Why your fair lending risk arrow is probably pointing up

Clayton J. Mitchell, Niall Twomey
4/9/2021
Why your fair lending risk arrow is probably pointing up

Often, whether an organization is complying with fair lending practices can seem to lie in the eye of the beholder. Outside of a few very distinct requirements for notifications and communications, fair lending laws reference principles such as fairness and equity without precisely elaborating how those principles should be interpreted.

Because of this lack of elaboration, the enforcement of fair lending laws can involve a degree of subjectivity. Even the prohibited bases for lending decisions have changed over time and continue to vary based on the specific regulation.

For companies in the banking industry, subjectivity and unknowns can create confusion and lack of confidence. And with fair lending in particular, the inherent subjectivity means that fair lending risk tends to rise and fall in waves as enforcement priorities change and public attention comes and goes.

Right now, fair lending risk at most financial services companies is rising due to new enforcement policies and consequences of the COVID-19 pandemic. But assessing your company's risk can become a business opportunity instead of a compliance burden if approached in the right way.

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Clayton J. Mitchell
Clayton J. Mitchell
Managing Principal, Fintech
Niall Twomey
Niall Twomey
Principal