Presented by:
Gary Iorfido, JD, CCBCO
ACBB’s Compliance Anchor Consultant
Fair Lending Regulations
 The Objective of the Fair Lending laws and regulations is to
make credit broadly accessible without regard to any
prohibited basis
 Equal Credit Opportunity Act (“ECOA”, Reg B: 12 CFR 1002)
 Enacted in 1974
 Falls under the CFPB’s jurisdiction
 Fair Housing Act (FHAct: 12 CFR 100)
 Signed into law by President Lyndon B. Johnson in 1968 as a follow-up
to the Civil Rights Act of 1964
 In 1988, Congress passed the Fair Housing Amendments Act, which
expanded the law to prohibit discrimination in housing based on
disability or on family status (pregnant women or the presence of
children under 18).
 Regulated by HUD
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Related Federal Laws
 Home Mortgage Disclosure Act (HMDA)
 Enacted in 1975 and implemented by Regulation C
 Provide the public with loan data used to determine whether housing
credit needs are being met
 Assist public officials in distributing public sector investments
 Assist in identifying possible discriminatory lending patterns
 Community Reinvestment Act (CRA)
 Enacted in 1977 and implemented by Regulation BB
 Encourages financial institutions to help meet the credit needs of their
communities in which they operate, including low- and moderateincome neighborhoods, consistent with safe and sound banking
operations
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Equal Credit Opportunity Act
ECOA applies to any extension of credit, including those to
business entities, and prohibits discrimination based on:
Race or color
Religion
National origin
Sex
Marital status
Age (provided applicant is of legal capacity to contract)
Receipt of income derived from any public assistance program
(including Section 8 housing allowances)
 Applicant’s exercise, in good faith, of any right under the Consumer
Credit Protection Act
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Equal Credit Opportunity Act
 Under ECOA it is also illegal for creditors to:
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Ask about marital status if an applicant is applying for separate,
unsecured credit with the following exceptions:
o Applicants living in a community property state.
o No matter what the state of residence is, joint credit (credit
shared by a married couple) or credit secured with property
Ask if the applicant plans to have children or additional children
o Creditors can ask about the number, ages, and financial obligations
relating to all existing children.
Refuse to consider or discount any income earned from a part-time
job, pension, annuity, or retirement benefits program.
Disallow regular sources of income, such as reliable veteran’s
benefits, welfare payments, Social Security payments, alimony, child
support, etc.
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Fair Housing Act
 FHAct prohibits discrimination in all aspects of residential
real estate-related transactions based on
Race or color
Religion
National origin
Sex
Familial status (defined as children under the age of 18 living with a
parent or legal custodian, pregnant women, and people securing
custody of children under 18)
 Handicap
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Fair Housing Act
 “Residential real estate-related transactions” include:
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Making loans to buy, build, repair or improve a dwelling
Purchasing real estate loans
Selling, brokering or appraising residential real estate
Selling or renting a dwelling
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Prohibited Bases
 ECOA
Race or Color
Religion
National Origin
Sex
Marital Status
Age
Income from public
assistance
 Right exercised under
Consumer Credit Protection
Act
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 Fair Housing Act
Race or Color
Religion
National Origin
Sex
Familial Status (defined as
children under 18 living
with parent or custodian,
pregnant women)
 Handicap
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ECOA and FHAct
 Prohibitions under both laws on any prohibited basis:
 Failure to provide information or services or provide different
information or services regarding any aspect of the lending process,
including credit availability, application procedures, or lending
standards
 Discouraging or selectively encouraging applicants
 Refusal to extend credit or using different standards in determining
whether to extend credit
 Varying the terms of credit offered, including the amount, interest
rate, duration, or type of loan
 Using different standards to evaluate collateral
 Treating a borrower differently in servicing a loan or invoking default
remedies
 Using different standards for pooling or packaging a loan in the
secondary market
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Factors You Can Consider
 Income
 Amount and probable continuance
 Cannot discount or exclude part-time or retirement income
 Income of spouse used in a credit application must be considered
equally with that of the applicant
 Alimony, child support, or separate maintenance payments should be
considered to the extent that such payments are likely to be
consistently made
 Debt to Income
 Savings, Investments, Real Estate of the applicant
 Immigration Status
 May consider whether applicant is a legal resident of the United States
 May differentiate between a non-citizen who has been a long-time
resident and someone who is here on a temporary visa
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Factors You Can Consider (Con’t.)
