Fair Lending Remedies: Your Program's Benchmarks
Fair lending enforcement actions lay out the actions needed to correct a problem that has been identified. It is usually the case that these actions, made generic, comprise the core parts of a good fair lending program. The two most recent fair lending cases are no exception. They provide a good measurement for your fair lending program. If your institution does what these two banks are required to do, your program should be a good one.
The required elements in the consent order could also be considered as elements of an affirmative action program. When a consent order is issued, it is designed by the DOJ to cause change in how the institution reaches and serves its customers. The desired result is equal service and equal access by the end of the agreement period. Causing change could be one definition for affirmative action.
A fair lending program is not static. The purpose of a fair lending program should be to ensure that previously unserved or underserved populations are reached through advertising and education. Another purpose is to design loan products that meet the needs of this population. And finally, a program should include self-evaluation to determine the success of the program.
Location
First American must open four new branches in minority census tracts. The branches must provide a full range of services and hours of operation typical of other branches. All branches will have ATMs.
Old Kent must open at least three new branches in minority census tracts.
Staff
First American will employ a full-time Director of Community Lending. The bank must also provide periodic training at least annually.
Old Kent must hire three additional business lending originators with responsibilities to originate loans from minority areas of Detroit. All staff must be trained at least annually in fair lending.
Marketing
First American must design and manage a marketing program specifically targeted to generate significant additional applications for all types of credit products from qualified residents of and small businesses located in minority census tracts. The agreement establishes minimum conditions for print media, radio, and multi-lingual promotional materials. The funds spent on these marketing efforts must not be less than $400,000.
Old Kent must ensure that products are marketed and made available in predominantly African American census tracts. It must maintain a marketing program that is designed to generate significant additional applications from qualified residents and businesses in the City of Detroit.
Credit Needs Assessment
First American must thoroughly assess how its credit products and delivery of services serve the needs of minority communities. The assessment must include a review of available federal, state, and local government programs.
Consumer Education
First American must spend at least $300,000 during the agreement to provide credit counseling, financial literacy, business planning, and related financial education in minority census tracts. At least half of these funds must be used to sponsor programs offered by public-interest or non-profit community organizations. The programs must be multi-lingual.
Old Kent shall fund to an amount of at least $100,000 credit counseling, financial literacy, business planning and other educational programs targeted at the minority consumer and business communities of Detroit.
Loan Commitments
First American must invest $5.0 million over the term of the order. The special loan program must provide qualified applicants with an interest rate of at least 50 basis points below the bank's standard rate set for that product.
Old Kent must invest at least $3.0 million over the term of the order by offering loans on terms that are more advantageous to the applicant than would normally be offered.
Copyright © 2004 Compliance Action. Originally appeared in Compliance Action, Vol. 9, No. 14, 12/04
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