BY lucY griFFin
tOO OFTEN, complianceisthought of as consumer protection. This can be a dangerous misconception. While many of the regulations that
fall under the aegis of compliance are designed
to protect consumers, not all of them are. Some
of the laws, such as Bank Secrecy (BSA), apply
across the bank. Others, such as The Equal Credit
Opportunity Act (ECOA) and Flood Insurance
Reform Act of 2012, apply to all lending activities.
Finally, some trigger coverage in commercial
lending when you least expect it.
To determine how a regulation affects commercial
lending, it’s important to take a closer look at those
rules through a reg-by-reg breakdown based on loan
type. First, general rules that apply to all commercial
loans are discussed. Next, the rules that apply to
commercial real estate loans are covered. Finally,
tips are provided for how to create or transform
your commercial lending compliance program.
COMMeRCIAL L
ECoA
Perhaps the regulation that causes the most anxiety to compliance managers is Regulation B or ECOA. Often misunderstood
by commercial lenders to be a “consumer” protection regulation, it applies with equal force to all lending—commercial and
consumer. (Its close relative, the Fair Housing Act, applies to
all housing-related commercial lending, as well as to consumer
transactions.)
In the commercial lending arena, there are two major considerations for compliance with Regulation B. One is the possibility of
discrimination based on the ownership of the business. When the
Fair Housing Act (FHA) is added to this mix, regulators look at the
ownership of buildings, the people who live in them, the location
of the property securing the loan, or a customer’s business base.
Closely related to prohibited discrimination are the protections
afforded by the Americans with Disabilities Act (ADA). Failure
of a commercial client to accommodate disabled employees or
customers could be held against the bank as well as its client.
Both ECOA and the FHA cover more than discrimination
against the credit applicants. They also include protections re-
lated to the applicant and even the neighborhood population.
ECOA also protects any party that is required to sign the credit
obligation. If an individual is required to sign or guarantee the
loan simply because that individual is the spouse of the business
loan applicant, that individual has the right to sue the lender for
illegal discrimination. Failure to remember that protection is one
of the most difficult compliance issues banks face in commercial
lending. It’s also how most of the violations occur. Too often,
commercial lenders request a spousal signature or guarantee,
simply because the spouse co-owns non-business property with
the applicant. If the spouse is not a business owner or officer,
this violates Regulation B. s h u t
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