All in Regulation B

Incomplete Applications

Adam Witmer
Regulation B, Fair Lending

This is a guest post by one of our Compliance Cohort members, Jennifer Johnson.  Jennifer is a Vice President and Chief Risk Officer at a $225 million community bank, and shares her years of experience in multiple banks with us in this article.

In a previous article, we discussed those frustrating customers who come to us with bits and pieces of the information we need to make a loan decision, providing us with an incomplete application. If you’re OCD like me, those situations drive you more than a little crazy, especially when you know that you have obligations to notify the customer of your decision within 30 days of receipt of the request. So how do you handle these scenarios without pulling out your hair? I have a simple solution…

What is the 30-Day ECOA Rule?

Adam Witmer
Adverse Action, Regulation B

GUEST POST! This is another feature article by one of our Compliance Cohort members, Jennifer Johnson.  Jennifer is a Vice President and Chief Risk Officer at a $225 million community bank, and shares her years of experience in multiple banks with us in this fantastic article on the 30-day Reg B rule.

In an ideal world, loan applicants would come to us fully prepared with all the documentation we need to make a loan decision. I don’t know about you, but I certainly do not live in that ideal world. More commonly, applicants come to us with a loan request and bits and pieces of what we need, which can lead us to stash applications on the shelf while we wait for more information. Time passes, and before you know it, we have violated Regulation B’s 30-day rule. “Wait!” you may say, “what are you talking about? I didn’t have a completed application! How could I have violated ECOA’s 30-day rule?”  While it may be true that you didn’t have a completed application, if you stop there, you’re missing some of the important nuances of Regulation B’s notification requirements…

CFPB Releases Annual Fair Lending Report for 2018

Adam Witmer
Regulatory Update, Fair Lending, Regulation B

On June 28, 2019, the CFPB released their annual report on fair lending.  Coming just seven months after the last annual report to congress (12/4/18), this annual report to Congress describes the Bureau’s fair lending activities in innovation, outreach, prioritization, guidance and rulemaking, supervision, and enforcement for calendar year 2018.  This is the first report released under new CFPB Director, Kathleen Kraninger.

NOTE: The 2018 CFPB fair lending report to Congress will be included in our 2Q 2019 Regulatory Update program, which will be released in July of 2019, covering all of the regulatory changes that a compliance professional needs to be aware of from the activity that occurred during the 2nd Q of 2019.

Comparative vs Overt Disparate Treatment

Adam Witmer
Fair Lending, Regulation B

Fair lending continues to be one of the highest risk areas for any creditor.  Deficiencies can result in significant penalties, fines, and other enforcement actions.  Therefore, each creditor must understand the different types of fair lending violations that could be cited during a fair lending audit or compliance examination.  In other words, if a creditor if familiar with what an examiner will be looking for, they will be more likely to self-identify and correct the issue before it becomes a significant exam violation.

3 Tips for Fair Lending Training for the Board

Adam Witmer
Fair Lending, Regulation B

As more and more examiners are expecting fair lending training for the Board of Directors, it is important to ensure that training efforts meet the needs of directors of the Board.  Well effective board training can be similar to training for other employees of the financial institution, it is important to understand several unique factors necessary for effective director training. The following three tips can be used for providing fair lending training to the Board of Directors.

Adverse Action Reasons Chart

Adam Witmer
Regulation B, Fair Lending

When a financial institution denies an application, Regulation B sets forth several requirements that must be met.  Among other things, financial institutions are required to notify an applicant of the denial and (as applicable) provide the applicant with a “statement of specific reasons” for denial.  One of the biggest challenges in providing the specific reasons for denial is determining which adverse action reasons should be listed on the denial notice. As Regulation B does not explain what reasons should be used, financial institutions benefit from creating an Adverse Action Reasons Chart. This article provides a sample adverse action chart that could be used by financial institutions.

Denial Reasons of Excessive Obligations & Insufficient Income

Denial Reasons of Excessive Obligations & Insufficient Income

Adam Witmer
Adverse Action, Regulation B

This Compliance Clip (video) discusses the difference between two denial reasons found on most adverse action notices: 1) Excessive Obligations in Relationship to Income and 2) Insufficient Income for the Amount of Credit Requested. Adam discusses why most denial forms have these two different, but distinct debt-to-income (DTI) options and explains the best practice for when to use each reason - which might not be what you think.

Using a Credit Score Disclosure in Lieu of the Adverse Action Notice

Using a Credit Score Disclosure in Lieu of the Adverse Action Notice

Adam Witmer
Adverse Action, FCRA, Regulation B

This Compliance Clip (video) answers the question of whether the FCRA pieces of the AA Notice must be completed every time, or if creditors can combine certain FCRA disclosures with the AA Notice. Adam attempts a new approach to adding a bit of humor to a mundane compliance topic and fails terribly. He makes a promise to never attempt this approach again (unless he is asked).

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