On Compliance: Risk-based lending
Credit unions must follow rules pertaining to non-discrimination and to credit score use disclosures.
Risk-based lending for credit unions can be tricky. After all, credit scores exist for a reason and assessing someone’s loan worthiness based on that score is common practice. Staying in compliance when doing risk-based lending requires following both the Equal Credit Opportunity Act and section 1029 of the Consumer Financial Protection Act of 2010, better known as the Dodd Frank Act.
Non-Discriminatory Lending
According to the ECOA, it is illegal to discriminate against any applicant based on race, religion, sex, national origin, marital status, age, or source of income. This means it is illegal for a credit union to use the aforementioned reasons as a basis for refusing a loan to any member, discouraging any member from applying for a loan, providing different credit terms for members with similar creditworthiness situations, or closing member accounts.
continue reading »