March’s Top Regulatory Change

Each month, Quantivate provides our blog readers with access to the top attorney-generated compliance alert our customers receive. While there were 12 alerts and advisories to be aware of in March, this month the biggest to come into effect was an advisory to all financial institutions reminding them of the ability to establish special-purpose credit programs.

Executive Summary

Five federal financial institution regulatory agencies, in connection with the Department of Housing and Urban Development (HUD), the Federal Housing Administration (FHA), and the Department of Justice (DoJ), issued an Interagency Statement to remind creditors of the ability to establish special-purpose credit programs (SPCPs) under the Equal Credit Opportunity Act (ECOA) and Regulation B to meet the credit needs of specified classes of persons.

SPCPs are credit assistance programs for economically or socially disadvantaged consumers and commercial enterprises.

In connection with the Interagency Statement, the NCUA issued Letter to Credit Unions 22-CU-03, and the FDIC issued Financial Institution Letter FIL‑08-2022.

Key Issues of Regulatory Action

The Interagency Statement explains that ECOA and Regulation B permit creditors to extend special-purpose credit offered pursuant to—

• any credit assistance program expressly authorized by Federal or state law for the benefit of an economically disadvantaged class of persons;
• any credit assistance program offered by a not-for-profit organization for the benefit of its members or an economically disadvantaged class of persons; or
• any special purpose credit program offered by a for-profit organization, or in which such an organization participates to meet special social needs if it meets certain standards prescribed in regulations by the Bureau.

The Interagency Statement notes that some stakeholders previously expressed uncertainty as to the treatment of ECOA and Regulation B special-purpose credit programs under the Fair Housing Act. On December 7, 2021, HUD released guidance concluding that special purpose credit programs instituted in conformity with ECOA and Regulation B generally do not violate the FHA. Accordingly, financial institutions may consider the use of special-purpose credit programs across all types of credit covered by ECOA and Regulation B. The Interagency Statement also clarifies that the agencies do not determine whether a program qualifies for special purpose credit status. Accordingly, financial institutions must determine whether their program qualifies for special purpose credit status. The agencies encourage all financial institutions to consider using an SPCP to provide credit to economically disadvantaged individuals, consistent with ECOA and Regulation B requirements as well as applicable safe and sound lending principles.

Relevant Links

The full announcement and corresponding letter from the FDIC can be found below.

Navigate Compliance Change Management with Ease

In March, Quantivate Compliance Management Services customers were made aware of 12 compliance alerts and advisories that will impact banks and credit unions soon. In partnership with business law firm Farleigh Wada Witt, Quantivate customers can access integrated regulatory change alerts featuring executive summaries, in-depth documentation, and action plans.

Quantivate’s software and content partners take the headache out of regulatory change management so compliance teams can focus on more important tasks.

As the leader in governance, risk management, and compliance for banks and credit unions, Quantivate provides an integrated approach to compliance management through:

1. A fully configurable platform that adapts to even the most unique compliance processes.
2. Templates, workflows, and configurable notifications/alerts designed for banks and credit unions
3. Data integration with our Enterprise Risk Management, Internal Audit, Policy & Document, and Business Continuity applications to create a comprehensive view of your compliance program.

Looking to mature your compliance program and simplify regulatory change management? Learn more about Quantivate Compliance Management.

Read next | Financial Services Compliance Challenges for 2022 >