Tell us
what you think
Our Sponsors
 |
Our Sponsors
|
Question & Answer
Question: Can we charge a loan origination of $50.00 for loans of $3,000 or more, and a loan origination fee of $100.00 for loans of less than $3,000? Does this have fair lending problems?
Answer: Whether this has fair lending problems depends on several things. First, your market. What kind of loans does your bank make now and what are the credit needs of your community - especially those of low- and moderate-income residents in your community. Equally important, who are the likely borrowers of the more expensive loans?
If your low and moderate- income population has a high correlation with racial or ethnic minorities, you could appear to be charging higher fees to minorities. No justification for the higher fee is going to sound convincing under these circumstances.
Similarly, if there is a credit need that you have identified in your community, making the product more expensive is difficult to explain when you are putting forward your CRA performance.
Second, consider your motives. Any additional or higher fee should be related to the actual cost of the product. If you can demonstrate that loans of less than $3,000 cost the bank more, then you may be able to justify the additional fee. However, you should be prepared for possible objections from members of your community. Also, you should be ready with some hard numbers.
You may also want to consider how your lenders will find out the information they need to be able to quote fees to the customer. The very act of finding out the loan amount could let the customer know about the difference in fees. All in all, we think this isn't the best of ideas.
Copyright © 2000 Compliance Action. Originally appeared in Compliance Action, Vol. 5, No. 4, 5/00
Rate This Article
Current Rating For the Feature:
| Total Ratings for this Feature: 0 |
|