All in Compliance Management
A current hot topic with examiners, Adam explains how a financial institution can assess fair lending risk.
Regulation D sets transaction limitations on savings accounts where a customer is not permitted to make more than 6 restricted transaction from the account during the statement cycle (or calendar month). If a customer repeatedly makes excessive withdrawals, Regulation D, by definition, changes the account type from a savings account to a transaction account. The result is that a converted account would be incorrectly reported on the Call report by the financial institution. Therefore, Regulation D requires financial institutions to monitor restricted transactions and to take action if a consumer exceeds the maximum number of transactions permitted on a savings account.
Fair lending is one of the hottest topics in regulatory compliance. As the dust has settled from TRID and the examiners haven’t quite focused their full efforts on the new HMDA rules, fair lending scrutiny is as intense as it ever has been. In fact, it always has been a hot topic and will always be one. One trend new trend that I have been seeing, however, is a demand for community banks and credit unions to conduct a fair lending risk assessment.
On the surface, collecting and recording demographic information (DI) seems fairly straightforward and simple. One would assume that requesting and collecting the ethnicity, race, and gender of an applicant wouldn’t be terribly difficult. Besides, the requirement to collect government monitoring information (GMI) has been around for nearly 40 years (though the regulators just recently changed the reference from GMI to DI). Why is it then that so many financial institutions still struggle with...
Loan exceptions occur any time a loan file does not meet the established standards for a financial institution. Lenders typically have guidelines they must follow, and when those guidelines are not exactly adhered to, an exception occurs. There are typically two types of loan exceptions: 1) Policy exceptions and 2) underwriting exceptions. Policy exceptions occur when...
Conducting a second review of Adverse Action notices is one of the best ways to reduce fair lending risk. For this reason, examiners will often recommend a formal process by which to conduct a secondary review of adverse action notices if a bank or credit union does not already have one established. We believe that a second review should include two parts: 1) a technical...
