Fair Lending and Regulation B

Question 1

Fair Lending & Reg B

What are the disclosure requirements for various types of advertisements: print, oral/radio, and video (TV, YouTube, etc.)?

Answer 1

• For printed or online ads, credit unions can meet the requirements by including the Equal Housing Logo with either the words “Equal Housing Lender” or “Equal Housing Opportunity”
• For oral ads, the credit union can use either statement: “Equal Housing Lender” or “Equal Opportunity Lender”
• For video ads, the credit union can follow either the rules for the printed/online ads or the rules for oral ads. However, both disclosures are not required for video ads.

Question 2

Fair Lending & Reg B

During which part of the lending process must credit unions treat all applicants in the same manner?

Answer 2

The entire process.

Federal credit unions cannot discourage an application, discriminate in setting the terms or conditions or deny a real estate-related loan on a prohibited basis

Question 3

Fair Lending & Reg B

What are the three different types of lending discrimination? In what types of situations could each occur?

Answer 3

OVERT DISCRIMINATION - Explicit actions that discriminate against a protected class. EXAMPLE: Offering higher loan rates to women versus men

COMPARATIVE EVIDENCE OF DISPARATE TREATMENT
- Receive less assistance than other applicants
- Not offered the same alternatives or potential for exception
EXAMPLE: John and Jane with similar situated applicants receiving different outcomes

EVIDENCE OF DISPARATE IMPACT
- NEUTRAL policy
- Does not obtain the same level of service, access to information or credit as other members
EXAMPLE: Using certain creditworthy factors that may look better for one group of people than others based on historical data

Question 4

Fair Lending & Reg B

What is a “prohibited basis”?

Answer 4

ECOA:
• Race
• Color
• Religion
• National origin
• Sex
• Marital status
• Age (provided the applicant has the capacity to contract)
• Public Assistance Income

NCUA:
• Race
• Color
• National origin
• Religion
• Sex
• Handicap
• Familial status (having children under the age of 18)

Question 5

Fair Lending & Reg B

What types of actions are considered adverse actions under Regulation B? What actions are not adverse?

Answer 5

ADVERSE:
• Reductions in credit limit
• Refusal to increase credit limit
• Denials of credit applications
• Making counteroffers that are not accepted
• Refusal to renew or extend credit
• Termination of account

NOT ADVERSE:
• A change in the terms expressly agreed to by an applicant
• Any action taken in connection with inactivity, default, or delinquency
• A refusal to extend credit because the creditor does not offer the type of credit plan requested

Question 6

Fair Lending & Reg B

What are a credit union’s options for responding to an incomplete application?

Answer 6

• Credit union could respond within 30 days after taking adverse action on an incomplete application
• Credit union could send the member a “Notice of Incompleteness” informing the member of the required information and the time period for the member to respond

Question 7

Fair Lending & Reg B

What is the timeframe for sending an adverse action notice? If the credit union makes a counteroffer, what options does it have for providing an adverse action notice?

Answer 7

• 30 days after receiving a COMPLETE credit application
• 30 days after receiving an INCOMPLETE credit application
• 30 days after taking action on an EXISTING credit account
• 90 days after making a counteroffer mbr does not accept
• Combined notice including counteroffer and adverse action notice

Question 8

Fair Lending & Reg B

Adverse action and risk-based pricing rules interaction with the Fair Credit Reporting Act’s requirements.

Answer 8

Credit unions are required to send members an adverse action notice under the Fair Credit Reporting Act (FCRA) when the credit union uses information obtained from a consumer reporting agency to take a negative action on the member’s account or application.

• Risk-based pricing notices required when granting credit to a member on terms that are less favorable than the terms granted to other members (i.e., a higher annual percentage rate)
• Exception to risk-based pricing is when an adverse action is sent (risk-based pricing is less than favorable terms–adverse action when credit is denied)