The Independent Community Bankers of America (ICBA) recently called on President Donald Trump’s administration to rein in the application of fair lending laws it claims are “overzealous” and have resulted in several enforcement actions the association deems “unwarranted.”
The ICBA said in a press release that despite the implementation of compliance systems, intended to ensure credit decisions are fairly and uniformly applied without factoring in gender, race or national origin, community banks have seen a rising trend in threats of enforcement.
“Community banks are fully committed to fair lending and strongly oppose discrimination prohibited under laws such as the Fair Housing Act and Equal Credit Opportunity Act,” ICBA President and CEO Camden R. Fine said in the release. “However, community banks are experiencing enforcement overreach that diverts an abundance of resources from serving their local communities to complying with and responding to unwarranted fair lending allegations.”
The release states that small financial institutions regularly encounter “groundless claims, prolonged enforcement actions, and unnecessary litigation” which “harm community banks and the customers they serve by undermining the availability of credit in local communities and throughout the economy.”
The release asserts that the nearly 6,000 community banks in the country are supportive of consistent and transparent standards when regulators evaluate lending practices and stand staunchly opposed to illegal discrimination.
The ICBA cited a recent claim the Department of Justice filed against KleinBank for “redlining” minority neighborhoods in Minnesota as being “misguided” and baseless.” The DOJ’s lawsuit claims that the bank engaged in redlining by: “excluding majority-minority neighborhoods from the area it serves; locating branch offices and mortgage loan officers in majority-white neighborhoods, but not in majority-minority neighborhoods; and targeting marketing and advertising exclusively toward residents of majority-white neighborhoods.”
The ICBA pointed out that the 110-year-old family-owned bank never had been cited for fair lending violations by its primary regulator, the Federal Deposit Insurance Corp.
“This and similar actions directly attack the community banking model, in which hometown financial institutions serve their local communities and economies,” the release states. “Requiring community banks to expand their market presence into neighboring counties would force them to alter their model and sound business practices. ICBA looks forward to working with the new administration on these issues.”
Rolling back regulations has been a clear priority for the president with his recent regulatory freeze order, his '1-in, 2-out' order and his order for a review of Dodd-Frank.