I see a lot of marketing targeted to Millennials, Latinos, Baby Boomers and other segmented markets. Did you know that marketing only to specific groups and not marketing to others, may violate fair lending laws? Many lenders are surprised to hear that!
In fact, American Express was fined by the CFPB over this issue for discrimination based on age. Two banks were fined because one targeted the Asian population, and another bank discriminated against white males. In all of these instances, the lender had a broader market to offer access to credit, and chose to market to only certain types of people on a prohibited basis.
Your marketing department should be well-versed and trained in Fair Lending Marketing Principles! If not, they may be causing you chaos. Your marketing has to be appropriate and distributed to all potential clients in your market, not just segments of your market.
ECOA states that you may not discriminate based on these prohibitive factors: Race, Religion, National Origin, Sex, Gender Identity, Marital Status, Age, Receipt of Public Assistance
The Fair Housing Act adds Handicap and Familial Status.
If you exclusively or heavily market any of these targets, at the exclusion of the others in your market area, you will have a fair lending issue!
Let’s look at a few examples that may indicate problematic targeted marketing.
- Minority owned mortgage companies or banks, that focus on their specific minority group, despite the fact that the area that they serve has a diverse population.
- Large marketing budgets to attract the “Millennial” market and smaller attempts at other markets.
- Focusing only on Baby Boomers.
- Marketing only to the LGTB Community.
- Large marketing budgets targeted specifically to Lending to Women and little to no marketing for other types of people in the service area.
We all know that people are more likely to do business with people that they perceive to be more like them. If you are in a good sized metropolitan market, and you want to target certain types of buyers, your marketing will need to incorporate all of your market, and not just some of your market.
Before I go further into fair lending marketing strategy, don’t get all bunched up about targeted marketing to the examples I cited. You can absolutely target market segments of the community. For instance, you may have hired a couple of originators who speak Spanish and have a passion for the Latino community. Perfect, let’s do it. Yet if you don’t also have originators covering the other people in your area, then you are likely to have fair lending issues.
What is a Fair Marketing Strategy?
The first consideration is how diverse are your loan originators? Do you have sufficient diversity in your sales staff to properly represent the populations in your assessment area? For instance, do you have originators that are Latino, African-American, Male, Female, Young, Old, etc. When your origination staff is diverse, then your marketing efforts are likely to be diverse as well.
To illustrate, let’s take a look at the Chicago area where I live. This is one massive metropolitan market! As such, we have a lot of diversity in our population. If you want to lend in this market, then you will want to demonstrate, to your prudential regulator, that you offer equal access to credit in this market. It does not mean that you plop an office in a well to do area, hire people from that area and call it a day. That may have been okay at one time for mortgage bankers in particular, but now life has changed and you are evaluated based on your diversity in marketing.
Instead, your sales staff and your marketing should be compatible with the Northside, Southside, and Westside (sorry, we don’t have an Eastside because that is a lake). Each part of Chicago has its own types of borrowers, ethnicities, culture and even types of housing. A family in front of a suburban home will unlikely resonate with a family who lives in the City.
Now imagine that my recruiting strategy includes salespeople from all of these areas. This gives me great representation in ALL of my market, versus just representation in PARTS of my market! Each of them is given marketing budgets that assist them in their respective markets. Therefore, my company is not just offering access to credit to one segment of my market, I am offering access to credit to all parts of my market!
If you have not reviewed your marketing strategies, the diversification of your sales staff or baseline fair lending issues that may be of concern; just remember I’m only a phone call or email away!