 Credit History
 Lender should consider credit history of accounts that the applicant
and applicant’s spouse are permitted to use or for which both are
contractually liable
 Upon request, any information that the applicant presents to show
credit information is inaccurate
 Upon request, any credit in the name of applicant’s spouse or former
spouse that demonstrates the applicant’s creditworthiness
 Savings, Investments, Real Estate of the applicant
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Types Of Lending Discrimination
 Three methods of proof recognized by courts:
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Overt evidence of disparate treatment
Comparative evidence of disparate treatment
Evidence of disparate impact
 Disparate Treatment: Lender explicitly considers prohibited
factors (overt) or differences in treatment not fully
explained (comparative evidence)
 Disparate Impact: Policy or practice disproportionately
excludes or burdens certain persons or groups on a
prohibited basis, whether intentional or not.
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Even if disparate impact can be justified by "business necessity," it
may still be found to be discriminatory if an alternative policy or
practice could serve the same purpose with less discriminatory
effect.
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Types Of Lending Discrimination
 Most lenders are not intentionally biased or discriminatory
(overt)
 Disparate treatment is more likely to occur in the margins –
applicant is not clearly well-qualified nor clearly unqualified
 Loan Officer discretion in pricing or granting policy
exceptions increases the bank’s risk of disparate treatment
considerably
 Level of assistance to applicants to help them qualify for
credit should be consistent and without any prohibited bias
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Lenders are under no obligation to provide such assistance, but to
the extent that they do, it must be provided uniformly
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Overt Discrimination
 Indicators of overt discrimination
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Including explicit prohibited basis identifiers in the institution’s
written or oral policies and procedures (underwriting criteria, pricing
standards, etc.)
Collecting information, conducting inquiries or imposing conditions
contrary to express requirements of Regulation B
Including variables in a credit scoring system that constitute a basis
or factor prohibited by Regulation B or, for residential loan scoring
systems, the FHAct. (i.e., age)
Statements made by the institution’s officers, employees or agents
which constitute an express or implicit indication that one or more
such persons have engaged or do engage in discrimination on a
prohibited basis in any aspect of a credit transaction
Employee or institutional statements that evidence attitudes based
on prohibited basis prejudices or stereotypes.
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Overt Discrimination - Examples
 Lender offers a credit card with a limit of $750 for
applicants aged 21-30 and $1,500 for applicants over 30.
(Age discrimination)
 LO tells a customer “we do not like to make home
mortgages to Native Americans, but the law says we cannot
discriminate and we have to comply with the law”
 Bank does not grant 30 year home mortgages to applicants
over 70 years of age because they “won’t live long enough
to repay”
 Bank uses a credit scoring model for residential mortgages
that considers an applicant’s age
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Indicators Of Disparate Treatment
 Underwriting
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Substantial disparities among the approval/denial rates for applicants
by monitored prohibited basis characteristic (especially within
income categories)
Substantial disparities among the application processing times for
applicants by monitored prohibited basis characteristic (especially
within denial reason groups)
Substantially higher proportion of withdrawn/incomplete
applications from prohibited basis group applicants than from other
applicants
Vague or unduly subjective underwriting criteria
Lack of clear guidance on making exceptions to underwriting criteria,
including credit scoring overrides
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Indicators Of Disparate Treatment
 Underwriting (Cont’d)
 Lack of clear loan file documentation regarding reasons for any
exceptions to standard underwriting criteria, including credit scoring
overrides
 Relatively high percentages of either exceptions to underwriting
criteria or overrides of credit score cutoffs
 Loan officer or broker compensation based on loan volume (especially
loans approved per period of time)
 Consumer complaints alleging discrimination in loan processing or in
approving/denying residential loans.
