Independent Banker - February 2022 - 36

PORTFOLIO
and those with low credit scores are
far more likely to have disputes on
their credit reports.
In a press conference about
the Trustmark National Bank
enforcement action, newly
confirmed CFPB director
Rohit Chopra said fair lending
enforcement will be an emphasis
of the Biden administration: " If
we allow racist and discriminatory
policies to persist, we will not live up
to our country's ideals. We need a
fair housing market that is free from
old forms of redlining, as well as new
digital and algorithmic redlining. "
" HUD's disparate impact rule
change is significant, " says Marshall.
" Disparate impact violations don't
require any discriminatory intent. A
policy violates the rule if it creates a
discriminatory effect on a group of
persons unless the policy serves a
substantial and legitimate interest
that cannot be served by a policy that
creates less discriminatory effect. "
He advises community bankers to
think about the following questions:
 Are there areas in my community
I am not serving as robustly
as others?
 Are there disparities in terms of
interest rates or other terms or
loan acceptance rates?
 If so, does that correlate to
identifiable groups?
 What story does our HMDA
data tell?
Fair lending: Where
should you start?
Your program should
include but may not be
limited to:
f Board and management
oversight
f Policies and procedures
f Training
f Monitoring and/or audit
f Consumer complaints
f Third-party oversight
f Marketing/advertising
f Application process and
underwriting
f Pricing and other terms
and conditions
f Redlining
the fair lending bucket. " It's a new
frontier of fair lending enforcement, "
says Michael Emancipator, ICBA
vice president and regulatory
counsel. " Much like HMDA made
available a large dataset for home
mortgage lending, 1071 will make
a similar dataset available for small
The future of enforcement
The new rules will be fertile ground
for regulators. Examiners will look
for potential fair lending issues and
investigate them if found. Banks could
face stiff penalties for violations, such
as in the case of Trustmark. The best
way to avoid those consequences is to
be proactive, understand your bank's
own lending patterns and seek early
course correction, if needed.
Section 1071 of the Dodd-Frank
Act (DFA) adds a new element to
business lending.
" When the first data are available,
we expect significant attention from
the media and public scrutiny about
what the data say, approval rates,
who is getting loans and on what
terms. While finalization is in the
future, it is a looming concern. "
Emancipator advises community
banks to familiarize themselves with
fair lending changes and the potential
impact on current lending practices,
operations and data collection,
maintenance and reporting.
" Not all data will be available in the
public domain, so some contextual
information might be missing about
how or why certain credit decisions
were made that could refute potential
charges of illegal discrimination, "
Emancipator says. " We are trying
to highlight things that may cause
erroneous conclusions and encourage
the CFPB to either remove the data
field or find a solution to mitigate
the negative consequences from
erroneous conclusions. Among other
proposed solutions to this problem,
the most apparent one we support
is to exclude community banks with
assets of $1.3 billion or less, or at
least not publish the data reported by
those banks. "
" Banks need to take proactive steps to monitor
their own lending patterns, track and analyze the
data and, if needed, take corrective action. "
-MICHAEL MARSHALL, ICBA
Completeness, accuracy,
conformance to regulatory and
legal rules; and consistency
among procedures, policies and
documentation are all critical. Master
the fundamentals to succeed. 
Mary Thorson Wright is a writer in
Washington, D.C.
36 Q ICBA Independent Banker Q February 2022
Independent Banker - February 2022

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