980, practiced
law in a lot of different ways, doing
different things for a long time.
Among those, I was in the Pennsylvania
Attorney General's Office, Bureau of
Consumer Protection for almost 7 years.
Where I kind of took a deep dive
into consumer protection matters.
I came out, among other things, I taught
consumer law as an adjunct professor,
and eventually in early 2014, I joined
NCUA in the, what was then the Office of
Consumer Protection in the Division of
Consumer Compliance Policy and Outreach.
After a couple of years, I became the
director of the division and stayed
there doing consumer compliance
work, including fair lending work.
Until I retired in December of 2021.
Very good.
You're joining a big cast of
care who've left NCA recently.
A lot of people hit that point in time
where it's time to do something else.
And I'm glad that you're out here now
assisting credit unions more directly.
So today we're going to talk a little
bit about fair lending and a fair
lending one on one, if you will.
So.
So, NCOA has a lot of examiners that
do exams, and then there's a structure
about fair lending exams and things
like that, and that was housed in your
office, but before we kind of get into
that, let's just start with, when someone
says fair lending, what does that mean?
There's no formal definition of
fair lending, but in essence, it's
a system that requires Decisions on
applications for credit to be based
solely on credit related factors,
not on factors that are unrelated to
creditworthiness and are discriminatory.
So fair lending is usually
looked at by what is prohibited
rather than what is required.
There's an example on HUD's
website, HUD's Department of
Housing and Urban Development,
which oversees the Fair Housing Act.
Here's what it says on
its website for consumers.
What is fair lending?
Fair lending prohibits lenders from
considering your race, color, national
origin, religion, sex, familial
status, or disability when applying
for residential mortgage loans.
Fair lending guarantees the same
lending opportunities to everyone.
We'll see also that in addition to
that, that fair lending is designed
to enhance the availability of credit.
As I mentioned, I had been an adjunct
law professor and when I would teach
different laws and regulations, I'd always
like to see why were the laws created?
What's the purpose of the laws?
And fair lending is one of those
subjects where that's generally
contained right in the laws themselves.
There's language in them that
says why Congress passed the law.
For example, the Equal Credit
Opportunity Act, which is probably
the main fair lending law, says
this right in the statute itself.
The Congress finds that there is
a need to ensure that the various
financial institutions and other firms
engaged in the extensions of credit.
exercise their responsibility to
make credit available with fairness,
impartiality, and without discrimination
on the basis of sex or marital status.
Now, as an aside, the original ECOA
only covered those two prohibited
bases, sex or marital status.
But then Congress went on
to say a little bit more.
It says economic stabilization would
be enhanced and competition among
various financial institutions and
other firms engaged in the extension
of credit would be strengthened by an
absence of discrimination on the basis
of sex or marital status, as well as by
informed use of credit, which Congress
has heretofore sought to promote.
In the Fair Housing Act, there
is language that says this.
It is the policy of the United States
to provide within constitutional
limitations for fair housing
throughout the United States.
And then in HMDA, the Home
Mortgage Disclosure Act, this
is a statement of findings.
The Congress finds that some depository
institutions have sometimes contributed
to the decline of certain geographic
areas by their failure pursuant to
their chartering responsibilities.
To provide adequate home financing
to qualified applicants on
reasonable terms and conditions.
That's kind of a direct reference
to redlining, which I'll talk
about a little bit later.
And then it talks about the purpose
of the chapter, which is to provide
data and other information to
those who are interested in making
sure that housing financing is
extended on a remuneratory basis.
Just one quote I like, it's from President
Lyndon Johnson, when he proposed the Fair
Housing Act, it was part of the Civil
Rights Act of 1968, which was I think
the second one, the first one was in 64.
But he said this, I am proposing
fair housing legislation again this
year, because it is decent and right.
Injustice must be opposed, however
difficult or unpopular the issue.
So that's sort of the long
answer to your question.
What is there?
There's a lot of meat there.
Let's unpack it a little bit in a second.
I'm going to ask you
why this is important.
But before I get to that,
that quote is great.
