Are OCC’s revised fair lending guidelines “fair enough”?

Valerie Hletko was quoted by Global Banking Regulation Review about several notable revisions to the OCC's fair lending booklet.

“First, the booklet now includes novel issues that have been in focus recently, such as proxies for protected class status and credit models that utilize alternative data,” Valerie told GBRR.

Noting that a Government Accountability Office (GAO) report in June criticized the lack of clarity and consistency in the OCC's fair lending examination procedures, Valerie explained, “In particular, the GAO found that outdated and unclear examination guidance could lead to inconsistency in redlining examinations and enforcement."

“Seemingly in response, the booklet now includes an expanded list of redlining risk factors and other prescriptive enhancements,” she said. “However, it is very general as to methodology.”

Valerie remarked that a bank’s CRA area can be "convenient" for a redlining analysis but it may be too limited, and notes that the analysis should focus on access to credit in "different geographical areas" within a reasonably expected market area.

However, she continued, the revisions may not satisfy all the outstanding concerns over the guidelines, noting that the GAO report also criticized them for not specifying evidence or information that might support or contradict statistical disparities.

“It is unclear whether the updates regarding how performance will be measured will satisfy the GAO's concerns,” Valerie concluded.

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