Western Banker - November/December 2016 - 20

Everything Old is New Again - Updating FCRA Compliance in a CFPB World However, these new digits could designate an area or community, down to the level of a group of apartments or office buildings. Depending on the population and total number of addresses in the locale, the ZIP + 4 can designate a "delivery sector" like a group of streets, buildings or even a specific high rise building. Inappropriate usage of ZIP codes in the marketing of lending products can open up the potential for discrimination in lending practices. In lower populated regions a ZIP + 4 could be identifiable at a household level; creating risk of the data being classified as Personally Identifiable Information. In specific cities or densely populated markets, the ZIP + 4 could denote a particular building where tenancy is disproportionately skewed to racial or lower income markets. Marketing risk indicators can be influenced by advertising methods within a particular geography. Advertising only in media that serve non-minority areas can trigger a marketing campaign risk. Risk Assessment & Model Governance Targeted marketing by geography given the branch footprint can be an effective tool in identifying the likelihood or propensity for acquiring new customers. The policies, standards and thresholds used in the definition should undergo scrutiny and routine oversight by independent or "second lines of defense." Developing a strong model governance process and incorporating proactive analysis of both the geographic footprint for campaigns and for actual loans secured can assist organizations in spotting inadvertent gaps in lending compliance. Within the compliance management system, the lending compliance oversight function should define the compliance responsibilities and ensure that those responsibilities meet legal requirements and internal policies. The analysis of the geographic patterns and loan penetration combined with a clearly defined lending criteria policy can help ensure that the model is unreasonably excluding prospective borrowers on a prohibited basis. Risk management factors or considerations can include: 1. Define market areas based on legitimate business reasons - ensure they are understood continued 2. Clarify and map both targeted campaign locations and the loan penetration results to ensure marketing efforts encompass the entire market area 3. Conduct a review of loan applications from applications within market area targets, and consider monitoring and comparing loan activity to census data to spot any possible discriminatory trends 4. Identify new market area targets that previously have been untapped 5. Review focus areas where there is potential for discretion in lending operations 6. Assess and validate differences in products, service levels between branches are due to legitimate or justifiable business reasons 7. Review compensations agreements and incentive programs for loan officers 8. Establish clearly defined standards for referral of applicants 9. Create and maintain clearly outlined procedures for managing exceptions 10. Ensure risks with third parties are identified; and treat the obligations as if the bank performed the activities directly Keys to navigating lending compliance today require organizations to take a holistic and pragmatic review of their compliance management systems. Leveraging and analyzing the data to ensure fair lending requires not only a set of policies and standards, but requires ongoing risk assessments for the adoption and implementation of the business processes in offering lending products. Build a repeatable process for lending oversight within compliance functions to maintain a Lending Compliance Report Card that can be adapted as either regulations or enforcement actions spotlight new areas of faulty grades in lending compliance. ● About the author: Linnea Solem is vice president of business risk & compliance and chief privacy officer at Deluxe Corporation. 793925_JBLloyd.indd 1 20 www.wib.org Western Banker 2/5/16 3:19 PM http://www.lloyd-ins.com http://www.lloyd-ins.com http://www.wib.org

Table of Contents for the Digital Edition of Western Banker - November/December 2016

A Message from the President & CEO
Back to the Future to Manage Portfolio Performance
The WIB App Store
Managing Your Bank’s Reputation by Taking an “Inside-Out” Approach to Communicating News
Interest Rate Risk and ALM: Most Institutions Are Doing it Wrong
Everything Old is New Again — Updating FCRA Compliance in a CFPB World
Professional Development
Secrets to Employee Engagement for Bank Managers
March of the Millennials: Cultivating Relationships Within the Digital Generation
Welcome New Members
Index of Advertisers
Western Banker - November/December 2016 - cover1
Western Banker - November/December 2016 - cover2
Western Banker - November/December 2016 - 3
Western Banker - November/December 2016 - 4
Western Banker - November/December 2016 - A Message from the President & CEO
Western Banker - November/December 2016 - Back to the Future to Manage Portfolio Performance
Western Banker - November/December 2016 - 7
Western Banker - November/December 2016 - 8
Western Banker - November/December 2016 - 9
Western Banker - November/December 2016 - The WIB App Store
Western Banker - November/December 2016 - 11
Western Banker - November/December 2016 - 12
Western Banker - November/December 2016 - Managing Your Bank’s Reputation by Taking an “Inside-Out” Approach to Communicating News
Western Banker - November/December 2016 - 14
Western Banker - November/December 2016 - Interest Rate Risk and ALM: Most Institutions Are Doing it Wrong
Western Banker - November/December 2016 - 16
Western Banker - November/December 2016 - 17
Western Banker - November/December 2016 - Everything Old is New Again — Updating FCRA Compliance in a CFPB World
Western Banker - November/December 2016 - 19
Western Banker - November/December 2016 - 20
Western Banker - November/December 2016 - Professional Development
Western Banker - November/December 2016 - Secrets to Employee Engagement for Bank Managers
Western Banker - November/December 2016 - 23
Western Banker - November/December 2016 - March of the Millennials: Cultivating Relationships Within the Digital Generation
Western Banker - November/December 2016 - 25
Western Banker - November/December 2016 - Index of Advertisers
Western Banker - November/December 2016 - cover3
Western Banker - November/December 2016 - cover4
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