I love quotes and the finding of Congress,
when you highlighted that on redlining.
As you're reading through and
discussing all of these things,
I'm thinking, okay, that is why N.
C.
U.
A.
has the office that you worked for.
That is why N.
C.
U.
A.
goes out and does.
A certain number of fair
lending examinations.
I want to say somewhere between 25 and 30.
We can get into a little bit of
that and how those things work.
But before we dive into what this means
for credit unions specifically, and
how it works with NCA, explain a little
bit why these laws are so important.
There's two reasons.
One is what I just described, which
is that the right thing to do is to
prevent injustice, but it's also because
for those of you listeners who are
responsible for consumer compliance.
Involved in lending consumer lending,
especially, you need to know what
the law is, because it can affect
the viability of the credit union.
So, the laws and these regulations
that I'm going to discuss that are fair
lending related, they tie into some
very important credit related concepts.
We're not talking just about mortgage
lending here, because the fair
lending laws also apply to other types
of credits, such as auto lending,
credit cards, and personal loans.
They're pretty wide ranging.
So some of the policy issues that consider
when you talk about fair lending are,
number one, the availability of credit,
which ties into financial inclusion.
Not just a credit union issue.
That's kind of a social issue, as we've
learned, especially in the last few years,
that it affects equality in credit terms.
It tries to ensure that, as I
mentioned earlier, as a law state,
that credit is extended solely based
on credit related factors and no other
aspects that aren't credit related.
And then I talked about redlining
and you had mentioned it, Mark.
Just so you know, this sounds like it's
ancient history, but unfortunately,
there still are issues with redlining,
and it's really important for
credit unions to know about this.
And I'll talk about that in a second.
But redlining, just a little refresher,
is a method of excluding properties
in a specific geographic area from
eligibility for mortgage loans.
It can also be affected
by who the borrower is.
There are racial implications in borrowers
were African American, they would be at a
disadvantage and it was used to actually
perpetuate segregation and deny African
Americans the ability to improve their
financial standing and achieve wealth.
Through home ownership, the way that
non African Americans could, and
unfortunately, this was actually a
government policy, federal housing
administration no longer exists
in the way it was originally,
but had an underwriting manual.
There was a quote from that underwriting
manual that says that incompatible
racial groups should not be permitted
to live within the same communities.
And this is an official US policy.
The Federal Housing Administration used
color coded maps, and in those maps, the
red zones were considered to be hazardous,
and generally, communities which were
predominantly African American were in
those red zones or were those red zones.
There are instances where the
manual required walls to be
built between neighborhoods.
And obviously this is no longer
official government policy, but
there are remnants of this that
affect predominantly people of color
and the values of their properties.
Generally, credit unions have a different
analysis of their lending when determining
whether they're involved in redlining.
And there are some people say that credit
unions cannot redline because of the
field of membership issue that forms a
basis of their customer base, the members.
But let me just throw this out at
you because it's a real life example.
A credit union that is chartered to
allow as members, people who live or work
within a specific specified metropolitan
area and the surrounding counties.
And this particular credit
union does not have any branches
in the metropolitan area.
It's a major metropolitan area.
And the majority, I should say the
largest number of majority minority
neighborhoods are in that metropolitan
area, as opposed to surrounding areas.
So the question can be asked if the
credit union does not have a physical
presence where the minority applicants
are, or most of them, can it redline?
I'm not going to answer the question,
because there's a lot of factors that
go into it, but I'm just throwing it out
there because it's not a simple yes or no.
Pause there for one second.
So when someone expands into a community
that in part would explain by why NCUA
requires them to establish a presence or
define when they're going to establish
a present as part of their business
plan, because obviously, if you're
expanding to include an area, you
should provide service to that area.
And you can get into the whole
concept of most or a lot of
banking happens on phones.
Well, there are a Areas and there
are people who need to have branches
in order to conduct business.
I guess even I said another way, a lack
of action to have a branch somewhere
could be perceived as a violation.
Is that an overstatement or
is that actually something
that you would agree with?
I would agree with that.
