Simplifying the Fair Lending Risk Assessment - ABA - … · Web viewThe following represent a number of questions you may wish to add to your fair lending risk assessment. ... basis

Additional Indicators and Factors to Consider for Fair Lending Risk Assessment

The following represent a number of questions you may wish to add to your fair lending

risk assessment. Clearly not every question that could be asked is listed in the various

risk sources or in the SMAART compliance program factors. But the questions that

follow should provide you a strong foundation from which to build your unique fair

lending risk assessment for your bank. Where necessary, you should develop additional

questions that specifically apply to your bank and the fair lending issues you must

manage.

The questions below are organized by the risk sources and SMAART factors described

and discussed in the Fair Lending Risk Assessment Tool. Some questions depending

on the way they are worded can apply to more than one risk category and even different

SMAART factors. If you see questions in one category that you believe you can use in

another category that is OK. As stated in the Tool, there is no set format for conducting

a fair lending risk assessment and set of specific questions you can ask in documenting

your risk profile or identifying you fair lending risk exposure.

Risk Source 1: Retail Footprint and Marketing Strategy

Market Circumstances

1. How diverse are the borrower characteristics in the markets covered by your retail footprint or the

geographic areas adjacent to your footprint?

2. Does the bank’s CRA-delineated assessment area exclude any adjacent low- or moderate-income

geographies?

3. Does the bank modify its lending activities to react to the local economy?

4. Do the bank’s strategic growth plans reflect community growth and demographic trends?

5. Do unexplained lending gaps exist within your market area?

6. Do community groups in your market area express concern about adequacy of lending?

7. What is the demographic make-up of your existing portfolio versus new loans coming in?

1 ABA Toolbox on Fair Lending

8. Do the demographics of the portfolio match the community demographics?

9. Are there conspicuous lending gaps within your service area?? Are there reasons that explain why?

10. Are there demographic shifts in the community that are not reflected in census data?

11. How does the local economy and competition impact your lending activities?

12. How consistent is the demographics of the loan portfolios with community demographics and

identified credit needs?

13. How diverse are the borrower characteristics in the markets covered by your retail footprint or the

geographic areas adjacent to your footprint?

14. Are market area determinations based on ZIP codes or census tracts rather than MSAs or larger

geographical subdivisions when considering HELOC modifications?

Delivery Channels

1. What delivery channels exist and do products or product terms vary by channel?

2. Does the bank have operating subsidiaries or loan production offices that originate loans using

incentives or standards different from that of the bank?

3. Are underwriting and pricing standards consistent among lending channels and bank lending

centers?

4. Are there any disparities on a prohibited basis by lending channels that originate the same product?

5. Does loan product marketing vary by geographic area or delivery channel? Is so, why and does it

influence the products that are available to potential borrowers who may have differing prohibited

basic characteristics?

6. Does any credit administration activity, such as application processing, servicing, loss mitigation, etc.

vary by any delivery channel?

7. Does the bank have a wholesale lending operation which services a larger geographic area than the

bank’s retail branch footprint?

8. Do underwriting terms for the same product vary depending on the delivery channel?

Production Complexity

1. Does the bank only offer a traditional mix of non-complex loan products?

2. Are special prices, products, or services offered in some markets and not others?

3. Do different loan products penetrate geographic or borrower markets differently?

4. Is the bank using sophisticated lending platform technology to support loan production?

5. Are standards for referring applicants to other product choices, subsidiaries, or other lending

channels clear, objective, and consistently applied?

6. Does the bank’s volume of and options for consumer, small business, and commercial lending match

its business strategy throughout its market area?


7. Does the bank have a significant and explainable volume of consumer lending? Small Business

lending?

8. Do credit administration changes impact only certain products or services?

Marketing

1. Has the marketing and advertising media used varied recently?

2. Have new or different product sets been marketed and were they marketed throughout your market

area?

3. Has marketing or advertising coverage within your market area changed recently?

4. Is marketing done in languages besides English?

5. Do marketing and advertising materials vary to promote special or limited time offers?

6. Is your level of marketing and advertising tailored or targeted to address market competition?

7. What types of media are utilized?

8. Is scripting for tellers or telephone sales representatives used?

9. Have the materials been reviewed prior to implementation?

10. What level of advertising is used to address market competition?

11. What loan product or service marketing is performed?

12. Would a reasonable person believe that your advertising patterns or practices indicate certain

customers are less desirable?

