Sub-Prime Lending Getting Prime Time

Paul Smith, Regulatory Counsel for ABA, led the Washington Update panel at PCi's CRA and Fair Lending Colloquium. Predatory lending was the leading topic. Smith explained that examiners - safety and soundness examiners - are giving so much attention to sub-prime lending issues that they are becoming sub-prime activists.

Examiners are looking closely at the percentages of portfolios that may be sub-prime. To determine this, they are asking lenders to pull current credit scores and using those rather than the scores in effect at the time the loan decision was made to determine whether the loan is sub-prime. This manifests a strong concern about safety and soundness.

Another area of examiner scrutiny is credit card programs that target sub-prime borrowers or that are designed to make income from fees (late charges and the like) rather than from the extension of credit.

Copyright © 2002 Compliance Action. Originally appeared in Compliance Action, Vol. 7, No. 13, 11/02