Yeah, I think you touched on something.
Obviously the world is changing and
the way that people interact with
financial institutions is changing,
but I think the credit union system
has grown up on being community based.
You know, that without being physically
present, that can have an effect
on how your lending is dispersed.
Yeah.
Who you can serve.
It was sad to hear what policies were
in government as recently as the 1950s.
And I think if I heard you right, you
said they had actually defined red zones.
And I'm, am I right to assume that
it was those red zones that may
have led to the phrase redlining?
Yes, absolutely.
Okay.
Got it.
There's other issues too, which
have come to light recently.
There's a presidential initiative
around appraisal bias and ways
to counteract appraisal bias.
Unfortunately, and this is tied
into the redlining because whole
neighborhoods may be subject to
Appraisals that lower property
values and they're self perpetuating
actually has a regulation regarding
appraisal accuracy and it imposes
obligations on credit unions to make
sure that appraisers that they use are
providing appraisals that are based on.
non discriminatory matters or factors.
But anyways, the reason I mention all this
is, again, it sounds like ancient history
to some extent, but it really is not.
It's something that it's
important to guard against.
Another reason why all this is
important is because non compliance
creates risks to credit unions.
You can set aside all those policy
issues, but all these laws and regulations
I'm going to talk about generally have
some type of enforcement provision
for regulators, including the NCUA,
but also they provide for private
actions, including class actions.
So, there's all several different types
of risk are implicated with or for
non compliance with fair lending laws.
very much.
So, I'm a credit union.
I'm doing every type of
loan that you can imagine.
I'm a community charter credit union.
I've never had any issues with the normal
exams, but NCUA has the authority to come
in and do a specific fair lending exam.
And that was the group that
you were in charge of at NCUA.
And there are some
authorities that NCUA has.
There's some authorities, I believe
you said that DOJ has, and then
Housing and Urban Development or HUD.
Am I interpreting all that right?
And then along those lines, if you
were running a credit union, and
you were wanting to be ahead of the
curve on NCOA coming in and poking
around and taking a look at this whole
arena, what would you do if you were
out there running a credit union?
Well, if we can wait for
a few minutes, I got it.
I want to talk about, I want to talk
about that after I talked about the laws
because it'll detail nicely into it.
But yeah, there are things that
the credit union should focus on
and can do to help protect itself.
So, let's talk about the laws and
regulations that are involved with this.
As I mentioned before, the main one
is the Equal Credit Opportunity Act.
It's a federal law.
ECOA is the acronym for those
who are familiar with acronyms.
And the Equal Credit Opportunity
Act prohibits discrimination in
any aspect of a credit transaction.
And it applies to a wide variety of
extensions of credit, including extensions
of credit to small businesses, And
also the corporations, partnerships
and trusts under certain circumstances.
So there are two major
requirements in ECOA.
The first is that it expressly
prohibits discrimination in any
aspect of a credit transaction
based on a list of prohibited bases.
And these are race or color.
And this terminology is from ECOA.
Race or color, religion, national origin,
sex, marital status, age, and that's
provided the applicant has the capacity
to enter into contracts generally 18.
The applicant's receipt of
income be derived on from any
public assistance program and the
applicant's exercise in good faith.
Of any right under the Consumer
Credit Protection Act, that's to
prevent retaliation for an applicant
who has asserted certain rights.
That's the first major
requirement of a COA.
This podcast is too short to go
into all the excruciating details.
But I do want to at least mention
that that's the basis for it.
The 2nd, major requirement
is that a creditor.
Must provide applicants with the
reason for any adverse action and
what adverse action means is a denial
of credit that was applied for, or
a denial of credit under the terms.
Applied for so if an applicant applies
for a mortgage that's advertised
at a certain rate, some type of
term and the creditor counters and
says, you don't qualify for that.
But here is a less favorable set
of terms that you qualify for.
Not necessarily discrimination, but this
must be disclosed to the applicant, the
adverse action notices, the colloquial
term for the disclosure of information.
I just want to mention that the Dodd
Frank Act created a new section in ECOA.
