What Compliance Officers Can Learn from JPMorgan Chase

jpmorgan-settlementIn a recent filing with the Securities and Exchange Commission, JPMorgan Chase reported that it has been questioned by the U.S. Department of Justice regarding possible racial disparities in loans the bank purchased from auto dealers.

While the report does not mention whether the bank is the target of the probe or simply participating in discussions, the announcement is noteworthy in that it is further evidence of the CFPB’s aggressive pursuit of discriminatory practices in auto lending — and one of the country’s largest banks is not immune.

Focus on Regulation

In 2013, the CFPB warned that institutions could face lawsuits if the loans they purchase from auto dealers are found to have treated prohibited basis applicants differently than non-prohibited basis applicants with respect to the interest rates, APRs and dealer markups charged. Since that time both Toyota Motor Credit Corp and Ally Bank — to name a few institutions — have also faced investigations and enforcement actions.

CFPB Director Richard Cordray recently echoed the 2013 warning, indicating that the agency “has focused significant resources on rooting out discrimination in indirect auto lending” and reimbursed $136 million to 425,000 customers.

Safeguarding Against Exceptions

Ensuring your institution’s compliance is vital during this time of intense scrutiny. Even if your bank does not treat people differently with respect to pricing, if your dealers do, you could find yourself on the CFPB’s radar.

To ensure your loans are in compliance, perform a fair lending pricing risk assessment by race, gender, ethnicity and age at both the portfolio and dealer levels.

Performing these monitoring tasks will keep you ahead of the curve should your institution face scrutiny in the future.

 

Posted in Auto Lending, Fair Lending Best Practices, Fair Lending Blog, Fair Lending Hot Topics, Lessons in Fair Lending and tagged , , , , , .

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