13. Do you advertize only in media serving particular racial or national origin areas of the market?

14. Does marketing through brokers or other agents that the bank knows (or has reason to know) serve

only one racial or national origin group in the market?

15. Do you use marketing programs or procedures for residential loan products that exclude one or

more regions or geographies within the bank's assessment or marketing area that have

significantly higher percentages of residents of a particular racial or national origin group than does

the remainder of the assessment or marketing area?


Risk Source 2: Degree of Credit Administration Discretion Allowed

Lending policies and procedures approved by credit administration

1. Are credit operations centralized or decentralized?

2. Have credit administration guidelines, policies, and standards changed recently in any credit

administration activity?

3. Are credit administration policies, procedures, and standards in each credit administration activity

clear and objective, and communicated to appropriate staff?

4. Do procedures articulate expectations for providing consistent applicant/borrower assistance in each

credit administration activity?

5. Are actual practices used in each credit administration activity consistent with established policy,

procedure, or standard?

6. Are policies, procedures, and practices in each credit administration activity devoid of any overt

discriminatory language, stereotypes, or geographic limitations?

7. If credit administration is decentralized, are products or services for separate operating centers

evaluated separately.

8. If credit administration is decentralized, how effective is the enterprise-wide control environment?

9. Are loan applicants referred to other products that may be less advantageous or that are priced

higher?

10. Are loan applicants referred to products in other lending channels?

11. Have credit administration policies, procedures, standards, or guidelines changed recently?

12. Are all credit administration personnel aware of changes to policies, procedures, standards, or

guidelines?

13. Are credit administration policies, procedures, standards, or guidelines easy to incorporate into daily

operations?

14. Are pricing and other terms and conditions standards objective?

15. Are underwriting criteria vague or subjective?

16. Are lending–related policies, procedures, and practices clear and objective?

17. Is loan underwriting centralized or decentralized?

18. Does credit administration employ automated underwriting standards?

19. Are scoring systems used in any aspect of the credit transaction (underwriting, pricing, servicing,

waivers, credit line increases, and so forth)?

20. Do the automated scoring system cutoff scores appear objective and based in solid financial

decisioning?

21. Are automated scoring systems used for all applications of the same type?

22. Are escrow account procedures clear and objective?


23. Is fair lending part of product development and approval processes?

Degree of discretion in credit administration process

1. What amount of judgment or discretion can credit administration staff exercise in making decisions?

2. Does the degree of permitted discretion change by geographic area, delivery channel or credit activity

– application processing, underwriting, loss mitigation, servicing, etc.?

3. Can the exercise of discretion impact lender or other staff compensation?

4. Do lenders or other staff involved in different credit activities – application processing, underwriting,

servicing, etc. - document their exercise of discretion?

5. Are criteria that guide lenders and other staff discretion clear and objective, and how are the criteria

communicated to appropriate staff?

6. Are there disparities in the level of permitted discretion exercised in each credit administration activity

by prohibited basis characteristics?

7. Are pricing policies and guidance for discretion objective?

8. Are corrective actions taken when discretion errors or missteps are found?

9. Is lender discretion covered in bank policies and procedures

10. Does the practice of exercising discretion vary from formal policy and procedure?

11. How objective are the criteria that guide originator discretion and how are they communicated?

12. Do files contain sufficient information to document lending decisions?

13. Are loan underwriting standards explicit and do they provide objective guidance for any discretion

given to the lending staff?

14. Are the controls in default management and loss mitigation tightly managed or is there a large

amount of discretion allowed for servicers in collections, workouts, and/or foreclosures or

repossessions?

Lending results

1. Do unexplained approve/deny disparities on a prohibited basis exist by loan product or credit

administration activity?

2. Do unexplained pricing and other terms and conditions disparities on a prohibited basis exist by loan

product or credit administration activity?

3. Do unexplained disparities among application processing times (in any credit administration activity)

exist by prohibited basis group?

4. Is there a difference in the proportion of approved not accepted and withdrawn/incomplete

applications by a prohibited basis group?

5. Are there disparities in the percentage of prohibited basis group applicants in loan products or

products with specific features relative to control group applicants?


