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What the Fed Chair has to Say About Fair Lending Enforcement

2 min read
Jun 24, 2020

This week brings us two news stories on Fair Lending. First, we’ll check in on Federal Reserve Chairman Jerome Powell’s latest comments on Fair Lending enforcement. Then we’ll report on the latest speculation on the FDIC’s CRA modernization plans.

Fed’s Powell on Fair Lending Enforcement

I would say that we are definitely recommitting ourselves to the enforcement of fair lending laws.”

Those are the words of Federal Reserve Chairman Jerome Powell at a House Financial Services Committee hearing on the economy last week.

During the hearing, Powell was asked about economic justice as a part of social justice and how financial regulatory agencies can promote inclusion.

He also noted that the Fed has made diversity and inclusion a high priority.

“We do supervise on banks for fair lending practices. Where we see that kind of pattern and practice, we engage in strong enforcement measures. There is some of that going on already…I do think we have a role. I believe we will do our best to play that role. I wouldn’t say it’s the lead role, but I would say that we are definitely recommitting ourselves to the enforcement of fair lending laws, as I mentioned,” he said.

Viewpoint: Is this a sign that increased Fair Lending enforcement is on the horizon? Now is a good time to evaluate and strengthen your Fair Lending compliance management system.

Have you been evaluating your Fair Lending risk with Fair Lending Risk Assessments? This should include areas like CRA, HMDA, and Redlining. Do you have the three lines of defense covered including business line operations, a compliance management system, and audit? Do you have a strong compliance culture?

No one has a crystal ball to predict how the regulatory landscape might change. The smart move is to have strong compliance fundamentals in place so that you are prepared and compliant.

We've created this Free Fair Lending Compliance Checklist to give you a high-level evaluation of your Fair Lending compliance foundation. It is a great starting point to see if there are any areas you need to explore in more depth.


Reports Suggest FDIC Isn’t Planning to Join OCC CRA Modernization

Even though the OCC and FDIC released a joint notice of proposed rulemaking for CRA modernization late last year, it’s unlikely that the FDIC will adopt the final rule released by the OCC in May, according to a report by a research company.

It suggests that the FDIC will eventually put a new rule out for comment, but that it is currently focused on its COVID-19 response.

Viewpoint: CRA rules at FDIC banks (and likely also Fed and OCC banks under $2.5 billion) likely won’t change soon, but that doesn’t mean CRA compliance programs can grow stagnant. Examiners will continue to examine banks to ensure CRA is being followed. Make sure your bank has an effective CRA program and regularly analyzes CRA data to understand and manage CRA compliance risk.

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

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