Independent Banker - October 2020 - 26

PORTFOLIO
process, which helps them to better
understand the rules, Sathappan says.
In addition, reviewing exam reports
to see where commercial lending was
cited can lead to a larger discussion of
policies and procedures, she adds.
Avoiding common missteps
Some of the hot spots in commercial
compliance these days relate to fair
lending practices within the context
of business lending and Regulation
B's intent to borrow jointly, complying
with the 30-day clock related to
adverse action notices and discriminatory
treatment. " Fair lending has
always been on the consumer side and
the commercial side of lending, and
now there is a heightened focus and
a new level of compliance testing on
the commercial side, " says Michael J.
Marino, executive vice president at M
& M Consulting in Springfield, Mass.
Bankers may believe that having
financial statements come in with the
spouse's information included is adequate
to communicate joint intent.
However, that isn't the case. Joint
intent has to be clear from the time the
application is received.
" Part of the reason this trips banks
up is that commercial lending does not
have a formal application similar to
the consumer side, " Sathappan says.
" So, lenders sometimes don't document
that joint intent sufficiently. "
She adds that using model application
Tackling cyber threats
ICBA's Cyber and Data Security
Guide has resources to
educate your bank's customers
on what to do in the event of
a cyber threat or breach. Visit
icba.org/cybersecurityguide
to see the toolkit.
" The greatest value of [third-party
firms or consultants] is that they bring
experiential treatment from numerous
institutions and organizations. "
-Michael J. Marino, M&M Consulting
forms, as well as training and conducting
file reviews, will help commercial
lenders to comply with that rule.
Another common misstep is not
providing adequate documentation
on timing related to the 30-day time
period for adverse action notices.
When does that clock start? If it stops
for a particular reason, why? Disparate
treatment and the idea of treating one
borrower differently from another can
be a slippery slope. Banks have to be
careful in providing the same treatment
to everybody and document
those files. They also need to adhere
to fair lending compliance in the context
of the current market, specifically
as it relates to Paycheck Protection
Program (PPP) loan applicants and
requests for loan forbearance. Make
sure all PPP loan applicants and forbearance
requests are treated the same
with no disparate treatment.
Best practices to avoid penalties
Banks can stay on the right side of
regulators by following best practices,
including being consistent in
underwriting and credit analysis. For
example, banks need to make sure
lenders have a good, user-friendly
credit policy.
Some banks may have procedures
mixed in with policies. The credit
policy has to be a clearly defined
" why " they are making credit decisions
versus the " how " of procedures. It
helps regulators understand the bank's
approach to credit and risk while
26 Q ICBA Independent Banker Q October 2020
providing a friendly directive that staff
can easily understand and use.
" Make sure people are adhering to
your credit policy and people aren't
making a lot of exceptions, " Stevens
says. " The more exceptions you have,
the more you are going to get in trouble. "
He adds that credit policies
should be evaluated and updated every
two or three years to reflect current
regulations and changes in the market.
It's important to keep lines of
communication open to make sure
everyone at the bank is on the same
page and to maintain a good relationship
with regulators so that the
compliance officer is comfortable asking
questions. Another good strategy
is to use pre-closing and post-closing
checklists that are regulatory-oriented
and that offer guidance to ensure that
everything that needs to be done is
completed, Marino says.
After closing, ensure that the documentation
and onboarding for that
borrower is done appropriately. Community
banks can get some safe harbor
by using model forms.
It may also be helpful for banks,
especially those with fewer employees,
to leverage the expertise of third
parties that can provide consulting,
auditing or loan review services.
" The greatest value of those firms, "
Marino says, " is that they bring experiential
treatment from numerous
institutions and organizations. "
Beth Mattson-Teig is a writer in Minnesota.
http://www.icba.org/cybersecurityguide
Independent Banker - October 2020

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