The Board of Governors of the Federal Reserve System (FED) updated the reporting form as well as the reporting and supplemental instructions for information collection on the consolidated financial statements for holding companies (FR Y-9C). Also published was the supporting statement for FR Y-9 reports. The FR Y-9C report collects financial data from a domestic bank holding companies, savings and loan holding companies, U.S intermediate holding companies, and securities holding companies on a consolidated basis in the form of a balance sheet, an income statement, and detailed supporting schedules. Another U.S. regulator, the Consumer Financial Protection Bureau (CFPB), recently published a report detailing consumer complaint response deficiencies of the Big Three credit bureaus—Equifax, Experian, and TransUnion. In another communication, CFPB noted that examiners found lenders violate fair lending law by improperly inquiring about small business applicants’ religious affiliation and by considering an applicant’s religious affiliation in the credit decision.
In response to these findings by examiners, lenders updated the questionnaires to ensure compliance with fair lending laws; lenders also identified affected applicants and provided an offer for each identified applicant to reapply for a small business loan. The laws in the country, for example, the Equal Credit Opportunity Act, protect individuals from discrimination based on their religious beliefs. CFPB is concerned that some financial companies are unlawfully considering religion when making decisions on financial products. The Equal Credit Opportunity Act does not simply cover products for family or household use; it also covers other financial products such as small business loans. CFPB is particularly concerned about how financial institutions might be making use of artificial intelligence and other algorithmic decision tools. For example, let’s say a lender uses third-party data to analyze geolocation data to power their credit decision tools. If the algorithm leads to an applicant getting penalized for attending religious services on a regular basis, this could lead to sanctions under fair lending laws. CFPB plans to more closely monitor the use of algorithmic decision tools, given that they are often “black boxes” with little transparency. Institutions will face consequences for this type of robo-discrimination, according to CFPB.
- Reporting Form FR Y-9C (PDF)
- Reporting Instructions FR Y-9C (PDF)
- Supplemental Instructions for FR Y-9C (PDF)
- Supporting Statement for FR Y-9
- CFPB Statement on Artificial Intelligence Bias
- CFPB on Credit Bureau Deficiencies
Keywords: Americas, US, Banking, Reporting, FR Y-9C, Robo Discrimination, Lending, FED, CFPB, Artificial Intelligence, Regtech, Consumer Lending, SME Lending
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