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Information from NCUA on Fair Lending Examinations

Recently, CUNA Regulatory Advocacy staff had an opportunity to talk with National Credit Union's (NCUA) Kent Buckham and Moisette Sweat, top personnel in the agency’s Office of Consumer Protection (OCP), about fair lending examinations. 

Questions/Answers on Fair Lending

1. When we talk about fair lending examinations, what does that entail?
A:  NCUA’s fair lending examinations involve consumer compliance analysts from the Office of Consumer Protection (OCP) examining federal credit unions (FCUs) for compliances with fair lending laws, mainly the Equal Credit Opportunity Act and the Fair Housing Act.  Analysts follow the revised 2009 FFIEC fair lending exam procedures.

2. How many credit unions are being examined this year for fair lending enforcement?
A: 10 federal credit unions

3. Why are the fair lending exams separate from safety and soundness exams?
A:  Because of the specialized nature of the fair lending exams, they are done separately from safety and soundness exams.  OCP consults with regional directors when scheduling fair lending exams to avoid conflicts with the safety and soundness examinations.

4. Are all FCUs subject to such examinations?
A:  Yes, with a focus on FCUs that participate in mortgage lending; however, only a limited number of FCUs are chosen each year for a fair lending exam.

NCUA’s OCP will select a pool of FCUs to examine based on the following suggested issues involving an FCU credit union:

  • A diverse population mix including community credit unions, credit unions with underserved area additions, credit unions designated low income, and credit unions with a mix of moderate to low income members.  
  • A high HMDA denial or withdrawal rates outside of the norm for a typical financial institution as identified in the FFIEC HMDA National Aggregate Reports.
  • Moderate or high risk ratings in compliance during the most recent safety and soundness examination.
  • Claims of lending discrimination by members.
  • High number of compliance exceptions for all consumer regulations. 
  • Regional Director recommendations.
  • Risk-based or varied loan pricing programs.
  • High-priced mortgage loans, as defined by the Truth in Lending Act and Regulation Z.
  • High concentrations in indirect lending.
  • High concentrations in small commercial loans.
  • Excessive real estate loan modifications.
  • Fields of membership or geographical areas with high concentrations in military personnel to ensure fair lending and compliance with the Service members Civil Relief Act.
  • Prior fair lending examination identified concerns.

5. Are state chartered federally insured credit unions subject to fair lending exams from NCUA?
A: No.

6. Are fair lending exams risk focused, and how does that work?
A:  Fair lending exams are compliance examinations.  The purpose is to screen for and detect discrimination in lending and ensure compliance with fair lending laws.

7. How are credit unions notified they will be examined for fair lending?
A:  A notification letter identifying the analyst in charge (AIC) and information FCUs must provide are mailed at least 60 days before the first day onsite.

8. Do they receive advance notice of what is expected?
A:  Yes.  The notification letter and communications with the AIC explain what is expected.  Additionally, the FFIEC fair lending exam procedures are available at www.ffiec.gov/PDF/fairlend.pdf.

9. What if credit unions have difficulty assembling required information, does NCUA help with that? And is a good faith effort on that acceptable?
A:  The AIC may provide guidance to FCUs on assembling the required information and will obtain as much information as is available from NCUA systems.  A good faith effort on the part of an FCU is appreciated and will be considered during the examination process.

10. Do you see any growing problems in the credit union system regarding fair lending?
A:  We do not see any growing problems, but have had some issues regarding the validity of data credit unions provide for analysis during exams.

11. Does NCUA provide an aggregate report on credit unions fair lending track record?
A:  Yes, it is included in the annual National Trends report.

12. Does NCUA coordinate with the CFPB and Justice department on fair lending?
A:  For FCUs within its supervisory jurisdiction for compliance, NCUA is not required to coordinate with the CFPB.  Under fair lending laws, NCUA has the authority to refer matters to the Department of Justice (DOJ) when it determines there is a pattern or practice of discrimination or noncompliance with fair lending laws.  NCUA provides comment and input of annual reports to Congress regarding fair lending from the CFPB and DOJ.