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Indicators Of Disparate Treatment
 Pricing (Interest Rates, Fees, Or Points)
 Financial incentives for loan officers or brokers to charge higher prices
(including interest rate, fees and points). Special attention should be
given to situations where financial incentives are accompanied by
broad pricing discretion, such as through the use of overages or yield
spread premiums.
 Presence of broad discretion in loan pricing (including interest rate,
fees and points), such as through overages, underages or yield spread
premiums. Such discretion may be present even when institutions
provide rate sheets and fees schedules, if loan officers or brokers are
permitted to deviate from those rates and fees without clear and
objective criteria.
 Substantial disparities among prices being quoted or charged to
applicants who differ as to their monitored prohibited basis
characteristics
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Indicators Of Disparate Treatment
 Pricing (Cont’d)
 Consumer complaints alleging discrimination in residential loan
pricing.
 In mortgage pricing, disparities in the incidence or rate spreads of
higher-priced lending by prohibited basis characteristics as reported in
the HMDA data.
 A loan program that contains only borrowers from a prohibited basis
group, or has significant differences in the percentages of prohibited
basis groups, especially in the absence of a Special Purpose Credit
Program under ECOA.
 Use of risk-based pricing that is not based on objective criteria or
applied consistently
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Indicators Of Disparate Treatment
 Steering
 Lack of clear, objective and consistently implemented standards for
o referring applicants to subsidiaries, affiliates, or lending channels
within the institution
o classifying applicants as “prime” or “sub-prime” borrowers, or
o deciding what kinds of alternative loan products should be offered
or recommended to applicants (product placement).
 Financial incentives for loan officers or brokers to place applicants in
nontraditional products (i.e., negative amortization, “interest only”,
“payment option” adjustable rate mortgages) or higher cost products.
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Indicators Of Disparate Treatment
 Steering (Cont’d)
 For an institution that has one or more sub-prime mortgage
subsidiaries or affiliates, any significant differences, by loan product, in
the percentage of prohibited basis applicants of the institution
compared to the percentage of prohibited basis applicants of the
subsidiary(ies) or affiliate(s).
 For an institution that has one or more lending channels that originate
the same loan product, any significant differences in the percentage of
prohibited basis applicants in one of the lending channels compared to
the percentage of prohibited basis applicants of the other lending
channel.
 Consumer complaints alleging discrimination in residential loan pricing
or product placement.
 For an institution with sub-prime mortgage subsidiaries, a
concentration of those subsidiaries’ branches in minority areas
relative to its other branches.
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Indicators Of Disparate Treatment
 Marketing
 Advertising patterns or practices that a reasonable person would
believe indicate prohibited basis customers are less desirable.
 Advertising only in media serving non-minority areas of the market.
 Marketing through brokers or other agents that the institution knows
(or has reason to know) would serve only one racial or ethnic group in
the market.
 Use of marketing programs or procedures for residential loan products
that exclude one or more regions or geographies within the
institutions assessment or marketing area that have significantly
higher percentages of minority group residents.
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Indicators Of Disparate Treatment
 Marketing (Cont’d)
 Using mailing or other distribution lists or other marketing techniques
for prescreened or other offerings of residential loan products that:
o Explicitly exclude groups of prospective borrowers on a prohibited
basis; or
o Exclude geographies (e.g., census tracts, ZIP codes, etc.) within the
institution's marketing area that have significantly higher
percentages of minority group residents
 Advertising that leads a reasonable person to believe prohibited basis
customers are less desirable
 Proportion of prohibited basis applicants is significantly lower than
that group's representation in the total population of the market area.
 Consumer complaints alleging discrimination in advertising or
marketing loans.
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Disparate Treatment
COMPARATIVE EVIDENCE
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LO finds similar adverse credit information on applications for a nonminority couple and a minority couple
“You have some
delinquencies on your credit
report. If you can provide
satisfactory explanations,
we may be able to get you
approved.”
