While not all financial institutions offer private banking services, they do likely have certain customers that receive a better “deal” based on their overall relationship with the institution. That could result in better rates and/or terms on a loan. While it’s not wrong to offer a better deal or negotiate rates and terms, institutions do need to be careful that such decisions are not based on (or appear to be based on) any criteria protected by Regulation B (race, sex, age, marital status, etc.). There must also be consistency among lenders and/or private banking personnel as to how these offers/negotiations are carried out. Having procedures in place and appropriate training helps to get everyone on the same page.
Jerod explains more in the video.
Video Highlights:
- Loan relationship pricing is susceptible to fair lending risk whether a financial institution has formalized private banking services or not.
- Loan relationship pricing and offers need to be clearly defined and be consistent among loan officers.
- Training and oversight are necessary to mitigate any fair lending risk.
