FED Updates FR Y-9C Reporting Form; CFPB Scrutinizes Lending Practices
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.
Related Links
- 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
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
David Fihrer
Skilled life insurance actuary; subject matter expert on IFRS 17 and source of earnings
Previous Article
MFSA Issues Reporting Updates for Banks Under CRD IVRelated Articles
EBA Clarifies Use of COVID-19-Impacted Data for IRB Credit Risk Models
The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.
EP Reaches Agreement on Corporate Sustainability Reporting Directive
The European Council and the European Parliament (EP) reached a provisional political agreement on the Corporate Sustainability Reporting Directive (CSRD).
PRA Consults on Model Risk Management Principles for Banks
The Prudential Regulation Authority (PRA) launched a consultation (CP6/22) that sets out proposal for a new Supervisory Statement on expectations for management of model risk by banks.
EC Regulation Amends Standards for Calculating Credit Risk Adjustments
The European Commission (EC) published the Delegated Regulation 2022/954, which amends regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.
BIS Hub Updates Work Program for 2022, Announces New Projects
The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.
EIOPA Issues Cyber Underwriting Proposal, Statement on Open Insurance
The European Insurance and Occupational Pensions Authority (EIOPA) published two consultation papers—one on the supervisory statement on exclusions related to systemic events and the other on the supervisory statement on the management of non-affirmative cyber exposures.
US Senate Members Seek Details on SEC Proposed Climate Disclosure Rule
Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)
EIOPA Consults on Review of Securitization Framework in Solvency II
The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.
UK Authorities Issue Regulatory and Reporting Updates for Banks
The Prudential Regulation Authority (PRA) issued a statement on PRA buffer adjustment while the Bank of England (BoE) published a notice on the statistical reporting requirements for banks.
BCBS Issues Climate Risk Principles while HKMA Expresses Its Support
The Basel Committee on Banking Supervision (BCBS) issued principles for the effective management and supervision of climate-related financial risks.
