Fair lending is a hot topic among most financial institutions in particular those regulated by the CFPB, NCUA, OCC, & FDIC. Fair Lending poses new challenges for financial institutions not only in completely understanding the laws but also in knowing how to comply with each of the regulations. This article is the first in a multi-part series to give lenders proper Fair Lending Training around regulations and compliance.
Step 1 in compliance with Fair Lending is by understanding which laws govern the regulations and what groups are protected under those laws. There are two laws that govern Fair Lending Regulations:
Prohibits discrimination in residential real estate transactions:
- Making loans to buy, build, repair, improve a dwelling
- Purchasing real estate loans
- Selling, brokering, or appraising residential real estate
- Selling or renting a dwelling
Prohibits discrimination in any aspect of a credit transaction
Reg B implements the technical requirements of ECOA and we have HMDA the home mortgage disclosure act and CRA the community reinvestment act
As part of your ongoing Fair Lending Training, it’s a good idea to review each of these laws in depth and follow the updates from each of the regulatory bodies.
Prohibited Basis Groups
Both laws prohibit discrimination against the usual-race, gender, religion. ECOA includes age, marital status, and source of income, and the FH act includes handicap and familial status. I wouldn’t be too concerned about which law has which protected classes and just consider all of the classes prohibited to use as rational for any decision making.