I am looking for feedback from banker's and experts on the topic of fair lending risk in factoring programs. Say the Bank's Factoring Department is acquiring ABC Factoring. ABC Factoring's contracts charge a higher rate to their customers than the Bank's Factoring Department charges. Is the Bank able to continue to charge a higher rate for these customers, even if/when the customer requests changes to be made to their current contract (i.e. increasing their facility limit)? Also if the Bank's Factoring Department's policy is to run credit reports when a customer is requesting an increase in their facility limit. Can the Factoring Department decide not to pull credit reports on the ABC Factoring customers they acquired because ABC did not have a policy to pull credit reports when their customers requested an increase in their facility limit?

IMHO, they are now your customers, if you bought the relationship. Going forward, treating them any different that any of your other customers risks fair lending scrutiny. Of course, prior to any modifications or renewals of existing contracts, you are under no obligation to make any changes.

Randy gave excellent recommendations.
I would also look at the guidance that has been posted on indirect paper. The fact that the factor’s rates are higher than the bank could be an issue if the company (ABC) was targeting minority businesses. Also, I was not sure if you were referring to purchasing contracts, or the entire company. In either case, I would make an effort to look at their marketing.

Thank you both for your responses!