And that requires the collection
of data from applications
for small business credit.
And in fact, CFPB has issued a proposed
rule about what data would be collected
and how it would be collected.
But nothing's going to happen until
that becomes a final regulation.
But I did just want to mention that.
And as you raised Mark, ECOA does provide
for enforcement by regulators and it
provides the right to bring private
lawsuits, including class actions.
Generally, the N.
C.
U.
A.
is the enforcement agency
for federal credit unions.
And the states or the Federal Trade
Commission were named as the enforcement
agency for state charter credit unions.
Most of you probably know that the CFPB
is responsible for enforcement of the
larger financial institutions, those
with over 10 billion dollars in assets.
I don't want to get into that,
but generally speaking for federal
credit unions, the NCUA is the
primary enforcement agency.
And one other thing that you
mentioned, the Department of Justice.
It has certain enforcement authority, but
the equal credit opportunity act requires.
The regulators, including the excuse me
to refer to any financial institution.
It regulates.
Where it uncovers a pattern or practice
of discrimination, that's a requirement.
It's not discretionary.
Right.
So then when that happens during
a fair lending exam at NCOA where
you've determined that that's
happened, NCOA must refer to DOJ.
Correct.
One other thing before we go on.
So ECOA establishes, as you stated,
expressly prohibits discrimination
based on race or color, religion,
national origin, and the other
items that you went through.
When I think back to my examiner
days, a phrase someone once said is,
you can discriminate based on income.
And that's where you get the debt ratios.
And that's where you get the ability
to repay and things like that.
The list of the things that
ECOA protects people from being
discriminated against, it makes sense.
When you look at them, you want to treat
people fairly in all of these areas.
Do you have any comments
relative to the statement?
You can discriminate based on income.
First of all, you have to determine
whether or not it's discrimination, quote,
I mean, this gets into a legal analysis.
If it's not listed, then is
it really discrimination?
I agree with you.
You obviously can use credit related
factors and making that credit
determination and income is one.
It's used all the time.
What I should mention is there
are essentially two different
types of discrimination.
Disparate treatment, which is where you
would provide all people with a certain
prohibited, within a certain prohibited
basis, you treat them differently.
And age is one that is
probably most common.
You're not supposed to
discriminate based on age.
When I was at NCUA, my people
found a number of credit unions
who had different age thresholds.
For certain types of credit or
terms or how they were evaluated
and that is disparate treatment.
Let's pause there.
So let's use me as an example.
I'm not quite this age, but let's
say I was 65 and I'm still working
and I want to get a 30 year mortgage.
You might have policies that
were written theoretically that.
Might have given better opportunities
to someone a little younger with the
theory that a 30 year loan for a 65
year old like me isn't necessarily a
risk, but they're also presupposing
that I'm not going to work till 75, 85.
Am I in the right arena of
what you're thinking there?
It gets a little dicey when
you start talking about that.
There are some exceptions, if you will,
when you're dealing with the adequacy
of collateral and those types of things.
But generally speaking, that
would be discrimination depending
on how things are worded.
I should also mention that ECOA does
permit creditor to treat older people
differently if there is a benefit
to them in the way they're treated.
But that's a different issue.
So a credit union could have no ill will,
could have no intent, but just by having
worded things in a certain way, could
be creating a situation where there's
discrimination, even though all their
intent is good, they just chose to write
the policy in a way that if you step back
and looked at it, could be discrimination.
You're exactly right.
Intent is not an element
of violating ECOA.
To complete the thought, the second
type of discrimination is what's called
disparate impact, where on its face
the rule treats everybody the same,
but the result is that some group in
one of these prohibited bases ends
up on the short end of the lending.
They get overwhelming majority,
get credit under different terms.
And then the question is whether
there was any kind of business
justification for what was happening.
It's to eliminate discrimination
that is not overt, but occurs because
the terms or the conditions for the
extension of the credit are done
in such a way that they improperly
affect the people in that group.
