In a recent episode of "With Flying Colors," host Mark Treichel sat down with Joe Goldberg, a former NCUA official, to discuss the critical topic of fair lending. This blog post highlights key takeaways from their conversation, providing credit unions with essential insights into fair lending compliance.
You can listen to the entire episode HERE.
Understanding Fair Lending
Joe Goldberg defines fair lending as a system that requires credit decisions to be based solely on credit-related factors, not on discriminatory elements. As he succinctly puts it, "Fair lending is usually looked at by what is prohibited rather than what is required."
Key Fair Lending Laws
The discussion covered three primary laws that govern fair lending:
1. Equal Credit Opportunity Act (ECOA)
2. Fair Housing Act
3. Home Mortgage Disclosure Act (HMDA)
Each of these laws plays a crucial role in ensuring fair and equitable lending practices.
Types of Discrimination
Goldberg explained two types of discrimination:
1. Disparate treatment: Treating individuals differently based on prohibited characteristics.
2. Disparate impact: Policies that appear neutral but result in discriminatory outcomes.
Importantly, Goldberg noted, "Intent is not an element of violating ECOA." This means credit unions can be in violation even without intending to discriminate.
Protecting Your Credit Union
To ensure compliance and protect both the credit union and its members, Goldberg recommends:
1. Knowing the laws and regulations thoroughly
2. Implementing a robust compliance management system
3. Providing comprehensive training to all relevant staff
4. Maintaining oversight of lending practices and third-party relationships
NCUA's Fair Lending Program
The podcast also shed light on NCUA's fair lending examination process, including full fair lending exams and supervision contacts. Understanding this process can help credit unions prepare effectively.
Key Takeaway
Perhaps the most important message from the discussion was Goldberg's observation: "Credit unions try to get it right, but they don't always do that. The more they can educate themselves, the better off they will be and the better off their members will be."
This underscores the importance of ongoing education and vigilance in fair lending practices. By staying informed and proactive, credit unions can better serve their members while maintaining regulatory compliance.
For more in-depth information on fair lending, credit unions can refer to resources like the NCUA Fair Lending Guide, the FFIEC website, and CFPB resources.
Remember, fair lending is not just about avoiding penalties—it's about fulfilling the credit union mission of serving all members equitably and fairly.
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