Financial services organizations continue to adjust the way they operate – from business models and digital banking platforms to third-party partnerships and mergers and acquisitions. But even in the face of change, financial services organizations are obligated to treat all customers in a fair and responsible manner.
This obligation is underscored with the U.S. Department of Justice’s launch of the Combatting Redlining Initiative.1 The initiative represents a robust and coordinated effort to investigate and prevent redlining, which is prohibited by the Fair Housing Act and the Equal Credit Opportunity Act.
Laws to combat redlining have been in place for more than 50 years, but financial services organizations can’t afford to assume their lending practices comply. Instead, they need to regularly verify that they are compliant. A single violation can cause significant harm to an organization. Consequences can include damaged brand and reputation, costly fines and penalties, and derailed strategic growth opportunities, such as acquisitions or introducing new products or services.
The Justice Department’s initiative is an important reminder for financial services organizations to reassess how they are monitoring for redlining risk and how they can prepare for increased regulatory scrutiny.
Here are five critical areas your organization can monitor more closely for redlining risk:
In addition to reducing the risks associated with redlining, financial services organizations that intentionally focus on inclusion can provide greater value to both their communities and shareholders by attracting more customers and helping underserved communities.
Crowe specialists combine data analytics with deep industry experience and regulatory knowledge to help organizations accurately assess fair lending risks and then develop policies and procedures to help improve:
1 “Justice Department Announces New Initiative to Combat Redlining,” United States Department of Justice, Oct. 22, 2021, https://www.justice.gov/opa/pr/justice-department-announces-new-initiative-combat-redlining