For the past decade, there has been a constant stream of enforcement actions against financial institutions for engaging in redlining. Redlining occurs when financial institution practices result in the restriction of lending in a particular geographic area, quite frequently a low-income or a high-minority population area. Redlining is:
- Usually cited as a fair lending violation
- Frequently listed as a weakness in a Community Reinvestment Act (CRA) management system
- Quite often listed as both a fair lending and a CRA concern
- Now there is Small Business Data Reporting
Fair lending laws, the Equal Credit Opportunity, and Fair Housing Acts, prohibit illegal discrimination on a prohibited basis. CRA deals with income disparities, requiring financial institutions to meet the needs of their entire community, including low- and moderate-income areas. For years, both CRA and HMDA regulations have provided the data needed to test financial institutions on how well they do in meeting the needs of those they serve.
On March 30, 2023, the Consumer Financial Protection Bureau (CFPB) published an 888-page final rule to implement Section 1071 of the Dodd-Frank Act. That section amends the Equal Credit Opportunity Act (ECOA) to require financial institutions to collect and report certain data in connection with credit applications made by women, minorities, and/or LGBTQI+ owned businesses and small businesses.
- The effective date is 90-days after publication in Federal Register
- Compliance dates are tiered based on transaction volumes. The first tier will be required to report on October 1, 2024, and the final compliance date for tier 3 is January 1, 2026
The combination of these critical regulations will bring to light issues in lending policies and will highlight a lack of lending in certain areas which is a direct link to Redlining. The financial institutions that fail to meet the credit needs of its selected assessment area are a target of special interest groups. The populations of the redlined areas are often high minority (fair lending) and low income (CRA). That is the collision of fair lending and CRA. What will the future bring with the passing of Small Business Data Collection 1071 regulations?
Who Should Attend
This program is designed for members of the board of directors, managers of all lending departments, bank counsel, compliance officers, loan officers, and auditors.
Continuing Education Credit Information
The Collusion of Fair Lending, CRA and Small Business Data Collection and Reporting (Section 1071) has been approved for 2.5 CRCM credits. This statement is not an endorsement of this program or its sponsor. Credits are redeemable for Live attendance only. For questions on certificates, please email email@example.com. Certification holders must report these credits at https://aba.csod.com.