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#2242852 - 09/21/20 08:26 PM Fair Lending Enforcement on Commercial?
TMatt87 Offline
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TMatt87
Joined: May 2011
Posts: 1,874
Idaho
Does anyone know of any somewhat recent enforcement actions related to fair lending violations in commercial lending? We have some in our credit administration that think this only applies to consumer loans. TIA.
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Fair Lending
#2242874 - 09/21/20 11:55 PM Re: Fair Lending Enforcement on Commercial? TMatt87
Inspector Offline
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Joined: Apr 2016
Posts: 214
I don't know if I would consider 2004 to be fairly recent but here are two involving business redlining.

U.S. v. Old Kent Bank (E.D. Mich.) involved predominantly African American neighborhoods of the Detroit MSA and was the Department's first case alleging discrimination in small business lending, as well as residential lending. Pursuant to the May 2004 settlement agreement, the bank's successor will open three new branch offices, spend $200,000 for consumer education programs, and spend $3 million to subsidize loans in the formerly redlined areas, which we project will total approximately $50 million in subsidized loans.

U.S. v. First American Bank (N.D. Ill.) involved the predominantly African American and Hispanic neighborhoods in the Chicago and Kankakee metropolitan areas, and alleged that the bank failed to provide residential, small business or consumer lending services. Pursuant to the July 2004 consent order, First American Bank will open four new branch offices, spend $700,000 on outreach and consumer education programs, and spend $5 million to subsidize loans in the formerly redlined areas, which we project will total approximately $80 million in subsidized loans.
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#2242882 - 09/22/20 01:31 PM Re: Fair Lending Enforcement on Commercial? TMatt87
Inherent_Risk Offline
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Joined: Jan 2017
Posts: 307
I'm betting the implementation of 1071 is going to result in some more examples for you. If your credit folks would like to wait for those, maybe they can even be IN one!

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#2242890 - 09/22/20 02:37 PM Re: Fair Lending Enforcement on Commercial? TMatt87
TMatt87 Offline
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TMatt87
Joined: May 2011
Posts: 1,874
Idaho
That's my concern. With the 1071 SBREFA proposal out, I'm trying to get our commercial side on board now, because it takes them a long time to adjust to any changes.
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#2242941 - 09/22/20 10:20 PM Re: Fair Lending Enforcement on Commercial? TMatt87
InFairness, CRCM Offline
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InFairness, CRCM
Joined: Nov 2010
Posts: 429
USA
Not enforcement actions, but maybe look at some of the comments by advocacy groups and members of Congress about PPP loans not going to minority borrowers.
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#2243293 - 09/29/20 07:57 PM Re: Fair Lending Enforcement on Commercial? TMatt87
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,231
Bloomington, IN
From Reg B 1002.1:

Official Interpretation
1(a) Authority and scope.
1. Scope. The Equal Credit Opportunity Act and Regulation B apply to all credit—commercial as well as personal

What part of this do they not understand?
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#2245373 - 11/10/20 05:38 PM Re: Fair Lending Enforcement on Commercial? TMatt87
Jkeyes Offline
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Joined: Nov 2020
Posts: 2
Are there any updates as to when 1071 might take effect?

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#2245417 - 11/12/20 01:46 AM Re: Fair Lending Enforcement on Commercial? TMatt87
David Dickinson Offline
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Central City, NE
We don't have any info on an effective date yet. Anyone who does must have a crystal ball. smile
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#2245530 - 11/14/20 12:38 AM Re: Fair Lending Enforcement on Commercial? TMatt87
Adam Witmer Offline
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Joined: Sep 2010
Posts: 2,496
I agree with David and it is going to take a while. We saw an "outline of proposals" in September, and the next step is for a review panel to look at things, which comments for the review panel were due Nov 9. Other comments are due by December 15. So, the rule still has to go through the pre-rulemaking process, then to a proposal with comment periods, and then to a final rule. My best guess is a couple of years still, but it isn't too early to start preparing your commercial lenders as Reg B and fair lending absolutely apply to them.
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All statements are my opinion, not those of my employer, and should not be taken as legal advice.
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#2245537 - 11/16/20 01:54 PM Re: Fair Lending Enforcement on Commercial? TMatt87
Inherent_Risk Offline
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Joined: Jan 2017
Posts: 307
They are under court order to move things along, but I agree it'll still be a a while.

The Stipulated Settlement Agreement and Order sets forth the following timetable for the Bureau to engage in rulemaking to implement Section 1071:
•No later than September 15, 2020, pursuant to the Small Business Regulatory Enforcement Fairness Act (SBREFA), the Bureau will release an outline of proposals under consideration and alternatives considered.
•No later than October 15, 2020, or as soon as practicable thereafter if panel members are not available to convene, the Bureau will convene a Small Business Advocacy Review (SBAR) panel. The plaintiffs must make any recommendations of panel members by May 31, 2020.
•Pursuant to SBREFA, the SBAR panel must complete its report within 60 days of convening.
•The Bureau will promptly notify the plaintiffs of the completion of the SBAR report and the parties will thereafter meet and confer regarding a deadline for the Bureau’s issuance of a Notice of Proposed Rulemaking (Section 1071 NPRM). If the parties agree on a deadline, they will jointly stipulate to the agreed date and ask the court to enter that deadline. Any time that is more than 30 days after completion of the SBAR report, the plaintiffs can notify the Bureau that they want to ask the court to set a deadline for issuance of a Section 1071 NPRM and within 7 days of such notice, the parties will file a joint statement setting forth their positions on a deadline. The Bureau agrees not to propose or argue that the court should not set a deadline and the plaintiffs agree not to propose or seek a deadline that is less than 6 months after completion of the SBAR report. The parties will make their submissions according to the briefing schedule set forth in the agreement and the parties will ask the court to enter a deadline for issuance of the Section 1071 NPRM based on the submissions.
•After the closing of the comment period on the Section 1071 NPRM, the parties will meet and confer regarding a deadline for the Bureau’s issuance of a final rule implementing Section 1071 (Section 1071 Final Rule). If the parties agree on a deadline, they will jointly stipulate to the agreed date and ask the court to enter that deadline. Any time that is more than 75 days after the comment period closes on the Section 1071 NPRM, the plaintiffs can notify the Bureau that they want to ask the court to set a deadline for issuance of a Section 1071 Final Rule and within 7 days of such notice, the parties will file a joint statement setting forth their positions on a deadline. The Bureau agrees not to propose or argue that the court should not set a deadline and the plaintiffs agree not to propose or seek a deadline that is less than 6 months after the comment period closes on the Section 1071 NPRM. The parties will make their submissions according to the briefing schedule set forth in the agreement and the parties will ask the court to enter a deadline for issuance of the Section 1071 Final Rule based on the submissions.
•The Bureau must submit status reports to the plaintiffs and the court every 90 days beginning 90 days after the filing of the Settlement Agreement until a Section 1071 Final Rule is issued.

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