Yesterday the Department of Justice announced a fair lending settlement with Texas Champion Bank, a $345 million bank in Alice, Texas. The allegations concerned pricing on unsecured consumer loans to Hispanic applicants. The settlement was the result of a 2010 referral by the FDIC. In the settlement Texas Champion agreed to pay $700,000 in restitution to about 2,000 Hispanic applicants, establish a monitoring program, provide employee training and revise its policies to ensure prices charged for its loans are set in a non-discriminatory manner.
From my perspective the takeaways from this announcement are as follows:
· Smaller institutions are not immune to fair lending litigation. Small as well as large institutions need to have compliance management systems that include monitoring for differential treatment.
· Mortgage lending is not the only target of fair lending investigations. Texas Champion had 57 HMDA applications on its 2011 LAR. Check your focal points.
· Training employees about fair lending is very important. Training can be done very cost effectively. I do not do training but if you need a suggestion for a trainer contact me.
· The FDIC continues to be aggressive in its fair lending enforcement. Compared to the cost of DOJ settlements, fair lending programs are cheap insurance.
· Fair lending cases consume large amounts of bank resources outside of the finances. This case was referred by the FDIC in 2010. There was probably another year prior to the referral dealing with the FDIC.
Preiss&Associates has been doing custom fair lending risk analyses for more than 20 years. If you have fair lending questions, want to talk about your fair lending issues or have need for us to assist you with your fair lending program give us a call at 847-295-6881 or drop us an email at rpreiss@preissco.com.