Minority Applicants –
declined without affording
applicants opportunity to
provide explanations.
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Disparate Treatment
Comparative Evidence
 Two applications with similar characteristics (LTV, DTI,
employment stability, credit scores)
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Minority applicant’s loan is priced 1/8% higher because LO’s have
certain pricing discretion within limits.
 If you’re allowing lender discretion to go outside of a pricing
matrix in response to “competitive pressures”, you’re
setting yourself up for potential Fair Lending violations. A
pricing differential as low as 1/8% can be escalated to the
DOJ as a Fair Lending violation
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Disparate Impact - Examples
 A lender's credit policy sets a minimum loan amount for single
family residences at $60,000. This policy has been in effect for
ten years.
 This minimum loan amount policy is shown to disproportionately
exclude potential minority applicants from consideration because of
their income levels or the value of the houses in the areas in which
they live
 A bank’s incentive compensation program allows loan officers
to generate higher commissions for higher dollar loans, which
encourages lending staff to give preference to loan applicants
with higher income and net worth, to the disadvantage of
lower income minority applicants or communities.
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Disparate Impact
Recent court case may give rise to new interagency guidance:
Texas Department of Housing and Community Affairs v.
Inclusive Communities Project, Inc.
June 25, 2015
 August 5, 2015 letter from ABA is requesting that the
supervisory agencies provide a framework to limit disparate
impact liability challenges to cases where there are “artificial,
arbitrary and unnecessary barriers”:
 Focus initially on enforcing fair lending requirement based on
disparate treatment
 Only pursue disparate impact claim when there is evidence that an
available alternative or practice that has less disparate impact and
serves the entity’s legitimate needs exists
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Redlining
 Providing unequal access to credit, or unequal terms of credit
based on prohibited characteristic(s) of the residents of the
area in which the credit seeker resides or will reside or in
which the residential property to be mortgaged is located.
 Failure or refusal to extend credit in certain areas;
 Targeting certain borrowers or certain areas with less advantageous
products
 Making loans in such an area but at a restricted level or upon lessfavorable terms or conditions as compared to contrasting areas
 Omission or exclusion of such an area from efforts to market
residential loans or solicit customers for residential credit
 Redlining may violate both the FHAct and ECOA.
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Redlining – Potential Indicators
 Significant differences, as revealed in HMDA data, in the
number of applications received, withdrawn, approved not
accepted, and closed for incompleteness or loans originated
in minority versus non-minority markets
 Significant differences between approval/denial rates for all
applicants (minority and non-minority) in areas in minority
versus non-minority markets
 Significant differences between denial rates based on
insufficient collateral for applicants from minority versus nonminority markets
 Patterns of lending identified that differ by the concentration
of minority residents
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Redlining – Potential Indicators
 Significant differences in the number of originations of higherpriced loans or loans with potentially negative consequences
for borrowers, (i.e., non-traditional mortgages, prepayment
penalties, lack of escrow requirements) in minority versus
non-minority markets
 Establishing credit product markets that excludes MSAs,
political subdivisions, census tracts, or other geographic areas
within the institution's lending market or CRA assessment
areas and having relatively high concentrations of minority
residents.