6. Do you have disparities in the percentage of prohibited basis group applicants/borrowers in specific

credit products, servicing activities, or loss mitigation solutions, for example, compared to the

percentage of prohibited basis group applicants/borrowers offered different options or solutions?

7. Are there any disparities on a prohibited basis by lending channels that originate the same product?

8. For different loan products offered based on credit risk levels, are there any disparities by each loan

product category on a prohibited basis?

9. If you acquired another institution or purchased loans are like products consolidated into one portfolio

such that one loan in the portfolio may have been underwritten under one set of parameters where

another loan may have different parameters?

10. Are there disparities in the incidence of rate spreads of higher-priced loans by prohibited basis

characteristics as reported in your bank’s HMDA data?

11. Are there significant differences in the percentage of prohibited basis group applicants in loan

products or products with specific features relative to control group applicants?

12. Are there 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

those areas in the bank's market that have relatively high concentrations of residents of a

particular racial or national origin group compared with areas with relatively low concentrations

of residents of such racial or national origin group?

13. Do you have significant differences between approval/denial rates for all applicants in areas with

relatively high concentrations of residents of a particular racial or national origin group compared

with areas with relatively low concentrations of residents of such racial or national origin group?

14. Are there significant differences between denial rates based on insufficient collateral for

applicants from areas with relatively high concentrations of residents of a particular racial or national origin

group and those areas with relatively low concentrations of residents of such racial or national origin

group.

15. Does your CRA data indicate patterns of lending that differ by the concentration of residents of

a particular racial or national origin group?


Risk Source 3: How Exceptions are Handled

Exceptions

1. Is file documentation clear on why exceptions were granted?

2. Do exceptions require pre-approval?

3. Are loan credit and pricing/terms decision exceptions low in number and objective?

4. Does the incidence of exceptions vary by prohibited basis characteristic?

5. Are there particular lenders, offices, or management levels that have more or less exceptions

considering the number for the overall bank? What does this mean?

6. Are exceptions permitted in other credit administration activities and is there clear documentation to

support the exception?

7. Is the exception rate for pricing or fee waivers/charges minimal?

8. Are exceptions not on a prohibited basis?

9. Are corrective actions taken when exception errors or missteps are found?

10. What is the frequency of loan credit decision exceptions?

11. What is the frequency of loan pricing exceptions?

12. Are there particular lenders or offices that have more or less exceptions considering the number for

the overall bank? What does this mean?

13. Are permissible loan exceptions described or well-established and is authority and instructions for

documenting their exercise clear?

14. Do policies and procedures change when exceptions become the norm?

15. Has credit administration developed guidance for handling automated scoring system overrides and

exceptions (commonly called “overlays”)?

16. Are there any manual processes associated with your automated scoring system?

17. Do lenders follow automated underwriting standards?

18. What are the parameters for exceptions in using your automated scoring systems?

19. Is there clear guidance on for making exceptions to underwriting criteria, including credit scoring overrides?

20. Do loan files contain clear documentation of reasons for any exceptions to standard underwriting criteria,

including credit scoring overrides?

21. Are there relatively high percentages of either exceptions to underwriting criteria or overrides of credit score

cutoffs?


Risk Source 4: Role of Third Parties in Your Lending Operations

Due Diligence

1. Does the bank use TPOs in the lending process that could impact fair lending compliance (brokers,

servicers, appraisers, call Centers, application aggregators, etc.)?

2. Do you evaluate whether the TPO control structure manages the processes you have contracted to

TPOs?

3. Does the bank have written agreements with each TPO addressing its fair lending obligations?

4. Do agreements with define responsibilities and accountabilities, and require regular reporting?

5. Are there explicit contractual warranties for fair lending compliance undertaken by any TPO involved

in the bank’s lending activities?

6. Is due diligence performed prior to beginning the relationship and periodically thereafter?

7. Are TPO fair lending compliance programs required to be available for review by your bank?

Execution

1. How frequent are there staff or customer complaints about TPO conduct?

2. Are weaknesses in TPO operations corrected promptly?

3. How extensively does the bank outsource credit administration activities?

4. Is there a formal re-approval and risk assessment process to consider TPO performance over the

past period (year, quarter, etc.) to ensure that on an overall basis the relationship with the bank and

its customers is satisfactory?

