Fair lending risks and COVID-19 considerations 

Authored by Jennifer Kincel

Given the flood of consumer requests during COVID-19, banks need to revisit their fair lending risks. The pandemic resulted in a sharp influx of consumer requests for forbearance or modifications, and these could result in increased fair lending issues.  

Policies and procedures should be updated to reflect the temporary changes to the process and these updates should be communicated to staff. This will ensure that lenders are offering customers a consistent product versus one lender deciding to defer a payment while another is suggesting a partial payment.   

The denial process and complaints  

Another area that should be reviewed is the denial process during the pandemic. As COVID-19 has brought about many changes to bank operations, a second review process should be implemented to verify that the reasons for denial are supported by information in the credit file.  Additionally, the review should also ensure that adverse action notices were delivered in a timely manner.  

Complaints  

Banks should also be monitoring and tracking complaints as thoroughly as possible. Analysis of the complaints received will help identify areas of risk that will need to be reviewed in greater detail.  Additionally, compliant trends should be reported to senior management to be reviewed in greater detail.  

Regulators may be delaying examinations since they are dealing with the results of COVID-19; however, they will always revert back to fair lending laws. Case in point is the JPMorgan $53 million disparate treatment settlement with the Department of Justice (DOJ) in 2017. The DOJ alleged that the bank was recklessly disregarding the rights of at least 53,000 African American and Hispanic borrowers. It was claimed and that JPMorgan failed to catch a disparate impact affecting a group of their customers due to last of monitoring and loan file reviews. The time frame that was reviewed was during the 2008 financial crisis (between 2006 and 2009).

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