Let me give you an analogy from the
concepts of disparate treatment and
disparate impact, stepping aside from
fair lending, and I'll give you an
analogy where I'm going to try and
build in what you referred to as the
business purpose from some things that
I learned in my previous life at NCUA.
So, the research I did relative to
disparate treatment and disparate impact.
Gave an example of being a fireman and
if a fire department could establish
that fireman, but or fire woman using
the fireman as covering everybody
needed to have the ability to carry.
30 pounds of equipment, 60 pounds, pick
a number, a reasonable number that they
had to carry that up X number of flights
of stairs, because odds are that's what
that person is going to have to do at some
juncture that would establish the business
purpose for having that requirement.
And on average, a male fireman.
Theoretically is going to have a better
and easier ability to carry that weight,
perhaps, but that if it is set up in a
sound fashion, that is a business purpose
where you might have disparate impact
where people succeeding that test to
get into the door to be a fire person.
That could create disparate impact,
but it would not necessarily mean
that it was disparate treatment.
Is that a corollary to what we're
talking about here in Fair Lending?
Yeah, I think it's analogous.
There's some deeper analysis that would
probably have to be done in a Fair
Lending context, but yeah, but that's
essentially a good way to explain it.
The threshold and the burden of proof
might be higher in Fair Lending.
Probably, yeah.
Very good.
Back to where you were.
Okay.
I should have mentioned that ECOA
was implemented by Regulation B.
That's a boy.
So you're looking for the regulation
that contains more details.
It's Regulation B.
Now, the second law is
the Fair Housing Act.
As I mentioned a little bit before, and
in conjunction with Lyndon Johnson, and
that prohibits discrimination in all
aspects of residential real estate related
transactions, and that includes loans for
buying, building, repairing, or improving
a dwelling, purchasing real estate loans.
Selling, brokering, or appraising
residential real estate,
unselling, or renting a dwelling.
And the Fair Housing Act also
has a list of prohibited bases,
but it's different than E.
Coli, it's shorter.
It's only race or color, national
origin, religion, sex, menial status.
And handicap, but you should keep
in mind that ECOA also applies
to mortgage related transactions.
So, even though a transaction might
not fall under the Fair Housing
Act, it could still fall under ECOA.
So, just something to keep in mind, and
the regulations for the Fair Housing Act
are promulgated by HUD, and it's enforced
by HUD and the Department of Justice,
and it also allows for private actions.
And then the third major law that relates
to fair lending is, as I mentioned before,
HMDA, the Home Mortgage Disclosure Act.
That requires financial institutions and
that includes credit unions to compile and
disclose data about home purchase loans,
home improvement loans, and refinancings.
They originate or purchase or for
which they receive applications.
So it doesn't have to be account summated
transactions relating to applications.
And the purpose of HMDA is to provide
the public with data that can be
used to help determine whether
credit unions are serving the
housing needs of their communities.
We're all creditors, not just credit
unions, but also it's to assist
public officials in distributing
public sector investments.
So, as to attract private investment
to areas where it is needed.
And also to assist in identifying
possible discriminatory lending patterns.
And enforcing compliance with
anti discrimination statutes.
It covers, depends on certain thresholds
being met in terms of lending activity.
Again, there's way too much
detail on HMDA to cover it here.
Probably be a good subject
for another session.
And finally, HMDA is implemented
by Regulation C, as in CAT.
Originally, it was a Federal
Reserve Board regulation.
It's now a CFPB regulation.
And just let me just mention
a couple of other laws and
regulations that are important.
I did mention the NCOA non discrimination
regulation earlier, but actually I
mentioned the appraisal regulation.
The non discrimination regulation
prohibits discrimination in real estate
lending and in real estate appraisals
and advertising by federal credit unions.
I also want to mention.
Two other laws, which are sort of lumped
together with fair lending laws, even
though technically they are not one is
the service members civil relief act or
and the other is the military lending act.
The service members civil
relief act applies to certain
transactions generally entered into
before the onset of active duty.
The Military Lending Act applies
to certain transactions that are
entered into by active duty service
members or their dependents.
And although I did say a second ago
that they are technically not fair
lending laws or regulations, that's
sort of not true in some states.
