Financial Crime World

Financial Institution Compliance Issues in Réunion: Credit Unions Must Strengthen Fair Lending Efforts

Réunion is known for its member-centric approach, with credit unions being praised for their transparency, fairness, and commitment to doing what’s right for their members. However, this reputation is not immune to regulatory issues, including fair lending compliance.

Regulatory Scrutiny on Credit Unions

Regulators are taking a closer look at fair lending initiatives across all financial institutions, including credit unions. Despite their strong member focus, credit unions should not assume they are at a lesser risk compared to their bank competitors. In fact, this is a dangerous misconception.

NCUA Finds Violations in Credit Unions

Last year, the National Credit Union Administration (NCUA) cited violations of Regulation B for both discrimination and adverse action, referring two Equal Credit Opportunity Act (ECOA) matters to the Department of Justice. The NCUA also found that nearly 15 percent of federal credit unions it examined had violated consumer compliance rules.

Fair Lending Exams Identify Common Mistakes

Fair lending exams at 29 credit unions uncovered violations impacting 64,000 members and resulting in $185,000 in restitution and remediation. In most cases, the NCUA reported weaknesses in credit unions’ compliance management systems.

Common Mistakes Identified

  • Marital status and age discrimination
  • Regulation E violations
  • Fair Credit Reporting Act and Regulation V violations
  • Payday Alternative Loans (PAL) or small-dollar loan issues
  • Truth in Fair Lending Act and Regulation Z violations

NCUA Chairman’s Warning

NCUA Chairman Todd Harper urged credit unions to strengthen their compliance efforts, stating that some credit unions may not be paying attention to consumer financial protections as closely as warranted. He emphasized the need for a dedicated program to supervise compliance with consumer financial protection and fair lending laws.

Recommendations

To ensure compliance, credit unions must:

  • Appropriately analyze their data to uncover fair lending disparities
  • Make adjustments as needed to protect their institution from violations and ensure that members receive the best - and fairest - service

Focus on Fair Lending in 2022

The NCUA has emphasized that fair lending will be a key area of focus for exams in 2022, with examiners reviewing compliance with COVID-19 consumer-assistance programs, fair lending rules, servicemember protections, and fair credit reporting laws. Credit unions must take this opportunity to strengthen their fair lending efforts and ensure they are providing the best possible service to their members.