5. Are TPO fair lending compliance programs required to be available for review by your bank?

6. What information do you have about the quality of the training of TPOs regarding fair lending legal

requirements?

7. Do TPOs have strong automated controls, testing, and monitoring?

8. Are TPO employees trained and knowledgeable regarding fair lending legal requirements?

9. Are compliance review and audit findings corrected promptly? Is retrospective relief considered when

appropriate?

10. Does the TPO perform its own assessment, and is it reliable?

11. Are regulatory agency guidelines considered in managing TPO relationships?

12. Do you perform compliance reviews of the TPOs involved in your lending business?

13. Are your compliance review findings of TPO operations corrected promptly?

14. Are TPO fair lending complaints addressed and resolved, if possible?


Risk Source 5: Technical Regulation B and HMDA Requirements

Regulation B1. Do lenders collect information, conduct inquiries, or impose conditions contrary to express

requirements of Regulation B?

2. Are spousal signature requirements followed? If, so is there clear file documentation to validate the

spouse’s involvement in the lending process?

3. Is government monitoring information collected in accordance with Regulation B?

4. Is appropriate loan documentation required to be kept consistent with record retention requirements?

5. Is marital status taken into consideration when processing applications, underwriting loans, or

securing loan collateral?

6. How do loan policies or practices handle sources of income that are not the result of current full-time

income?

7. Are loan application forms consistent with appropriate law and regulation requirements?

8. Do you collect Government Monitoring Information in accordance with Regulation B requirements?

9. Do your forms and instructions for gathering applicant and closing information fulfill reporting and

record-keeping requirements?

10. Have there been any employee or bank statements that evidence attitudes based on a prohibited

basis?

11. Is there a timetable or schedule for making required disclosures to applicants?

12. Do you have automated scoring systems that score age one of prohibited basis characteristics?

HMDA and other loan data questions:

1. Does the bank have a history of HMDA data violations cited by your regulator?

2. Have HMDA data resubmissions been required in the past?

3. Is HMDA data review and submission outsourced?

4. Is the HMDA loan application register (LAR) updated quarterly?

5. Have you had to pay Civil Money Penalties (CMP) for inaccurate HMDA data?

6. Have members of the public requested your HMDA data?


Risk Source 6: Fair Lending Environment

Current Fair lending Environment

1. Has anything material changed recently in B, FHA, UDAP, HMDA, related state law? If so, did the

bank have adequate time to implement, and do all affected personnel understand the new

requirements?

2. What are competitors saying about the current fair lending environment?

3. What is your regulator emphasizing in recent publications?

4. Have credit products of the type your bank offers been the focus of news coverage?

5. Is there private party litigation activity concerning products or practices like yours?

6. What are complaints saying above your fair lending practices?

7. What legal actions have been taken against the bank? Against peers?

8. What enforcement actions have been placed against the bank? Against peers?

9. If against peers, do you have any of those activities in your bank?

10. Has the bank been subject to fair lending referrals?

11. Has the bank been investigated by HUD for allegations of not complying with the Fair Housing Act?

12. Any discrimination complaints filed against the bank by governmental agencies?

13. What are the latest changes to fair lending laws and regulations?

14. Have community groups contacted the bank with issues?

15. What are the current hot buttons with community groups in your market area? In general?

16. What are other lenders being criticized for? Do you have any of those activities in your bank?

17. Are community or other consumer groups consulted when developing loan products or programs to

help serve community credit needs?

18. Have fair lending issues been raised in the past?

19. Do you have litigation alleging discrimination in loan servicing or loss mitigation practices?


SMAART Factors

Systems

1. Are credit administration standards explicit and do they provide objective guidance for any discretion

given to lenders and other appropriate staff?

2. Are permissible exceptions described in policy or well-established, and are authority and instructions

for documenting their exercise clear?

3. Is the expected retail footprint of any new product or new geographic market roll-out required to be

considered for redlining or steering risk in our business planning phase?

4. Do procedures articulate bank expectations on providing consistent applicant assistance in all credit

administration activities?

5. Does your product development committee consider how credit administration risks will be controlled

to manage discretion?

6. Does the bank have well-defined standard for each loan processing activity?

7. Do you or do TPOs you work with use loan-related software to help with the credit administration

activities?