Because there are some states that
actually have anti discrimination laws.
That include a prohibition
against discrimination on
someone based on military status.
So, you could have lending
to service members be a fair
lending matter in certain states.
And I'm going to talk about that in a
minute when I talk about what the credit
unions need to do to protect themselves.
Let's kind of jump into that.
That's where I was going straight
for that about 15 minutes back.
And now we're about to get to that.
So if you were out running a credit
union, what would your focus be?
And how would you do your best
efforts to protect members and
to protect the credit union?
Sure.
All right.
Well, the very first thing is whoever's
going to be in charge of consumer
compliance or fair lending would
know the law and to be an expert in
the law, but they need to read it.
And the regulations so that they
understand that if something
happens, a light bulb will go off.
Ah, I think I remember there's something
in the Fair Lending Act or in HMDA.
I better go look at it to see.
So, knowing the law is very important.
And that ties in to the second thing,
which is That the credit union should have
a robust compliance management system.
The consumer compliance management
system is important because that affects
those transactions dealing with members.
There is no requirement that
the CMS has separate policies
and procedures for fair lending.
When I was at NCUA, we
recommended that credit unions do.
Because Of the significance of fair
lending, what it means to credit
unions members, you're better served
and the members will be better served.
It's a separate fair lending policy
so that those in the credit union
who deal with fair lending are
very clear about their obligations.
Part of a robust CMS is adequate training.
Training should be not only for those
in the lending department, but managers,
anybody who deals with any aspect of
lending, but also credit union management
and board members, because they have
responsibility for policies and procedures
and what happens in the credit union.
There has to be adequate
oversight within the credit union.
Over the lending practices, so that
if there is issues with fair lending,
management will be able to see them.
And finally, the last thing is
oversight over third parties
that the credit union deals with.
Indirect lenders who the credit union
has relationships with, especially
car dealers, because auto financing
is troublesome, can be troublesome
on several different levels.
But also vendors, the people who are
creating the systems that the credit
union is using for lending purposes,
you need to have an understanding
of generally how they work.
You don't have to know how the
programming works or the code.
Yeah, you do have to have
some understanding about that.
A lot of great ideas as you walk through
those, I can highlight that you and I
might need to do some separate podcasts
on several or all of those specific
categories from knowing the law to
CMS, to training, that's something
I'm looking forward to maybe doing a
deeper dive on sometime in the future.
That would be helpful.
I think you're right.
All right.
I've got just two other points when I do
want to talk about NCUA's fair lending
program that you mentioned before earlier,
Mark, the Office of Consumer Financial
Protection and actually the division that
I was head of the Division of Consumer
Compliance Policy and Outreach runs
the fair lending program in the NCUA.
There are dedicated examiners to
conduct the full fair lending exams.
There had been 30 a year, the
board approved the hiring of a
couple of additional fair lending.
Personnel for this year, so that
number is probably going to increase
and in addition to those full
blown fair lending examinations.
There are also what are known as
supervision contacts prior to those
were considered to be off site as
opposed to the onsite examinations.
But they are a little bit more targeted,
they're not as lengthy, and they are often
based on analyses of the HMDA data that
we talked about a little bit earlier.
In addition to those dedicated fair
lending exams and supervision contacts,
pretty much every year, field examiners
who are doing the general exams of
credit unions are also looking at
several consumer compliance areas.
And generally each year there are some
fair lending aspects to those targeted
review areas for 2022 in the NCUA
supervisory priorities letter, it says
that examiners will identify fair lending
policies and practices that indicate
discrimination risk or loan portfolio
and underwriting discrimination risk.
In addition, examiners will assess whether
a credit union has policies and procedures
to evaluate the consistency, fairness,
and accuracy of the appraisals it obtains.
So that's sort of general description
of the targeted fair lending
reviews at all exams this year.
That's a great summary.
Let me kind of paraphrase.
Correct me if I misstate anything.
So the, the standard exam that
credit unions are used to seeing.
