Topic: Fair Lending
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Are there any discrimination concerns with asking some but not all customers to lower their face coverings before letting them enter a branch? We have some customers who are recognizable with face coverings on and some business customers who come in on an almost daily basis. We would write a policy that highlights these potential differences, and we would follow the policy consistently.
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A policy of asking some but not all customers to lower their face coverings before entering your bank poses some risk of potential discrimination issues. However, if you thoroughly document your basis for waiving this requirement for certain customers, follow the policy consistently, and follow the safety guidelines for requiring customers to lower their face…
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Under the Taxpayer First Act, are we required to obtain taxpayer consents from non-borrowing spouses? Also, is there any guidance for banks related to a borrower who refuses to sign a taxpayer consent form? Can a loan be denied on this basis, and would such a denial present any fair lending concerns?
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We recommend obtaining a taxpayer consent form for any taxpayer whose tax return information you will be requesting from the IRS. For a non-borrowing spouse, your bank may be requesting a joint tax return that will include tax return information for both spouses, and in that case, we recommend obtaining both spouses’ consent. If a…
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We are considering providing perks (such as gift cards or concert tickets) to our mortgage loan customers who are first-time homebuyers. Are there any fair lending concerns with this type of program? Would we have to provide perks to all borrowers, not just first-time homebuyers?
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Assuming that the underlying loan program is not otherwise discriminatory, we do not believe that offering gift cards or concert tickets to a subset of your mortgage loan customers would be found to violate fair lending laws, but we do recommend monitoring the promotion, documenting your business reasons for targeting first-time homebuyers and remaining sensitive…
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We have a policy that a customer’s credit report is valid for six months, so we do not pull a new report or charge the customer if they apply for an additional loan within that six-month period. Is it permissible to provide this benefit to returning customers when new customers applying for loans are charged for a credit report? Also, is it permissible for us to allow a loan officer to choose not to charge a new customer for a credit report for various reasons?
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Yes, we believe it is permissible to reuse a credit report, allowing a returning customer to avoid the fee for a new report within the six-month timeframe set by your bank’s policy. The FCRA permits a lender to reuse a credit report for the purpose of reviewing a subsequent credit application (which is a “permissible…
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Our bank does not offer a business checking account that pays interest. However, we would like to create a checking account that pays monthly interest for a commercial customer that is a property manager. Are there any restrictions we need to be aware of, and would we need to offer this product to other customers? The customer would open separate accounts for the various properties it manages and would be holding funds related to the properties.
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We are not aware of any Illinois or federal law prohibiting a bank from offering higher deposit interest rates to a particular business customer, provided that the customer is not a bank insider. The Dodd-Frank Act removed the prohibition on paying interest on ordinary demand deposit accounts held by businesses, and since this commercial customer…
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We offer a “club account” for customers over a certain age who maintain a minimum in deposit and loan accounts with our bank. Club members receive a discounted interest rate for certain consumer loans, among other benefits. Are there any fair lending issues with providing this loan discount?
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There could be potential fair lending issues with this product, particularly given its minimum deposit or loan requirements, although carefully documented business considerations for offering the program could mitigate the risks to your banks. In general, any promotion that singles out a group of customers creates some potential for fair lending concerns. Although younger customers…
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We originate our first lien mortgage loans through a subsidiary. Can we require those borrowers to open a checking account with us?
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Yes, we believe that your bank can require borrowers to open a deposit account at your bank — provided that the requirement is applied consistently to avoid any fair lending implications. There is no prohibition against tying a loan product offered through a subsidiary to a deposit account product at your bank. Illinois and federal…
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Can we review the criminal history and prior liens or judgments of an individual who signs loan documents on behalf of a small business applying for a Small Business Administration loan? Do we need the individual’s written authorization?
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Yes. We are not aware of any law or regulation that would prohibit lenders from reviewing judgments, liens, or the criminal history of persons who sign loan documents on behalf of a business entity. However, you would need written authorization from the individual before obtaining a consumer credit report as a source for your inquiry…
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An individual applied for a consumer loan and was denied. We sent him an adverse action notice regarding our credit decision. Subsequently, his wife agreed to co-sign on the loan with him, so she added her name to his original application. We have decided to deny that application, too. Is the wife as a co-applicant entitled to an adverse action notice? If so, what should the notice contain?
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Yes, the wife is entitled to an adverse action notice, but only if your denial was based at least in part on the information in her consumer report (which appears to be the case here). Adverse action notices are required by two different laws. The Equal Credit Opportunity Act (ECOA) — as implemented by Regulation…
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We are looking into providing a financial incentive for borrowers to timely provide us with their loan documentation (financial statements, tax returns, etc.). For example, a borrower would receive $500 (or a $500 reduction in the loan principal) for providing their rent roll by a certain date. If a borrower fails to meet this deadline, then no incentive would be provided. Are there any regulations that we should consider?
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We are not aware of any statutory or regulatory limitations on paying incentives to borrowers who provide certain loan documents by timelines set by the bank, assuming that this program is applied equally to all customers for a particular loan product. We do recommend providing the terms of this program in writing and reviewing those terms…