Has anyone received any feed back from their examiners regarding fair lending and commericial loans. We were examined by the Fed and they are telling us we must put pricing rationale on our commercial write ups. Has anyone else been told this? Does anyone else do this? I thought this was a consumer regulation; put into place to make sure consumer were treated equally. Can anyone give me any feedback as to if this is happening at their institutions and how they are handling this on their commercial loans?

Thank you
PF

That is interesting. I haven't heard of this (yet). Our next exam is at the end of the year. We do post our "target rates" on our Intranet but we don't document pricing rationale. That would be tuff if you include relationship of existing loans, deposits, and perhaps the possiblity of future increase in loans and deposits. Seems to me like there should be more of a move to document whether the customer is income producing (i.e. a customer with a good rate may not be income producing because of the deposit side of the relationship.)

Reg B is absolutely not just a fair lending regulation. It equally applies to commercial loans.

I generally see more violations of 202.7 (requiring a spousal signature) on non-consumer loans, then on consumer loans. Also, the joint intent documentation was designed for non-consumer applications. These are all fair lending issues.

David,

I guess I misspoke, I do realize Reg B equally applies to commercial loans. But what I am asking is have you seen other financial institutions having to put pricing rationale on their commercial write ups so there examiners can use those files for a fair lending review? Is this what Reg B is meant to stand for? Just looking for some guidance regarding pricing rationale on commercial loans.

I'm not David and I haven't seen this, but we have pricing sheet guidelines for our business loans and then depending on the other business relationships the applicant has with us the pricing can vary up or down by 1%, any variation greater than 1% has to go to the ELC. But yes, IMO this would be what Reg. B was meant to stand for. Without some pricing rationale there is just as much room for pricing discrimination in business lending as there is in consumer lending. They will be comparing your pricing rationale for this business owned by a white male vs the same type or similar business owned by a protected class.

Yes I have seen banks required to justify pricing rationale on commercial loans. Most banks have an approach similar to the one Dan described.

Dan--What is the asset size of your financial institution? Ours is about $750M.

$205M.