Generally speaking, the priority letter
that you referred to are the topics that
those examiners may have some discussions
with the credit union during the contact.
And then within the office that you
worked at, there's the fair lending exams.
And the supervision contacts, and
it sounded like the supervision
contacts, if I heard right,
could come from looking at data.
So at there's some analysis of the
data that may trigger a supervision
contact, which is more of a, maybe
a rightful approach of a contact.
And then there's the full fair lending
exams, and am I right or wrong to
assume that those fair lending exams,
that might be where it's a random
sample where NCUA comes up with who
won the lottery and who's going to
get a fair lending exam, that would be
more of a random sample that wouldn't
necessarily been driven by any data.
It depends.
Each year, the agency would look
at anything that field examiners
may have found when they were
in during the previous year.
Occasionally, we'll get
information from whistleblowers.
There is information that was
obtained from other either
states or other federal agencies.
It wasn't totally random.
In addition to, excuse me, and
there could have been information
that was obtained during the
supervision contact in a prior year.
So some of those fair lending
examinations are based on information
obtained that indicated there
could be a fair lending problem.
In addition, there was a desire to look
at some of the larger credit unions
and possibly some of the smaller ones.
So it was not quite random for
those who weren't there because
there was some information
obtained, but to some extent, yes.
Okay, got it.
So, Joe, if someone was wondering what
the best resources out there on the
World Wide Web for wanting to study this
area, enhance their operations in this
area, where would you refer them to?
The first thing I would look at if
you're federally insured credit union
would probably be the NCOA Fair Lending
Guide, which is on the NCOA's website.
And there is also what's called
the NCOA Federal Consumer
Financial Protection Guide.
That guide contains pretty
much all of the interagency
approved Examination procedures.
So those 2 resources will help.
I can tell you that the NCUA Fair
Lending Guide was undergoing updating
and some revisions at the time that
I retired at the end of last year.
So, at some point, there will
be a new version of that, but
those 2 things are very helpful.
The FFIEC, Federal Financial Institution
Examination Council, which is a group
of the federal regulators, and the
FFIEC, Federal Financial Institution
Examination Council, which is a
group of the federal regulators.
is responsible for
collecting hum the data.
There are a number of hum
the resources on the FFIEC.
gov website.
And then the CFPB, the Consumer
Financial Protection Bureau has
a lot of both fair lending and
hum the resources on its website.
And finally, for those of you who
receive the The NCUA regulatory
alerts and letters to credit unions.
I would recommend looking at those.
They're all archived on the NCUA
website, but every year there are several
regulatory alerts here to HMDA and
occasionally there will be one or two
dealing with federal lending as well.
Those would be the primary resources
I recommend credit unions use.
There's a lot of good nighttime
reading there, I'm sure.
So two things, if there's some
easy to find web links that you
want to send me, I can put them in
the show notes for this episode.
So that someone who's listening
on their laptop might be
able to go there and find it.
And then lastly, before we wrap with
this episode, is there any final words
that you want to share with the audience?
I think that, from my experience,
credit unions as a whole do a
really good job with fair lending.
The attitude of most credit unions is
that they are there to help their members.
I would say that the majority of the
problems, the overwhelming majority
of the problems that with fair lending
that were uncovered while I was there,
not out of intent as you mentioned,
but it was out of ignorance of the
requirements of the several laws.
And probably over reliance on
vendors of lack of training
and those types of things.
That's why I mentioned the compliance
management system requirement.
Credit unions try to get it right,
but they don't always do that.
The more they can educate themselves,
the better off they will be and the
better off their members will be.
That's a great summary, Joe.
All right, well, Joe, I want to
thank you for being available
here for me and for credit unions.
And that's a wrap, folks.
That's it for today.
I'm Mark Treichel and I hope you join
me next time for With Flying Colors.
Thank you for joining us on this
episode of With Flying Colors.
Subscribe on your favorite podcast app to
hear future episodes where subject matter
experts of all varieties will provide
tips on how to achieve success with NCUA.
If you would like to learn more about
how we assist credit unions, check
out our services at marktreichel.
com.