 Difference in services available or hours of operation at
branch offices located in in minority versus non-minority
markets
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Redlining – Potential Indicators
 Policies on receipt and processing of applications, pricing,
conditions, or appraisals and valuation, or on any other aspect
of providing residential credit that vary between minority
versus non-minority markets
 The institution’s CRA assessment area appears to have been
drawn to exclude areas with relatively high concentrations of
minority residents
 Employee statements that reflect an aversion to doing
business in areas with relatively high concentrations of
minority residents
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Redlining – Potential Indicators
 Complaints or other allegations by consumers or community
representatives that the institution excludes or restricts
access to credit for areas with relatively high concentrations
of minority residents
 An institution that has most of its branches in predominantly
non-minority neighborhoods at the same time that the
institution's sub-prime mortgage subsidiary has branches
which are located primarily in predominantly minority
neighborhoods
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Marketing And Advertising
 Understand racial and national origin demographics
throughout Assessment Areas and general market footprint
 Ensure that any predominantly minority area is not excluded,
underserved, or selectively excluded from marketing efforts,
or less favorably treated in any way
 Review marketing materials for any potential bias (or
redlining) in the institution’s guidance regarding (for
example):
 the geographical distribution of pre-approved solicitations for home
purchase, equity or refinance loans, credit cards or other credit
 advertisements in local media or business or telephone directories
 business development calls to real estate brokers
 Ensure products and loan terms will not unfairly disadvantage
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any minority group or geography
Responsibilities
 Board and Management set the tone and expectations for
compliance with Fair Lending Laws
 Establish ZERO TOLERANCE POLICY for discrimination of any kind
 Know the demographics of the markets served by the institution
 Establish special lending programs designed to assist certain
underserved populations, where appropriate and reasonable to do so
 Ensure Fair Lending training is administered throughout the
organization from Board to front line staff on an annual basis
 Require sufficient reporting to Board on Fair Lending compliance
management, audit results, consumer complaints
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Responsibilities
 Loan Committees
 Awareness of Fair Lending principles in decision making
 Periodic review of policy exceptions and overrides for reasonableness
and any potential prohibited bias
 Senior Management
 Policy development without prohibited bias or disparate impact
 Creating appropriate product offerings with terms that give consumers
equal access to credit without disproportionately disadvantaging any
minority group
 Setting appropriate lending authority limits and minimizing or
eliminating Loan Officer discretion in terms or pricing without
secondary approval
 Ensuring that compensation programs would not result in
discriminatory behaviors or bias in lending efforts of loan officers
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Responsibilities
 CLO and Loan Officers
 Adhere to the bank’s credit policies and pricing guidelines
 Encourage credit applicants equally without bias toward any
prohibited bases characteristics – focus on credit and capacity
 Ensure any credit scoring systems are validated and do not create
prohibited bias in loan decisions
 Ensure all approval and denial decisions are justified and well
documented
 Branch Personnel, Call Center Staff and CSR’s
 Front line staff, including tellers and call center staff, must ensure no
one is discouraged from making application for credit based upon any
prohibited factor
 Human Resources
 Ethics policy should include Fair Lending and non-discrimination
clauses
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Responsibilities
 Loan Operations, Servicing and Collections
 Loan servicing and error resolution must be performed without
prohibited bias
 Collections activities, including loss mitigation assistance
offered/provided, should be monitored for any disparate treatment of
minority customers or minority areas
 Marketing Department
 Ensuring advertisements and promotions are free of any overt or
potentially perceived bias based on targeted consumer groups,
geographies or delivery channels
 Product and Business Development Committees
 Ensure Fair Lending concepts are considered in all product
development and business initiatives or promotions
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Responsibilities
 Compliance Officer
 Perform an internal self-assessment using a questionnaire designed to
evaluate overall Fair Lending risk. Consider:
o Policies and procedures and adherence to same
o Internal controls
o Marketing
o Product offerings
o Delivery channels
o Consumer complaints
 Evaluate HMDA LAR approvals and denials for evidence of potential
disparity on any prohibited bases
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Responsibilities
Compliance Officer (cont’d)
 Perform periodic review of adverse actions to ensure credit decisions
are sufficiently documented, supported by adequate information and
analysis, and not discriminatory
 Review consumer complaints for any alleged Fair Lending or UDAAP
issues
 Comparative file analysis to conduct match pair testing for disparate
treatment
 Prepare periodic reports to Board and Management about the
institution's Fair Lending risk based on data analyzed, risk assessments
performed, relevant consumer complaints, policies and practices
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Responsibilities
 CRA Officer
 Ensure no redlining when defining Assessment Areas
 Evaluate lending activity (approvals, denials, marketing, promotions) in
minority and LMI tracts within Assessment Areas and outside of
defined Assessment Areas
o Use more granular census tract delineations, even within an
individual Assessment Area, where LMI areas may have different
racial composition from one section to another
 Provide market demographics and analysis to Management and Board
to support informed, strategic decisions that will ensure credit needs
of the bank’s markets are adequately served without prohibited bias
 Review consumer complaints for potential Fair Lending or CRA related
issues
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Policy Considerations
 Policies and procedures of the institution should enable
management to prevent, or to identify and self-correct,
illegal disparate treatment
 Underwriting and loan servicing guidelines should be very
clear, including appropriate criteria and limits for granting
extensions and renewals
 Specifically include ECOA and FHAct precepts and prohibitions in loan
policies
 Secondary sign-off requirements for declinations to ensure adequate
consideration was given and reasons for denial are supported by file
documentation and analysis.
