The First Credit Decision
I am calling this next series the “Think List”. I have developed them to help your management teams gather together, and think about fair lending priorities for 2013. I hope you enjoy them!
Credit discretion starts with the first person in your company that communicates with the consumer. For years, companies have focused on credit discretion as it relates to the underwriting of the file. A file was defined differently amongst lenders such as “when we have a loan application”, or “when we have a loan application and all supporting documents”, etc. What many executives do not understand, is that not having effective monitoring at the first communication, leaves the barn door wide open for fair lending issues. After all, if you do not have monitoring in place in the beginning, how do you know if your front line is in violation consciously or sub-consciously? Remember, the more that you demonstrate your compliance management systems to the CFPB the happier they are.
______ When you train your front line for Fair Lending, do you also give them common scenarios that may pose an issue? Are the scenarios then discussed, as to the appropriate way to handle the situation? Or, do you just ask your staff to jump online, take a course and then check off the “training” box?
_____ Define all of the ways that a customer can contact you. From there review the common workflow and communication for each step until application. This will assist you in setting up policy, monitoring and oversight.
_____ How do you track the inquiries into your company? How do monitor how your employee’s follow up? If your policy is built around responsiveness, do you monitor it? If not, you really do not know what is happening and this may trip you up on an exam. A common technique during the exam is to review the policy and procedures, and then speak to the employee responsible about their knowledge of the policy or procedure.
_____ Do your sales managers have a higher degree of fair lending training, so that they can spot issues?
_____ Do your sales managers listen in on a certain percentage of calls to understand how consumers are being handled?
_____ Does the sales manager follow up with those who did and did not apply to talk with them about their experience?
_____ Do the operations managers do the same monitoring for their staff?
_____ Is the knowledge gained from this monitoring, then translated into sales/support guidance with Fair Lending in mind?
_____ How do you monitor those who are “discouraged” to apply? For instance, a loan originator tells a client that their credit score is not sufficient to support a mortgage loan. Is there a procedure for someone more senior to check the scenario? Or, are you allowing credit discretion at the level of the loan originator?
_____ How do you monitor inquiry emails and the promptness of their return?
_____ Do you assign areas to your loan originators that allow maximum coverage of your MSA’s? If so, how do you monitor whether or not an originator calls on all of those offices, and offers credit options fairly?
_____ Do you “mystery shop” anyone that communicates with a consumer? If not, do you hire out to do that? This demonstrates how you monitor, find an issue and then correct it. It is much better to know this information from your own source, versus CFPB mystery shoppers or non-profit mystery shoppers.
The CFPB and the DOJ have upped the ante on what are acceptable practices. Certainly, we are not used to this level of scrutiny. Yet, since it is here, it will serve you well to address the holes in your business before those holes become a problem for you. More “Think Lists” are on the way!