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5 Fatal Flaws That Will Destroy Your Fair Lending Compliance Program

4 min read
Nov 17, 2016

In today's compliance environment, it's essential that you have a strong Fair Lending compliance management program. Over the years, we've noticed these 5 fatal flaws that can jeopardize your Fair Lending risk management and catch the regulators' attention.

Do you ever feel overwhelmed by the prospect of managing Fair Lending compliance? We get it - and you're not alone. 

Many compliance officers, when faced with the onslaught of changes, ambiguous regulatory guidance, and tight compliance budget, feel like Fair Lending is a burden. Creating a comprehensive, custom Fair Lending compliance management program that accommodates your institution's unique policies, programs, products, management structure, and market can be tough - and it's probably only one part of your job.

Here's the good news: there are some crystal-clear things that you absolutely, positively, should not do when it comes to Fair Lending compliance risk management. Below are 5 fatal flaws that can destroy your Fair Lending Compliance Management Program... and how to avoid them!

Flaw 1: Failing to Analyze Your Data for Discrimination

Given that we specialize in Fair Lending data analysis, it might seem self-serving to put it first... but there is no better way to identify potential risks than through statistical analysis.The regulators often will start with data analysis, and you should, too.

The purpose of Fair Lending regulations is to ensure that similarly situated individuals are treated similarly. Data analysis helps monitor whether you're achieving that goal by identifying disparities that may indicate discrimination is occuring. Disparity does not necessarily mean that discrimination is occuring, but data analysis is the only way to know for sure.

Even if you don't file HMDA, you need to analyze your data. When analyzing your non-HMDA data -  such as credit card, small business, and other consumer, commercial or agriculture lending - you'll still be looking for disparities that may indicate discrimination.

Many compliance officers think that Fair Lending analysis is difficult and costly. It's neither - or at least, it doesn't have to be - and is one of the most important parts of your Fair Lending compliance program.

✮ Bonus Tip: Improve Your Fair Lending Compliance with Data Analysis. Get Free Sample Reports Today - Click Here!

Flaw 2: Not Offering Fair Lending Compliance Training

Training is an important part of any Fair Lending compliance management program. It helps set the tone for the entire organization. It's one of the seven discrimination risk factors the examiners will assess. All employees and management, including the Board of Directors, should be trained on Fair Lending annually.

Just offering annual training isn't enough, though. You also need to track attendance and comprehension, and repercussions for failing to attend or pass the comprehension assessment. 


  • Make sure that your training outlines what is permitted by your policies (i.e. rules for declining or file documentation requirements).
  • Review written training policies to ensure that there is a way to track attendance and test comprehension.
  • Build in repercussions for failing to take or pass training courses.
  • Explore role-specific training so that everyone understands Fair Lending risk in their job, particularly for individuals involved in the crediting process.
  • Evaluate training aids to make sure that they're helpful and complete.
  • Consider offering sensivity training to employees that deal directly with applicants and customers to help prevent discrimination.

CRA, Fair Lending Compliance Remain Essential in Mergers

There are several great training companies, and most have strong Fair Lending options. We also offer compliance training and training program development, and would be happy to help you if you think there's room to improve your Fair Lending training program. Learn more here.

Flaw 3: Operating Without Updated, Written Fair Lending Policies

Every financial institution needs a written Fair Lending policy. You policy statement should be comprehensive, covering all products, procedures, and phases of operation. Strong policies outline both what you will do, and what you won’t do.

Exceptions to policy and practices can create risk, so make sure to explain, document and report any exceptions and monitor for risk exposure.

In addition, Fair Lending policies need to be updated periodically so that they continue to reflect the changes in product and service offerings, programs, and more. 

Flaw 4: Foregoing an Annual Risk Assessment 

Best practices recommend that institutions complete a Fair Lending risk assessment every 12-18 months - or sooner if your products, services, business structure, policies or procedures change. As you grow, so does your potential risk exposure. An annual risk assessment will provide accurate perspectives on your risk, helping you manage it more effectively.

A risk assessment will help you identify potential weaknesses and unchecked risk in your compliance management program - before the examiners arrive. 

Flaw 5: Not Managing Your Consumer Complaints

Complaints are an incredibly valuable source of information and consumer insight, helping you understand the way consumers view and engage with your brand. Sometimes it is the first indication that your process may not be working. In addition, the regulators require that you manage your complaints as part of your compliance program.

Complaint management should include complaint management training, policies and procedures, and a process for fielding, responding to, tracking and reporting complaints. 

Pay particular attention to complaints that allege discrimination in pricing or underwriting, either submitted directly to your instituton or to third parties like the CFPB or social media. These sorts of complaints are an early warning system for compliance officers that something may be amiss. They are also likely to attract the regulators' attention.

TRUPOINT Viewpoint: We have the luxury of speaking with more than 500 customers nationwide, working with them on all aspects of their Fair Lending compliance managment - from data analysis to training. By working with fantastic compliance officers around the country, we get real-world, time-tested insights on what works and what doesn't.

In our experience, these are five fatal flaws that will weaken your Fair Lending compliance program. These aren't all the things to avoid, but are some that consistently present challenges. They apply to credit unions, community banks, mortgage companies - anyone that has to comply with Fair Lending.

We can help you manage and improve your Fair Lending compliance and we would love to be the one you turn to. If you want to learn more about how we can help you with Fair Lending, just submit the form below and we'll send you more information.  


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