Once upon a time in a land Far, Far Away there was a bank. It was a good bank filled with hardworking people who were dedicated to helping the people of Far, Far Away thrive.
The bank was very involved in its community. It ran financial literacy programs in schools and provided entrepreneurial training. Its management team served on nonprofits dedicated to community redevelopment. It regularly reviewed its lending performance to ensure it was effectively serving low- and moderate-income and majority-minority communities.
The bank was doing everything right and had the Community Reinvestment Act (CRA) rating to prove it—but it had not always been that way.
Like Sleeping Beauty, the bank had once fallen asleep at the wheel. It fell short of what it should have been doing to effectively meet the needs of its communities, especially, the minority and moderate- and low-income communities.
But something happened to cause a change! As with any good fairy tale, the bank underwent a transformation—with a little help from a fairy godmother (fair lending and community lending data analytics software). The bank saw where it was falling short of expectations and dedicated itself to doing a better job. It reinvented its approach to community involvement and fair lending. It drafted new policies and procedures. It reached out to the community. And it promised to never disappoint the people of Far, Far Away ever again.
It would be nice if that were where the story ended. Everyone loves a good comeback—but not everyone is willing to believe that someone who gets lost can really be found and that the course can be corrected for the better. They see the institution that was, is not the institution of today. But the past can and does at times rear an ugly head.
That is how the bank found itself once again navigating troubled waters. When the bank originally uncovered its issues, it was not a public affair. It proactively uncovered its shortfalls and then took steps to become a better corporate citizen—one that could be proud of its work and had the documentation to prove it. Its most recent Home Mortgage Disclosure Act (HMDA) Loan Application Register (LAR) filing was impeccable, just like the year before.
The same could not be said about its past filings, particularly the one five years ago, but the bank was not worried. Why would anyone care what had happened so long ago? Especially, since the bank had changed its ways and evolved. The bank had grown, moved forward, and was becoming a true corporate citizen.
But that is not where the well-meaning public interest group looked.
On the hunt for discrimination and disparate treatment, the public interest group began in the semi-distant past, drawing conclusions based on data from five years ago—back when the bank was not socially conscious. It sent the bank a draft of a letter it planned to send to the bank’s regulator, as well as the press. In the letter, the public interest group complained that the bank was not doing enough to lend to small businesses in minority neighborhoods. It wanted to ensure the bank was treating everyone fairly and providing equal access to credit.
Thankfully, this story has a good ending. Since uncovering its own lending issues and adjusting its lending policies, the bank had continued to analyze its loan data every year to ensure there were no unexplained disparities. It knew that borrowers from protected classes were receiving the same treatment as similarly situated borrowers. It could show exactly where it was lending and that it had gone from an underachiever to an economic engine in otherwise underserved communities. It was able to show how it had created lending programs to serve their communities and assessment areas and how those very programs created revitalization opportunities to otherwise floundering economies.
Would your institution be able to tell its story as clearly as the Bank of Far, Far Away? If you do not have the data to tell your story, it’s possible for a special interest group or the like to swoop in and fill in the blanks with their own narrative—one built on outdated information from a bygone era that no longer reflects your truth.
Make sure you have the tools to demonstrate you are a fair lending hero, a community builder. Do not let others paint you as a villain in your own story. It is the only way to demonstrate you have the tools to create your narrative and tell your story!