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Are Bank Directors Worried Enough About Fair Lending?

September 28 , 2022

By Kareem Saleh

Bank directors and executives, be warned: Federal regulators are focusing their lasers on fair lending.

If your bank has not modernized its fairness practices, the old ways of doing fair lending compliance may no longer keep you safe. Here are three factors that make this moment in time uniquely risky for lenders when it comes to fairness.

1. The Regulatory Spotlight is Shining on Fair Lending.
Fair lending adherence tops the agendas for federal regulators. The Department of Justice is in the midst of a litigation surge to combat redlining. Meanwhile, the Consumer Financial Protection Bureau has published extensively on unfair lending practices, including a revision of its exam procedures to intensify reviews of discriminatory practices.

2. Rising Interest Rates Have Increased Fair Lending Risks.
After years of interest rate stability, the Federal Reserve Board has issued several rate increases over the last three months to tamp down inflation, with more likely to come.

3. Penalties for Violations are Growing More Severe.
If your institution commits a fair lending violation, the consequences could be more severe than ever. It could derail a merger or acquisition and cause a serious reputational issue for your organization. Regulators may even hold bank leaders personally liable.

No matter what actions you take, a winning strategy will be proactive, not reactive. The time to modernize is now, before the old systems fail your institution.

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Read about our State of Mortgage Fairness Report in USA Today.  Read the Article
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