NAFCU Journal May June 2021

42 THE NAFCU JOURNAL May–June 2021 COMPLIANCE CENTRAL I n November 2020, the National Credit Union Administration (NCUA) gave an update on consumer compli- ance expectations for 2021, along with some insight into its exam focus. NCUA explained that upcoming credit union examinations would focus on, among other things, common fair lending issues, as well as loan accom- modations triggered by the COVID-19 pandemic. Additionally, the Biden admin- istration has indicated that fair lending will be among its priorities. Although pandemic-related loans may be reviewed as a part of regular exams and fair lending exams, the rise in fair lending focus is not pandemic-specific, as it appears the agency has been steadily rising, with NCUA seeming to increase its volume of stand-alone fair lending exams over the past few years. We have heard from a few credit unions about their experiences with NCUA’s fair lending exams and compared these insights to what NCUA described in its Letter to Federal Credit Unions regarding its fair lending exam program, which was published in 2013. In short, it appears that NCUA has increased its capabilities and readiness to conduct separate on-site (or virtual) fair lending exams in recent years and this trend will likely continue. Selection Process NCUA’s letter states “NCUA will use multiple factors to determine whether a federal credit union demonstrates the potential for higher fair lending risk which could lead to a fair lending exam.” These factors are: ■ Home Mortgage Disclosure Act (HMDA) Data Outliers: NCUA will review credit unions’ HMDA reports to determine if there is data that falls outside of the usual range for pricing, denial rates, withdrawals and loan terms. A credit union may be selected for a fair lending exam if this data indi- cates a higher risk of violation; ■ Fair Lending Violations: A credit union which has fair lending findings or violations in its regular NCUA exam; ■ General Compliance Risks: A credit union with moderate to high-risk rat- ings in other areas of compliance; and ■ Other factors: NCUA indicated that the volume, type and complexity of a credit union’s loan offerings may be a factor. NCUA will also consider the make-up of the community the credit union serves, as well as any fair lending complaints submitted by members. WHAT NCUA’S FOCUS ON FAIR LENDING EXAMS MEANS FOR CREDIT UNIONS By Loran Jackson, NCCO