 Collections activities, including foreclosure and repossessions,
must not be racially biased or disadvantage any prohibited
basis group or individual
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Policy Considerations
 Loss mitigation programs must be afforded those who qualify
without regard to any prohibited basis
 Minimize or eliminate individual lender discretion in
overriding credit criteria, loan terms or pricing guidelines
 Ensure overrides and policy exceptions are tracked and periodically
analyzed for potential disparate treatment
 Appraisal process
 Anti-coercion and independence in the appraisal process
 Independent appraisal reviews to ensure not only compliance with
appraisal standards, but also that minority neighborhood appraisals
are consistent with those in non-minority areas as far as appraisal
quality and analysis
 Lender compensation programs must not incentivize steering
and cannot be driven by profit metrics
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Management Reporting
 Board and Management should receive periodic reports of
Fair Lending oversight and risk
Risk Assessments and any related action plans
Self-Assessment Questionnaire
Comparative File Analysis
Market demographics compared to lending trends and production
Summaries of approvals and denials, as well as credit concessions or
policy overrides, for control groups v. prohibited bases groups within
different product types, and other relevant data
 Results of any Fair Lending audits or reviews
 Informational updates on regulatory actions against lenders for Fair
Lending violations
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Training
 Annual Fair Lending training
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Board of Directors
Management
Lending, Loan Operations and Collections Personnel
Front line and CSRs
Marketing Personnel
Compliance Officer and CRA Officer
 Include Fair Lending training with new employee orientation
 Utilize recent enforcement action examples as reinforcement
tool
 May utilize online courses, but ensure that Fair Lending
concepts are understood and adhered to
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Training
 At a minimum, annual Director and employee Fair Lending
training should include:
ECOA & FHAct
Basics and
Prohibited
Bases
Disparate
Treatment
and Disparate
Impact
Concepts and
Examples
Bank Policies
and Fair
Lending
Compliance
Expectations
Consequences
for Fair
Lending
Violations
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Penalties And Enforcement Actions
 RPM Mortgage, Inc. and its CEO – June 2015 – $1MM CMP
each, and $18MM restitution to consumers
RPM informs its loan officers that higher-interest-rate loans will result
in higher secondary-market prices, generating higher profits for RPM.
 Before the Compensation Rule became effective, RPM paid its loan
officers a “commission split,” that is, a pre-determined percentage of
the rebate or profit generated on a closed loan.
o Loan officers shared in the profits generated on higher-interestrate loans and thus had a financial incentive to steer consumers to
those more expensive products.
 After the Compensation Rule went into effect, RPM implemented a
new compensation plan based on “employee-expense accounts.”
o Like the one that preceded it, this compensation plan tied the loan
officers’ compensation to the interest rates of the loans they
originated.
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Penalties And Enforcement Actions
 Provident Funding Associates, L.P. – May 2015 - $9MM
restitution for violating FHAct and ECOA
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Provident had a pricing policy that gave the company’s loan brokers a
high level of discretion in setting interest rates and fees for mortgage
loans. Higher interest rates charged led to higher yield spread
premiums for the brokers.
The CFPB and the DOJ contend that this policy led to African
American and Hispanic borrowers being charged more in total broker
fees than white borrowers based on race rather than overall credit
risk.
