ECOA Self-Tests

Jonathan Foxx, Ph.D., MBA Chairman & Managing Director

April 7, 2022 Question Our regulator suggested that we do a self-test of our ECOA Regulation B compliance.   We originate loans in 24 states. Also, we have a multi-billion dollar servicing portfolio.  As the Compliance Officer and General Counsel, I believe there are legal privileges relating to the work product derived from a self-test. However, I can’t find much information about such privilege or whether it also applies to self-correction too.  We are voluntarily conducting the ECOA self-test to ensure compliance with fair lending requirements, among other things. We have done fair lending reviews previously; however, we believe that conducting ECOA self-test and self-correction reviews would provide additional legal protection.   What is the legal privilege provided by conducting ECOA self-tests? Answer In 1996, amendments were made to the ECOA and the Fair Housing Act (FHA) as part of the Economic Growth and Regulatory Paperwork Reduction Act of 1996. These provisions create a legal privilege for information developed by creditors through voluntary self-tests conducted to determine the level or effectiveness of their compliance with the ECOA and the FHA, provided that appropriate corrective action is taken to address any possible violations discovered.  To elucidate further, a government agency may not obtain privileged information for use in an examination or investigation relating to compliance with the ECOA or the FHA, or by a government agency or credit applicant in any proceeding in which a violation of the ECOA or the FHA is alleged. The 1996 act also provides a challenge to a creditor’s claim of privilege may be filed in any court or administrative law proceeding with appropriate jurisdiction.   The privilege, therefore, serves as an incentive by assuring that evidence of discrimination voluntarily produced by a self-test will not be used against a creditor, provided the creditor takes appropriate corrective actions for any discrimination that is found. Consider using our ECOA Tune-up as a tool to review your Regulation B compliance. It will help you gain an overall readout of your ECOA implementation.

Jonathan Foxx, Ph.D., MBA Chairman & Managing Director Visit our Website Pioneering Mini-Audits Compliance Solutions Speak to an Expert Contact Us Send an Email Ask a Question Careers

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