The Smoking Gun???

In his statement before the U.S. House of Representatives Committee on Financial Services, Chairman Harper discussed the state of the credit union system, including NCUA’s mission to examine credit unions with $10 billion or less in assets for compliance with consumer protection laws and regulations. Chairman Harper stated to the Committee that NCUA is conducting targeted fair lending examinations at federal credit unions to assess compliance with federal fair lending laws and regulations as these reviews are critical to identifying discrimination and economic equity.   This is nothing new.  He has been stating this for months.  But what is new is that for the first time publicly, he stated that, fair lending examinations conducted in 2023 revealed patterns or practices of discrimination violations, illegal redlining, indirect lending pricing concerns, systemic Home Mortgage Disclosure Act violations, Regulation B notification and government monitoring information violations, and numerous instances of inadequate fair lending compliance management systems. Specifically, in 2023, the NCUA referred six credit unions to the Department of Justice for discrimination based on age or marital status. These referrals impacted over 55,000 consumers, and associated remediation expenses exceeded $575,000.  THESE ARE PRETTY BOLD ALLEGATIONS WITHOUT EXPLANATION.

Kristen Clarke, Assistant Attorney General for Civil Rights at the U.S. Department of Justice (DOJ), spoke at America’s Credit Unions Governmental Affairs Conference in March 2024 to discuss DOJ’s nationwide Combatting Redlining Initiative, which aims to address modern-day redlining. Assistant Attorney General Clarke highlighted that credit unions should engage with their regulators to promptly implement any fair lending recommendations following a consumer compliance exam.  This first step can avoid a referral to DOJ for further investigation. She also reminded credit unions that, “while the Justice Department, along with our partners at the CFPB, NCUA and across federal and state government, continue to focus on enforcement, we are also eager to work with you and we will always acknowledge proactive efforts in the area of fair lending.”

Credit unions have always been aware of, and proactively involved in managing, their responsibilities to their members to implement fair lending compliance via a robust compliance management system, engaging with members, reviewing, and testing underwriting processes, and proactively building up their fair lending oversight and monitoring to ensure senior management and the board of directors are updated. As Assistant Attorney General Clarke pointed out, credit unions should first engage with their regulators if a consumer compliance exam identifies any potential fair lending issues.  Such a collaborative approach would be preferable to pointing this out to Congress in this fashion.  We heard one of the things that a credit union was dinged on was not putting in branches in underserved areas when they said they would.  Bottom line:  Check and keep checking what you are doing on the compliance front.  For further assistance review NCUA’s Fair Lending Guide and Fair Lending Compliance resources.

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