ECOA Violations identifying mortgage lenders and fixing or penalizing mortgage companies, banks and lenders who are "unfair"
Corrective
action is required “…when
the self-test shows that it is more likely than not that a violation occurred,
even though no violation has been formally adjudicated” (12 C.F.R.
§1002.15(c)(1)). In order to secure the privilege that comes with
self-testing and corrective action, the corrective action must be
“appropriate.”
Regulation
B provides guidelines for determining whether a creditor’s response to
potential ECOA violations is appropriate. First, the corrective action
must be “…reasonably likely
to remedy the cause and effect of a likely violation…” (12 C.F.R.
§1002.15(c)(2)).
regulations state that
corrective action is reasonably likely to remedy the cause and effect of a
violation if it:
- Identifies “…the policies and practices that are the
likely cause of the violation…” and
- Assesses the “…extent and scope of any violation…”
(12 C.F.R.
§1002.15(c)(2))
If self-testing reveals
evidence of an actual or potential compliance failure, the creditor must
determine whether it is necessary to provide remedial relief. If the
self-test involved the use of testers, and one of the testers received
discriminatory treatment, the creditor is not required to provide remedial
relief to the tester (12 C.F.R. §1002.15(c)(3)(i)).
However, if the self-test
shows that a credit applicant’s rights “…were more likely than not violated,”
then the creditor is required to provide remedial relief to that applicant,
unless the statute of limitations on an action available to the applicant has
expired (12 C.F.R. §1002.15(c)(3)(ii-iii)).
In 2009, the DOJ, the
Department of Housing and Urban Development (HUD), and the federal banking
regulatory agencies wrote a Statement of Policy to address concerns regarding
evidence of discriminatory treatment experienced by prospective homebuyers and
borrowers. This Statement includes answers to questions asked by
financial institutions, including answers to inquiries regarding what a lender
should do if self-testing shows evidence that lending discrimination exists.
·
Determining whether the
discriminatory act or practice was the result of faulty lending policies, poor
implementation of lending policies, or an isolated incident
·
Correcting policies or
practices that may have led to a discriminatory act or practice
·
Disciplining and
training employees involved
Noting that
while it does not “expunge or extinguish legal liability for violations of
the law,” proactive measures that include self-testing and corrective
action “…will be considered as a substantial mitigating factor by the
primary regulatory agencies when contemplating possible enforcement actions.”
[1] The Statement also notes that
self-testing and self-correction are regarded as a “substantial mitigating
factor” when the DOJ and HUD determine whether to seek penalties in an action
for ECOA violations.
Photographs of birdhouses in my Laguna Beach neighborhood, to cheer you up and make this legal information not so boring.
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