A new risk alert from CUNA Mutual Group reminds credit unions about expanded fair lending practices, which are slated to be an NCUA regulatory priority in 2023.
Todd Harper, NCUA chairman, has emphasized the importance of fair lending and suggested that examinations will extend beyond mortgages to include auto loans, credit cards and private student loans.
“Federally insured credit unions must be ‘all in’ on diversity, equity, and inclusion and their commitment to these principles should be reflected in the results of credit union lending and performance,” Harper stated at the agency’s DEI and Access Summit in November 2022.
With the expected, expanded focus on fair lending, the risk alert encourages credit unions to:
- Develop written fair lending policies and procedures that clearly state how the credit union will comply with fair lending laws. Deviations from policies and procedures should be reported, documented, and monitored, and training should be provided for employees, management and board members.
- Identify risks by conducting periodic fair lending risk assessment. This includes reviewing all credit products and services, organization structure, marketing, lending channels and unique decisioning centers, and determining if members receive consistent treatment for loan modifications and loan workout arrangements.
- Develop a fair lending program based on results of risk assessments, including establishing internal controls to monitor and reduce fair lending risks.
- Maintain guidelines for pricing, including guidelines for exception management and ensure there are no policies or practices that treat applicants of a protected class differently or have a disparate impact.
- Use and consistently apply risk-based pricing based on objective criteria and carefully manage pricing discretion. Consistently document reasons for pricing decisions (especially exceptions).
- Stay current of fair lending developments.
CUNA Mutual Group’s risk alerts, in addition to additional risk-prevention resources, may be accessed in their Protection Resource Center. Log-in is required.