It’s no secret that the regulatory compliance requirements for commercial loans are far less than that of consumer loans. This sometimes gives commercial lenders the perception that “rules” don’t apply to them. In reality, while the regulations may be few, the ones that do apply to commercial lending often have a much higher level of risk. For example, flood insurance, fair lending and the upcoming Section 1071 requirements are just a few.
Fair Lending is a big deal, and you need to ensure all your lenders, both consumer and commercial, avoid illegal discrimination in any form. Illegal discrimination doesn’t have to be intentional to get your institution into hot water. Seemingly innocent practices can sometimes have unintended consequences. A common area where issues can arise is lender discretion in setting loan pricing. Keep in mind, discretion is not wrong, but you are going to want to have some controls in place to manage the potential risk.
Kevin explains more in the video.