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Penalties And Enforcement Actions
Ally Financial Inc. and Ally Bank – 2013 - $80MM in damages
to consumers
Ally had a policy of giving dealers the discretion to increase or “mark up”
consumers’ interest rates, and paying dealers for those markups.
 Between April 2011 and December 2013, Ally’s markup policy
resulted in African-American, Hispanic, Asian and Pacific Islander
borrowers paying more for auto loans than similarly situated nonHispanic white borrowers.
 Auto Fare, Inc. - June 2014 - $225,000 settlement
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Owners and operators of two “buy here, pay here” used car
dealerships violated ECOA by engaging in a pattern or practice of
reverse redlining – or intentionally targeting African-American
customers for unfair and predatory credit practices – in the
financing of used car purchases.
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Penalties And Enforcement Actions
 Fifth Third Mortgage Co. – August 2014 - $1.5MM
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Company engaged in a pattern or practice of discrimination in
violation of the FHA and ECOA. Specifically, the defendants required
credit applicants with disabilities to provide an official letter from
their medical doctor to substantiate that their disability income
would continue, but did not impose a documentation burden on
applicants without disabilities to prove their income would
continue. The case arose from a referral from HUD.
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Penalties And Enforcement Actions
 Hudson City Savings Bank – 2015 - $25 million in loan
subsidies, $2.25 million in community programs and
outreach, and a $5.5 million penalty.
 The CFPB and DOJ allege that the Bank
 Engaged in discriminatory redlining practices that denied residents in
majority-Black-and-Hispanic neighborhoods fair access to mortgage
loans.
 Illegally provided unequal access to credit to neighborhoods in New
York, New Jersey, Connecticut, and Pennsylvania.
 Located branches and loan officers, selected mortgage brokers, and
marketed products to avoid and thereby discourage prospective
borrowers in predominantly Black and Hispanic communities.
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Penalties And Enforcement Actions
 National City Bank – 2014 – $35 million in restitution
 The bank charged higher prices on mortgage loans to AfricanAmerican and Hispanic borrowers than similarly creditworthy white
borrowers
 The CFPB and DOJ allege that National City Bank’s discretionary pricing
and compensation policies caused the discriminatory pricing
differences.
 National City gave its loan officers and brokers the discretion to set
borrowers’ rates and fees.
 National City then compensated the officers and brokers from extra
costs paid by consumers.
 African-American and Hispanic borrowers paid higher costs because of
this discriminatory pricing and compensation scheme.
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2014 DOJ REPORT
18 referrals in 2014:
 12 involving race or
national origin;
 5 involving sex;
 4 involving marital
status;
 3 involving age; and
 3 involving source of
income
Record Relief
From 2010 through 2014, the Division
has obtained more than $1.2 billion in
monetary relief in lending settlements
under ECOA, FHA, and SCRA.
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Consequences of Fair Lending Violations
Fines and
penalties
Restitution
Substantial
revisions to
policies and
procedures
Enhanced
Fair Lending
training
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Non-monetary Consequences
Significant
reputation damage
Potential Non-Monetary
results of Fair Lending
violations and related
enforcement actions
Business
interruption
Adverse CRA rating
Supervisory
Restrictions
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RESOURCES
 FDIC Side by Side: A Guide to Fair Lending -
https://www.fdic.gov/regulations/resources/side/parttwo.html#Selecting
 The Attorney General’s 2014 Annual Report to Congress
Pursuant to the Equal Credit Opportunity Act Amendments of
1976 -
file:///C:/Users/lzigo_000/Documents/STERLING/TRAINING/ecoareport20
14.pdf
 ABA Letter -
http://www.aba.com/Advocacy/commentletters/Documents/8-515KeatingLettertoRegulatorsreApplicationoftheDisparateImpact.pdf
 Interagency Fair Lending Examination Procedures http://www.ffiec.gov/PDF/fairlend.pdf
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Contact Information
Gary Iorfido, JD, CCBCO
Compliance Consultant
717-580-1192
[email protected]
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