Why Fair and Responsible Banking Risk Assessments are Important for Non-Mortgage Business Lines

Fair and responsible banking risk assessments – by which financial institutions identify, measure, control, and monitor their lending and, more recently, servicing activities to prevent discriminatory, unfair, deceptive, abusive, and predatory acts and practices – have long been part of the compliance function within financial institutions. To date, the literature on such assessments has focused largely on how to conduct them on mortgage business lines, but has not addressed non-mortgage operations, such as credit card, student, and automobile lending. The mortgage-centric focus of most articles results, in part, from historically greater regulatory, enforcement, and litigation scrutiny of the mortgage business. Moreover, Home Mortgage Disclosure Act (“HMDA”) data, which identifies applicants in protected classes, simplifies the quantitative components of a fair and responsible banking risk assessment. Outside the mortgage context, the difficult questions of whether, and how, to conduct such risk assessments have received scant attention.

Originally published in LexisNexis Emerging Issues Analysis. Reposted with permission.