With lending driving revenue and profitability for most community banks, it comes as no surprise that credit risk problems are at the heart of most matters requiring attention issued by bank regulators. Although credit risk issues are specific to each bank’s particular lending activities, the OCC and FDIC have noted recent trends in credit risk. This post discusses the trends that may be important to community banks and provides guidance for avoiding an MRA related to credit risk.
With the new presidential administration and Republican majorities in both houses of Congress, major changes to the Dodd-Frank Act are widely expected. There has been extensive coverage of what these impending changes mean for consumers and for the banking industry in general. This post examines potential changes from the perspective of community banks.
Last month, the Department of Justice (DOJ) filed a civil rights lawsuit accusing KleinBank, a Minnesota-based community bank, of violating fair lending laws by engaging in the practice of “redlining” by denying mortgage loans to predominantly minority neighborhoods. The DOJ’s complaint alleges that KleinBank “engaged in a pattern or practice of unlawful redlining by structuring its residential mortgage lending business so as to avoid serving the credit needs of neighborhoods where a majority of residents are individuals of racial and ethnic minorities, in violation of the Equal Credit Opportunity Act (ECOA) and the Fair Housing Act (FHA).”
Anyone who has owned or managed a business knows that the Americans with Disabilities Act (ADA) requires that public spaces be accessible to individuals with disabilities. And many bankers will remember the class action litigation surrounding ATM accessibility several years ago. Now a new wave of litigation is targeting banks and other businesses over the accessibility of their websites. Led by the same law firm that spearheaded the ATM accessibility litigation (Carlson Lynch Sweet & Kilpela), lawyers are sending letters to banks demanding that they make their websites more accessible and pay attorneys’ fees. This post sets out best practices for making your bank’s website ADA compliant and provides tips on what to do if you receive a demand letter from a lawyer.
On January 11, 2017, an administrative law judge (ALJ) issued a 176-page recommended decision finding merit in the FDIC’s charges that a Texas banker engaged in unsafe and unsound banking practices and breached his fiduciary duties. The case arose out of the FDIC’s allegation that the Respondent ignored Bank policy and misused Bank resources by paying personal expenses from Bank funds, failing to keep adequate records of his expenses, and concealing information relating to his misuse of Bank funds. The ALJ sustained the FDIC’s charges and recommended that the Respondent be banned from banking activities and fined $200,000. The recommended decision contains important information for banks regarding proper business expense policies and the scope of unsafe and unsound practices.
With major changes coming in Washington and important cases making their way through the court system, 2017 looks to be a busy year for bank litigation and regulation. This includes litigation and legislative challenges to the CFPB’s authority, enforcement actions involving allegations of unsafe and unsound banking practices, lawsuits over the validity of credit union regulations, and litigation surrounding the Wells Fargo fake account scandal.