Fair Lending Policy

FAIR LENDING POLICY

BACKGROUND AND PURPOSE

The Fair Lending Act encompasses two key federal laws that protect consumers from discriminatory practices in credit transactions:

Equal Credit Opportunity Act (ECOA): This law prohibits lenders from discriminating against credit applicants based on factors such as race, color, religion, national origin, sex, marital status, age, or receipt of public assistance. It ensures that all applicants have equal access to credit opportunities.
Fair Housing Act (FHA): The FHA prohibits discrimination in residential real estate–related transactions based on similar factors, including race, color, religion, national origin, sex, familial status, and handicap. It ensures fair treatment for all individuals seeking housing-related credit.

In essence, these laws aim to promote fairness, prevent discrimination, and ensure that credit decisions are made based on objective criteria rather than personal characteristics.

SCOPE

This Fair Lending Policy applies to all employees, contractors, and third-party vendors of FACEBANK. It ensures fair and consistent lending practices during the approval process.

KEY PROVISIONS

It is the policy of FACEBANK to make credit available to all qualified applicants. To accomplish this, it is the Bank’s policy to comply with both, the spirit and the letter, of all federal and state laws and regulations governing our activities. These laws include The Fair Housing Act and the Equal Credit Opportunity Act and its Implementing Regulation B, as well as laws that are closely related and serve the same goal including the Community Reinvestment Act and the Home Mortgage Disclosure Act.

The Board of Directors is responsible for overseeing the quality of compliance with this policy in the bank. Each officer and employee is responsible and accountable, within the guidelines of their Job Description, to familiarize themselves with the fair lending laws and regulations that affect their work.

As stated in our Consumer Compliance Policy, no officer or employee will, through policy, procedure, practice, or any other means, discriminate against anyone based on race, sex, national origin, color, religion, marital status, age (providing the Individual is of legal age to enter Into a business contract), the fact that all or part of the customer’s income is derived from public assistance programs, handicap, family status, or the fact that the customer has exercised his or her rights under the Consumer Credit Protection Act.

It is the Bank’s policy to apply these non-discrimination principles to all aspects of its business and all transactions with customers. This policy is particularly important in the bank’s lending area, where customers will be encouraged, not discouraged, to apply for loans.

In addition, it is the Bank’s policy to ensure that brokers or dealers are compensated in accordance to a Uniform Compensation Program determined by market conditions and subject to whether goods or facilities were actually furnished, or services were actually performed for the compensation paid.

Note that total compensation to a broker includes direct origination and other fees paid by the borrower, indirect fees, including those that are derived from the interest rate paid by the borrower, or a combination of some or all.

It is also the Policy of FACEBANK to ensure that all Broker Compensation programs are in place without taking into account any prohibited basis or subjective reasons. As a result, the Bank will maintain and update, as needed, a Rate Sheet, along with Fee Sheets in accordance with the type of loans offered, to ensure pricing competitiveness and uniformity within Fair Lending best practices and general guidance.

Refer to the Underwriting Guidelines for additional information on Broker Compensation.

To ensure the effectiveness of this policy, the Board of Directors directs bank staff to follow fair lending Bank policies closely to ensure non-discriminatory lending. It also has adopted a training program to keep the staff trained and current on all applicable fair lending laws, regulations, and guidance from the CFPB and the FDIC. Independent outside auditors will examine the bank’s performance annually and report to the Board of Directors through the Audit Committee.

Federal regulatory agencies have emphasized the risk-based approach to establishing a bank’s Fair Lending program and determining its compliance status. Before developing a fair lending compliance program or even preparing for an examination, management is expected to have a firm understanding of the Bank’s fair lending risk, based on an assessment of its loan products and services and application and credit approval processes. Management is also expected to update the fair lending assessment periodically to ensure that the risks of new loan products and services and changes in application and credit approval processes are clearly understood and appropriate controls are established to identify, control, and manage such risks. Recently, the regulatory agencies have provided the industry guidance via seminars reports, and documentation considered appropriate for assessing the quantity of a bank’s Fair Lending risks.

MANAGING RISK

FACEBANK prepares a fair lending risk assessment annually or updated as needed that addresses the following components:

Sources of Fair Lending Risk:

Overtly discriminatory policies and practices.
Unnecessary application of a nondiscriminatory policy that has a discriminatory effect.
Adverse use of discretion in the lending function relative to a prohibited basis.

Inherent Risk:

The risk that a situation or entity has before any controls are applied:

Business lines, products, and services
Retail footprint and market strategy
Regulatory risks and scrutiny
General operational risks
Third-party services – Compensation of Brokers & Dealers

Controls:

Processes, procedures, policies, systems, and other mitigating factors that help to reduce the inherent risk:

Training
Monitoring

Residual Risk:

The risk that remains after controls have been considered.

This fair lending risk assessment report is based on regulatory guidelines in the FFIEC Interagency Examination Procedures manual. It provides a comprehensive assessment of the fair lending risk associated with FACEBANK’s loan products and loan processes, (namely, the Bank’s current and prospective domestic and foreign-service areas).

ROLES AND RESPONSIBILITIES

The Board of Directors will review this policy annually. The Risk and Regulatory Compliance Department is primarily responsible for compliance with the fair lending laws and the policies and procedures related to these orders. Furthermore, the Risk and Regulatory Compliance Department is responsible for maintaining the Fair Lending Risk Assessment updated as required. The Risk and Regulatory Compliance Department will be responsible for reviewing compliance with FACEBANK’s policies and procedures relating to the fair lending laws. When prudent, the Risk and Regulatory Compliance Department will perform special reviews utilizing the Fair Lending Procedures issued by the regulatory agencies.

The Risk and Regulatory Compliance Department will provide a report to the Board informing of the results of fair lending compliance examinations, including ECOA. The Risk and Regulatory Compliance Department designated person will provide training to all lending personnel and the Board of Directors on fair lending requirements as described in the Bank’s Training Program. The Risk and Regulatory Compliance Department is responsible for maintaining this policy current and reporting to the Board of Directors any time discriminatory practices are noted.

While the majority of banks adhere to a high level of professional conduct, banks are reminded that they must take a proactive approach to identifying and stopping any acts or practices that may be seen as unfair or deceptive. There are numerous ways a bank may prevent violations of unfair or deceptive acts or practices regulations. Banks should draw consumers’ attention to the key terms, limitations, and conditions of each product or service so that the consumer can make informed decisions. Additionally, advertisements should be tailored for a realistic bank audience. Banks should also ensure that third parties who market or promote the bank’s products or services are adequately trained to make clear and accurate statements and representations.

RECORD RETENTION

All regulations require that a creditor maintain records as evidence of their compliance. The Bank will maintain records on all complaints for a minimum of five (5) years to maintain compliance with all applicable regulations.

FACEBANK POLICY

The Bank has established that in no such manner would the Bank violate customer’s rights under the Fair Lending Act regulation. FACEBANK’s employees are committed to ensuring that no such lending products or services offered to the customer create any injury.

In addition, the Risk and Regulatory Compliance Department will provide appropriate training to all Bank employees regarding Fair Lending Act at least annually in order to mitigate the risk of any consumer complaints related to the Act.

AMENDMENTS

The Unfair, Deceptive, Abusive Acts or Practices Policy will be updated to ensure FACEBANK’s compliance with regulatory requirements as regulations evolve.