8. Are adequate resources devoted to fair lending compliance?

9. Is Management responsive to risk management and fair lending issues?

10. Does management consider fair lending risk in product and service development strategy?

11. Does management have an appreciation for fair lending risk?

12. Is management a hindrance to corrective action?

13. Does the bank have processes for assimilating fair lending legislative and regulatory changes?

14. If risk-based pricing is used, is it based on objective criteria and applied consistently?

15. Is there a difference in services available or hours of operation at branch offices located in areas with

concentrations of residents of a particular racial or national origin group when compared with

branch offices located in areas with low concentrations of residents of such racial or national

origin group?

16. Do policies on receipt and processing of applications, pricing, conditions, or appraisals and valuation or

on any other aspect of providing residential credit vary between areas with relatively high

concentrations of residents of a particular racial or national origin group and those areas with

relatively low concentrations of residents of such racial or national origin group?

17. Is guidance on determining appropriate loss mitigation options, making policy exceptions, or

granting fee waivers clear and objective?

18. Do you provide clear consumer disclosures on loss mitigation options, the costs of each option,

and the risks involved available?


19. Are procedures for determining a borrower's ability to repay when selecting loss mitigation

options clear?

20. Are decision criteria for property inspections, broker price offers, appraisals, or other valuations clear

and objective?

21. Have you developed a significant value decline methodology for HELOC modifications that is

clearly supported, objectively determined, and consistently applied?

22. Is your process for establishing that a borrower's financial condition has significantly

deteriorated beyond ability to repay, for HELOC modifications, reasonable, objectively

supportable, and clearly documented?

23. Are soft or deteriorating market determinations for HELOC modifications based on reasonable

economic criteria, supportable standards, consistently applied, and clearly documented?

24. Do your soft or deteriorating market or declining market value determinations for HELOC

modifications consider potential disparate impact/redlining implications?


Monitoring

1. Are lender and other staff permitted to exercise judgment or discretion, and is it monitored?

2. Does the bank use a second review program? Is the program applied to check for consistent

application of underwriting or pricing standards? Is it applied to check for whether exceptions are

made available on a consistent basis across similarly situated borrowers?

3. Does the bank monitor credit administration policy exceptions and servicing activities and solutions in

the regular course of operations against the bank’s standards for their usage?

4. Does the bank monitor lending product volume changes and servicing activity volume and solutions

by prohibited basis and geographic distribution?

5. Are product disparity ratios in each credit administration activity reviewed by prohibited basis and

geographic distribution?

6. Are customer concerns or questions about their experiences with your credit operations recorded and

evaluated by management for fair lending red flags?

7. Are acceptance rates for loan solicitations or pre-screened offers monitored?

8. Are exceptions tracked as to frequency and magnitude?

9. How valid and reliable is your HMDA data?

10. Do you perform errors and omissions testing on your HMDA data?

11. Are HMDA key fields validated?

12. Are exceptions tracked and monitored?

13. Have automated scoring systems been tested and validated? Are system changes made with

Compliance sign-off? Is there disparate impact testing before the system goes into production?

14. Are servicing activities handled in an adequate control environment, including policies and

procedures, quality assurance, ongoing monitoring, training, automation, and management oversight?

Billing, Call handling, Automated dialers, Payoffs and Lien releases, Payment processing?

15. Are loan assumptions handled in a controlled manner with adequate monitoring and oversight?

16. Does management monitor the timeliness and accuracy of established fair lending management

information systems?

17. Does management annually review the effectiveness of the fair lending risk management program?

18. Are there fair lending risk factor reviews of issues by severity and frequency of occurrence?

19. Are fair lending compliance reviews performed?

20. Is loan decision making monitored for consistency with established policies, procedures, and

practices?

21. Are product disparity ratios reviewed by prohibited basis and geographic distribution?

22. If lenders are permitted to exercise judgment or discretion how is it monitored?

23. Does the bank have quality control functions to assess fair lending compliance?


24. Does the bank perform fair lending regression analysis or statistical modeling to ensure fair lending

compliance?

25. In response to prior identified fair lending issues, what did follow-up reviews indicate?

26. Have there been adverse findings related to processing time differences in the past?

27. Are fair lending complaints and outcomes tracked to ensure that bank staff is adhering to bank

policies and procedures, following regulatory requirements, and treating customers consistent with

bank customer service standards?

