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CFPB Shares Top 3 Fair Lending Compliance Priorities for 2017

4 min read
Apr 19, 2017

Do you know the CFPB's top three Fair Lending compliance priorities for 2017? And more importantly, do you know your risk? In this post, learn the Bureau's 3 Fair Lending priorities and how to manage your risk!

The Consumer Financial Protection Bureau recently released the 2017 Fair Lending Report, which included their top Fair Lending priorities for the year.

If you're not regulated by the CFPB, you might wonder why you should be concerned about their priorities. It is because the CFPB is a large and influential organization. And if experience is any guide, the CFPB's priorities tend to either reflect or become the industry's priorities.  

In order, here are the CFPB's top priorities for 2017:

  1. Redlining (Fair Lending) 
  2. Mortgage and Student Loan Servicing
  3. Small Business Lending

(For reference, last year's priorities were mortgage lending, indirect auto lending, and credit cards.)

In this post, we will talk about how the CFPB will be assessing risk in those key areas. We'll also share some ways you can assess your risk in these areas!

Here's the bottom line, though: you need to be evaluating your Redlining risk and your Fair Lending risk, for both HMDA and non-HMDA loans. 

How the Bureau Will Measure Risk

The CFPB uses a risk-based prioritization approach to let the CFPB's Office of Fair Lending focus supervisory and enforcement actions on markets, products and institutions that they believe represent the largest Fair Lending risks to consumers. This means that institutions with higher risk are likely to be examined first. (This is not unique to the CFPB; some other regulators also take this approach.)

When evaluating risk, the CFPB will:

  • Assess the strength of the compliance management program, including whether it is commensurate with the size, complexity and risk profile of the institution;
  • Determine if there is risk in a particular market, i.e. older consumers or student loan recipients;
  • Review consumer complaints, as well as tips and leads from advocacy groups, whistleblowers, and government agencies;
  • Consider supervisory and enforcement history; and
  • Analyze HMDA and other data.

These are some of the primary factors you should consider when reviewing your Fair Lending risk.

[Free Sample Redlining and Non-HMDA Fair Lending Analytics Reports!]

4 Tips for Addressing the CFPB's 2017 Fair Lending Priorities

As mentioned above, the CFPB will be focused on Redlining, mortgage and student loan servicing, and small business lending risk. Here are some tips for managing your risk:

1. Review Your Compliance Management Program

Determine if your Fair Lending compliance management program (CMP) is strong enough to monitor and mitigate these risks. While we won't go into too much detail about CMP basics, check out these 9 essentials of a strong Fair Lending CMP to determine if yours has the basics.

2. Analyze Your Data

Data analysis is essential for monitoring and managing risk in each of the three priority areas listed by the CFPB. Why?

Fair Lending is all about making sure that similarly situated individuals are treated similarly; data analysis helps evaluate whether that is the case by identifying disparities. Regulators will view disparities as red flags for potential discrimination. Disparity does not necessarily mean that discrimination is occuring, but data analysis is the only way to know for sure.

You'll look not only for the statistical significance of the disparity, but also how any disparity you have compares to peers and benchmarks.

Here at Ncontracts, we specialize in Fair Lending data analysis, and would love to show you how you can quickly and easily improve your process. Click here for a free demo of the Fair Lending software for Redlining and Small Business activity. We also offer affordable custom analysis to identify Fair Lending risk in your loan servicing.

3. Focus on Redlining Risk

Redlining is a compliance hot topic. While it's closely tied to both CRA and Fair Lending laws, it applies to all financial institutions. Redlining risk has been in the headlines consistently for the past year and a half, and industry thought leaders anticipate that this trend will continue.

Below are a few resources we've released and blogs we've posted about Redlining that will help you improve how you manage your risk:

Related: How to Build a Strong Fair Lending & Redlining Compliance Management System


As you work to manage and mitigate your Redlining risk, here are three simple steps you can take. In addition, if you're looking for more help analyzing and managing your Redlining risk, we're here to help.

4. Fair Lending is About Much More than Just HMDA

This recent Fair Lending Report underscores one key misconception, which is that Fair Lending is all about HMDA. The reality is that Fair Lending laws and regulations cover many different types of loans - not just mortgages. All financial institutions that make loans, even ones that don't file HMDA, should be considering their Fair Lending risk.

HMDA data is standardized and public, which makes it easier to analyze and compare. However, the regulators do pay attention to other types of loans; in the past, they've focused particularly on indirect auto and credit card loans. This year, they're signaling additional focus on small business lending. Now is the time to gather and analyze that data to identify any risk that may exist. Ncontracts is here to help. 

Ncontracts Viewpoint: Fair Lending compliance remains a regulatory priority, and this year, the focus will be on Redlining, servicing and small business lending. Are you prepared for scrutiny?  We can help make sure you're ready.  

If you have questions, we're here to help. We have plenty of free resources - such as blogs, checklists, and eBriefs - that we would be more than happy to share. In addition, we offer compliance analysis software and consulting that can help you achieve your goals.




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