Independent Banker - July 2024 - 21

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with redlining would examine
an institution's lending practices
primarily in neighborhoods where
minorities constitute a majority of the
population, he says.
Now, however, regulators are
extending their scrutiny to also
include census tracts that have a
significant minority population-say
a 30% Hispanic population or a
25% Black population-even though
minorities don't represent a majority
of that neighborhood.
Under fair lending laws, disparate
treatment in such neighborhoods
can be proven by indirect evidence,
Marshall says. Agencies can examine
the rates of approval in areas that
have substantial racial or national
origin character, versus areas that
are majority white. And with that
comparative analysis, they can prove
a disparate treatment violation.
Regulators have also extended the
geographical area in which they assess
a bank's lending practices, termed
as its " reasonably estimated market
area [REMA], " he says. In the past,
regulators have deferred to a bank's
CRA assessment area as its REMA, but
now regulators are defining it more
broadly, either as an entire county or
an entire metropolitan statistical area.
" So just be aware of what area might
be designated as your REMA based
on where you're doing your lending, "
Marshall says. " Then, plot both loan
" Just be aware of what area
might be designated as your
REMA based on where you're
doing your lending. "
-MICKEY MARSHALL, ICBA
application and origination data on
a map of your REMA and see if there
are areas where you're not doing a lot
of activity. If so, do those areas have a
racial or national origin character? If
so, you may have a violation. "
More from ICBA
Find ICBA's Identifying
and Addressing Redlining
Risk guide at icba.org/allproducts/product-details/
redlining-risk
ICBA
guidance for redlining risk
Marshall has developed a guide for
ICBA members, Identifying and
Addressing Redlining Risk, that
details the types of discrimination
claims that banks can face and what
they can do to protect themselves
from redlining violations.
If a community bank finds that it
has a relatively low number of loans
and applications in a certain area, it
should consider if it has policies or
practices that lead to this disparity
and whether it can implement any
changes to increase lending volume in
those areas, the guide says.
Banks need to assess their
marketing materials to guarantee
they are not excluding areas with a
racial or national origin character.
Specifically, banks should ensure
that all forms of targeted marketing,
whether digital or through physical
mail, include majority-minority areas
to avoid potential redlining violations.
Consider an SPCP
Banks should also ensure that their
advertising content is designed to
Katie Kuehner-Hebert is a writer
in California.
attract a wide range of applicants and
does not appear to exclude certain
racial or national groups, Marshall
writes in the ICBA guide.
If a bank observes insufficient
lending in majority-minority
areas, it may be necessary to
actively market to those regions to
increase loan volume. However,
community banks must also
avoid disproportionately offering
less-favorable loan terms or
higher interest rate products
in majority-minority areas, as
this would therefore be seen as
" reverse redlining. "
Banks looking to proactively
increase lending in majority-minority
areas may consider creating a special
purpose credit program (SPCP),
Marshall writes. Typically, treating
a group differently based on a
prohibited characteristic constitutes
disparate treatment, but it may be
allowable with an SPCP intended to
mitigate the economic disadvantages
of some groups.
The suitability of an SPCP depends
on a bank's individual circumstances.
Banks should consult legal counsel to
evaluate the risks and opportunities
associated with implementing such
a program.
independentbanker.org // 21
http://www.icba.org/all-products/product-details7redlinind-risk http://www.icba.org/all-products/product-details7redlinind-risk http://www.icba.org/all-products/product-details7redlinind-risk http://www.independentbanker.org
Independent Banker - July 2024

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