Limited English Proficiency & Consumer Compliance: Unpeeling the Onion

From time to time, we get inquiries from clients about how to address the Limited English Proficiency (LEP) within consumer regulatory compliance. The most regularly cited concerns involve Fair Lending, CRA and UDAAP. Today, there is no clear and absolute guidance from the regulators. Warning: The onion has many layers. Below, we lead you through a logical compliance approach to managing languages beyond English.

There are three primary concerns regarding Limited English Proficiency (LEP) and regulatory compliance for financial institutions:     

1. Fair Lending Concern: Are you making all of your products and services readily available to the consuming public? The Equal Credit Opportunity Act (ECOA) makes it unlawful to discourage applicants from applying or reject an application because of race, color, religion, national origin, sex, marital status, age or because you received public assistance.
   • Example: A potential Fair Lending Risk, according to the Interagency Fair Lending Examination Procedures: “Marketing through brokers or other agents that the institution knows (or has reason to know) would serve only one racial or ethnic group in the market.”
2. UDAAP Concern: Are you bringing in individuals based on specific advertising, like non-English language ads, and then are unable to properly follow through or execute on the lending process (e.g., disclosures, translators, service, collections, etc.) because of the langauage?
   • Example: CFPB’s Assistant Director Patrice Fickling: “In terms of Spanish language advertising, I think that lenders should be mindful of the potential risks of advertising in one language and not having services available in Spanish so that consumers understand the transaction they are entering into, so that consumers have access to help if they run into trouble in that transaction, and really at key decision points along the way.”
3. CRA Concern: The Community Reinvestment Act (CRA) is designed to encourage commercial banks and savings associations to help meet the needs of borrowers in all segments of their communities, including low- and moderate-income neighborhoods.
   • Example: We are seeing evidence of regulators actively exploring concerns regarding majority-Black and majority-Hispanic neighborhoods (e.g., Hudson City Savings Bank).

There are no clear answers on LEP.  However, here is an abbreviated list of questions we ask our clients when it comes to LEP:

• Service Support: If you are going to advertise and market to a language outside of English, are you prepared to support the advertising/marketing AFTER the campaign?
• Cradle to Grave: If you advertise for mortgage loans in a Spanish newspaper...Will you have applications in Spanish? Disclosures in Spanish? Website in Spanish? Call Center in Spanish? Loan Post Close Service in Spanish? Collections in Spanish? Loss Mitigation in Spanish? Translating services? Bottom Line: Can you offer the service from cradle to grave? If not, think about the UDAAP and Fair Lending implications.
• No Hablo Su Tipo de espanol: If you are going to offer Spanish, what type of Spanish will be utilized? There are a variety of versions of Spanish – Castilian Spanish from Spain, Latin American Spanish from Mexico, Caribbean Spanish from Puerto Rico, etc.
• Sprichst du Deutsch: If you are going to offer Spanish, are you planning to offer other languages for individuals in your market (e.g., Mandarin, German, Arabic)?  Where do you plan to stop the languages being  offered? Do you plan to serve Hispanics but not serve individuals who speak German?

With the lack of clear regulator guidance, we also know that there is no one size fits all approach in today’s market. Regardless, financial institutions need to be prepared to “be” the following:

1. Be Prepared: You need to be ready to explain your LEP strategy to the regulators (demonstrate that there has been an effort).
2. Be Sensitive: Be extra-sensitive when there are high populations of LEP residents.
3. Be Consistent: Make sure all members of your management team have the same answers when it comes to the LEP strategy. 
4. Be Realistic: Bigger financial institutions should consider that with more resources come higher expectations.
5. Be Listening: Listen to what your market is saying and pay attention to complaints, both internally and external regulatory sites.
6. Be Local: Some state and local laws require lenders to provide written disclosures in foreign languages.
7. Be Aware: The tide rolls in and the tide rolls out. The tide may change. The CFPB is rumored to be kicking around guidance on this issue.

We also acknowledge that the larger financial institutions are starting to offer oral interpretation services, bilingual staff, telephone service lines with interpreters, and translation services. Recognize that ECOA covers every part of the lending cycle (including advertising, underwriting, pricing, servicing, loss mitigation). The cost of the translation of vital documents and services has to be balanced with the cost of translations and the benefits to the borrowing LEP community. 

Although the CFPB has been relatively quiet on the LEP issue, the Bureau started to indicate that LEP borrowers are a priority.

In the CFPB’s April, 2015 Fair Lending Report, the CFPB stated that “the Bureau is exploring the obstacles consumers with Limited English Proficiency (LEP) face when attempting to access credit, as well as the challenges that creditors face when interacting with LEP consumers and complying with their various legal and regulatory obligations. The Bureau encourages lenders to provide assistance to LEP individuals in order to increase access to credit and to reach out to the Bureau with ideas of how to promote access. In doing so, lenders should take steps to ensure that their actions comply with ECOA.”

The CFPB’s Ficklin was quoted as saying, “Our hope is that we can help…navigate what I think is a very tricky path.”

We live in an increasingly diverse and multicultural United States. Giving access to credit services to LEP consumers can be tricky. Broad laws and regulations (e.g., ECOA) combined with sparce formal regulatory guidance makes the compliance path complicated. We acknowledge it would be terribly expensive for a small financial institution to translate all relevant materials (e.g., advertising, applications, disclosures, website, loan servicing, collections letters, etc.) into multiple languages. The regulators have been cautious about pushing on this LEP issue for a variety of issues, including the above.

Ncontracts Viewpoint: From where we sit, once you start, it is difficult to stop “peeling back the onion” on the language issue. For example, you might consider the regional Spanish dialect used to translate, whether to use Cantonese versus Mandarin (or both), how to handle website translations, how to staff service and collections teams, and much more.

While the federal regulators (including the CFPB) search for answers, the recommendation to most of our clients is simple: take the performance context of your financial institution and derive a single strategy where you can be consistent in execution! Unless there are extreme circumstances, the best path may be to stick to English until more precise guidance is provided. Most financial institutions, especially smaller institutions, are not in a position fully execute on a unique language. 

Ncontracts will continue to monitor the Federal regulator guidance. It is also fair to note that the CFPB’s supervision manual for ECOA reviews does have Module IV which asks about serving non-English borrowers and how they provide non-English language assistance (see questions below).  In addition, several states currently require disclosures in specific consumers’ native language – Texas, Arizona, California, etc. – but there is no uniform approach.

If you elect to peel back the LEP onion, do so with caution. There are many layers. 

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

Additional Reading and Resources

• CFPB Baseline ECOA, Including Module IV
  • Describe the institution’s policies and procedures for servicing loans held by borrowers with limited English proficiency (LEP borrowers) including the following information:
    • Does the institution flag files that require non-English language assistance? If so, how is this flagged? 
    • Do calls for customer service have an option for languages other than English? If so, how are those calls processed? 
    • Does the institution have customer service personnel available to provide assistance in languages other than English? 
    • If customer service personnel are available to provide assistance in languages other than English, are they dedicated customer service personnel (as opposed to personnel who have other roles, but are available to translate on an as-needed basis)? 
    • Do customer service personnel who are available to provide assistance in languages other than English receive the same training, and have the same authority, as other customer service personnel? 
    • Are translations of English language documents provided for LEP borrowers?
  • Great Recommendation – But Not Practical for Small Banks – Paul Hastings
  • Bilingual Ads - The Center for Auto Finance Excellence
  • Lost in Translation – Westlaw Journal