28. Are variables included in credit scoring systems that constitute a prohibited basis by Regulation B or, for

residential loan scoring systems, the FH Act?

29. Have internal audits, compliance reviews, or monitoring reports identified significant

weaknesses or violations in handling exceptions, fee waivers, incorrect credit reporting agency

reporting, or complying with bank policies and procedures?


Assessment

1. Does the bank have quality control functions to assess fair lending compliance?

2. Does the bank audit department assess fair lending compliance throughout the credit administration

process?

3. Does the board review annually the fair lending risk management program effectiveness?

4. Are fair lending risks evaluated during due diligence efforts when acquiring other institutions?

5. Does the bank conduct assessments of the fair lending risk that flows from its lending operations?

6. Are customer complaints identifying fair lending claims handled in accordance with bank processes

for investigation, response and appropriate remedy and any necessary systems improvements?

7. Have reviews been performed to ensure that consumers received what was advertised?

8. Do you use surrogate data for files where data is not available, such as serviced loans, credit cards,

other consumer and business credit – use of surname for race and ethnicity and given name for sex;

use of geocode indicator to determine if the applicant lives in a predominantly minority or non-minority

tract?

9. Have automated systems been tested to ensure compliance with Regulation B?

10. Are fair lending self- assessment results shared with the appropriate senior management?

11. What is the scope and frequency of internal audit for fair lending risk factors?

12. Is statistical modeling and regression analysis performed on HMDA or non-HMDA data? If so, are

results reported and recommendations followed?

13. Does the bank perform self-evaluations or self-tests? Are weaknesses or potential problems

addressed appropriately and consistently with ECOA and FHA requirements?

14. Was due diligence performed before acquiring or purchasing a loan portfolio? Was level of fair

lending risk assessed?

15. Are new product launch dates stopped if fair lending concerns are brought up?

16. Are unintended fair lending consequences identified and assessed when developing new lending

products before product launch?

17. What have been the results of fair lending mystery shopping?

18. Are fair lending complaints aggregated and where appropriate compared to marginal approved and

denied applicant files of similar products?

19. Are complaints assessed for information that may result in changes to products, services, marketing

activities, policies, procedures, or customer service standards to reduce complaint numbers?

20. Are complaints assessed to surface regulatory concerns that could result in violations of law or

regulations such as discouraging applicants, discriminatory practices, unfair and deceptive acts and

practices, or abusive or predatory practices?

21. Does the bank have turnover in its lending functions?



Accountability

1. Does the board foster a strong fair lending compliance culture within the bank and provide resources

necessary to fulfill the bank fair lending objectives they set?

2. Is there appropriate communication or reporting across board, senior management, business lines,

and compliance groups to enable each to perform their roles and be accountable for their

performance?

3. Does senior management incorporate bank enterprise-wide fair lending risk and performance reports

in their business decisions?

4. Does the compliance staff perform periodic fair lending self-assessments and other fair lending

compliance reviews, and recommend changes to policies, procedures, and standards as appropriate?

5. Do business line staff and managers understand that “they own” their unit’s fair lending risk and are

responsible for managing it?

6. Are there specific fair lending compliance requirements written into job descriptions of management

and credit administration personnel, and is the compliance unit consulted to obtain feedback when

performance reviews are done or before bonuses are paid?

7. Are business lines responsible for addressing fair lending risk and ensuring compliance with legal

requirements?

8. Are fair lending implications of loan marketing strategies and materials included in new loan product

review processes?

9. Is the expected retail footprint of any new product or new geographic market roll-out required to be

considered for redlining or steering risk in your business planning phase?

10. Is there any compensation system based on loan production or loan pricing? If so, is there an

incentive for a loan officer to charge more than the pricing sheet?

11. Is the loan officer compensated for certain types of credit, creating a potential fair lending risk of

steering?

12. Is the loan officer compensated for higher dollar credit, creating potential Disparate Treatment or

Disparate Impact issues?

13. What factors are used to compensate loan originators?

14. Can the exercise of discretion impact originator compensation?

15. Are fair lending responsibilities clearly defined?

16. Do fair lending technology solutions adopted by the bank incorporate bank standards? Are such

solutions appropriate to the size and complexity of the lending operation?

