The Office of the Comptroller of the Currency’s review process on fair lending practices is outdated, according to a new report from the Government Accountability Office.
In a review of five investigations into potential redlining, GAO found that the investigator guidelines did not take into account new statistical methods for analyzing redlining and that the investigators were sometimes inconsistent.
In three of these cases, the examiners found the banks’ response to be insufficient for the examiners’ statistical analysis. However, two reviewers reviewed the banks’ responses and performed additional work, which concluded that the banks were not redlining.
“Given the new statistical analyses, the guidelines lack specificity for some procedures,” the report says. “As examiner findings form the basis for supervisory action, updated and clear guidance can help ensure continuity in the rescheduling of examinations and enforcement of appropriate credit laws.”
The report also noted that the OCC recently changed its policy regarding fair lending investigations. In 2021, under the Biden administration, the agency began considering enforcement action in every case referred to the Justice Department. First, the OCC would generally not consider this move until after the Justice Department has referred the matter to the agency.
“In 2021, the Acting Comptroller asked OCC staff to review OCC’s fair credit assessment procedures and make recommendations on changes to consider, including the DOJ reference procedure,” the report reads. has gone. He added that this review prompted the OCC to consider whether the DOJ requires enforcement action in any fair lending process in which the DOJ enters into an agreement with an OCC-regulated bank. Or bring another civil action.”
In 2018, during the Trump administration, the OCC made significant changes to its annual process for retail lending at midsize and community banks, resulting in a significant reduction in the number of annual fair lending reviews. This “probably” contributed to a reduction in informal oversight immediately afterwards, the report said.
Although staff made some changes to the process, the agency did not assess how the small number of reviews impacted the agency’s ability to resolve lending fair violations at smaller banks.
“In the future, centralized data linking screening, selection and testing results will allow the OCC to better assess the trade-off between efficient resource allocation and the effectiveness of its fair testing,” the report states.
In response to the GAO report, the OCC said it plans to update the agency’s fair credit booklet to include, among other things, redefine and expand risk factors. The agency said the updated brochure should be released before the end of the year.
The OCC also said it would “develop additional training for examiners to redefine best practices for examinations.” It should be available to testers by September 20th.