The New York State Department of Financial Services ("DFS") warned auto lenders that they must comply with New York State's Fair Lending Law, including when lending through third parties (i.e., car dealers).
DFS identified several actions that lenders should take to institute a fair lending compliance program for indirect automobile lending. The fair lending compliance program should, among other actions:
- proactively monitor the implementation of the fair lending plan and whether the plan's policies are being adhered to;
- have a training program for new hires and current employees; and
- be reviewed and updated periodically to ensure that they are up to date.
Additionally, DFS reminded lenders of their liability for discrimination. In this regard, DFS further recommended that lenders should:
- be aware of a car dealer's business practices before entering into a third-party loan origination agreement;
- review any policies a car dealer uses when arranging to finance for customers and update the dealer of any areas of concern;
- regularly evaluate (with the dealer) its product marketing and advertising strategies to ensure that those strategies actually are in alignment with the provision of fair lending laws and the fair lending plan;
- consider reducing dealer discretion;
- monitor both its entire portfolio and specific dealers for compliance with fair lending policies; and
- take corrective action if there is a difference in interest rates that cannot be explained by objective credit factors.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
