This is the fourth post in our "Understanding Fair Lending" series based on a recent fair lending webinar with Jerry Miller. The first article (Fair Lending and Regulation B) is available and 6 more are coming. You can download the full webinar here.
Continuing our series on Fair Lending Regulation, we now address areas where UDAAP might have implications in commercial lending. This question came up during our free Fair Lending webinar earlier in June, and reinforces the challenges of implementing fair lending into the commercial environment.
The very first question in the 30-min Q&A that followed the webinar was about Regulation B and commercial lending, and we recommend you read that one as well. For UDAAP specifically, Mr. Miller explains how small business owners banking activities fall into a somewhat grey area between retail and commercial banking. His recommendation is to err in the side of caution, treating deposits, fees, and loans with extra scrutiny.
Of course, this is just a small piece of the 60-min session that took place on 6/4/14. Here are a few more options to supplement your fair lending training:
What do you think? Are there additional fair-lending questions you’d like addressed? Include them in the comments section below or email us at firstname.lastname@example.org. You can also find more Sheshunoff™ training and materials at the LexisNexis® Store.
MODERATOR: Does UDAAP, apply to commercial lending? While consumer is highlighted in the requirement, there is no formal definition and therefore, can be confusing.
JERRY MILLER: I agree. UDAAP, is the Unfair, Deceptive, Abusive Acts of Practices is for all practical purposes, a consumer regulation. But here is the caveat. We have some grey area in terms of small business owners. Admittedly they, when they do their borrowings or activities, are acting as a small business owner. At what point do they leave the consumer protection and enter the small business? Is that in terms of deposit relationships, is it in terms of fees paid, is it in terms of hours required to do their own consumer activity of banking because of an organization's hours strictly for small business owners? As you can tell, that sounds very confusing. UDAAP is, in terms of interpretation, very subjective. And so, again, I underscore it is oriented towards consumer regulations, but when it comes to small business, the area gets very, very grey.