17. Does the bank have well-defined standards for each loan processing activity? Such as loan approval,

loss mitigation, marketing and advertising, and handling of delinquencies?

18. Are fair lending considerations incorporated into all bank areas such as roll out of new products,

advertising, form changes and disclosures?


19. Does the Board incorporate fair lending requirements in its strategic planning process?

20. Does the board review fair lending performance?

21. Are the anticipated fair lending risks associated with Board business planning identified in Board

background materials for consideration in business plan decision-making?

22. Is failure to meet the bank’s fair lending compliance expectations a component of compensation?

23. Are fair lending risks evaluated during due diligence efforts when acquiring other institutions?

24. Have statement s been made by the bank'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?

25. Have there been employee or bank statements that evidence attitudes based on prohibited basis prejudices or

stereotypes?


Response

1. Does management respond promptly to fair lending regulatory examination findings? Are root causes

determined for any weaknesses or violations found and are appropriate program changes

established?

2. Does the bank have a process in place to capture, review, and respond to consumer fair lending

complaints?

3. Is management apprised when consumer complaint investigation evidences program weaknesses,

customer assistance breakdowns, or potential violations?

4. Is bank staff able to raise issues or concerns about the fair lending impact of bank operations?

5. Does management consider and respond to fair lending and other credit-related issues or concerns

raised by local community groups?

6. Does the bank have a process in place to quickly evaluate, recommend appropriate actions, and

implement updated fair lending policies and procedures as new regulatory requirement are mandated

or changes are made to current regulatory requirements?

7. Is management’s response to identified fair lending deficiencies prompt?

8. Is there a process for requests for compliance resources to be raised with senior management

9. Is feedback from consumer response programs shared with managers so they can correct staff

mistakes?

10. Are fair lending concerns addressed during new product development and approval processes?

11. Are customer complaints alleging fair lending violations (as well as UDAP and abuse) dealt with

separately, and with the proper degree of urgency? Allegations of misleading advertising, or

predatory lending?

12. Does the bank have a process to capture and respond to consumer fair lending complaints?

13. Is prompt management action taken on complaints which evidence potential weaknesses or

violations?

14. Does management monitor complaints for response back to the customer and provide appropriate

resolution as possible?

15. Are consumer complaints raising fair lending concerns resolved promptly?

16. Are remedies implemented to resolve consumer complaint root causes?


Training

1. Does bank staff involved in credit administration activities and technical support have fair lending

knowledge and expertise appropriate to their responsibilities?

2. Does the bank fair lending training cover requirements of fair lending laws and regulations and how

they apply to all credit administration activities?

3. Does the compliance officer or other compliance staff participate in compliance working groups with

other local bank compliance officers or with state association compliance efforts?

4. Are the compliance officer and other bank compliance staff provided training opportunities to stay

current with changing regulatory requirements and industry compliance challenges?

5. Does the bank offer fair lending training to or know that TPOs it uses provide training to their staffs?

6. Does the bank have processes for assimilating fair lending legislative and regulatory changes, as well

as new fair lending hot topics being emphasized by regulatory agencies that affect its operations?

7. Does targeted training cover the right audiences?

8. Is training adequate in depth?

9. Does training cover customer service issues?

10. Is training frequent (at employee hire and ongoing or refresher throughout)?

11. Is training updated as needed?

12. If there is a test or passing score, is it adequate?

13. Does bank staff involved in lending activities and technical support have appropriate fair lending

knowledge and expertise?

14. Does the bank’s fair lending training cover requirements of the fair lending laws and regulations? 15. Are lending policies, procedures and practices clearly communicated to staff with fair lending

responsibilities?

16. Does new lending–related staff receive timely and up-to-date fair lending training?

17. Does the bank provide or ensure fair lending training it is received by third-party loan originators or

providers the bank uses?

18. Is new staff given adequate training?

19. Does remaining staff have to take on additional responsibilities? Were these responsibilities new to

them?

20. Does staff understand their responsibilities and accountabilities?


Documents

Simplifying the Fair Lending Risk Assessment - ABA - … · Web viewThe following represent a number of questions you may wish to add to your fair lending risk assessment. ... basis