The news: The Consumer Financial Protection Bureau (CFPB) used troubling internal employee emails at Trident Mortgage to nail down proof of redlining, per American Banker.
What happened? Last month, Trident Mortgage paid $24 million to settle charges it faced after a CFPB probe revealed that it avoided initiating home loans in the metropolitan areas of Philadelphia, Pennsylvania, Camden, New Jersey, and Wilmington, Delaware. The regulator requested copies of employee emails, which it used as proof of intent for avoiding the loans. That proof included:
The CFPB found that Trident extended significantly fewer loans than its competitors between 2015 and 2019, originating 12% of home loans in mostly-minority populated areas compared to 21.5% by competitors in the same areas. And the emails reviewed by the CFPB led the agency to identify motive and intent behind the disproportionate lending.
As part of the settlement, Trident will hire a third-party credit needs assessment consultant in the next month. Trident denied that any discrimination had occurred.
Where’s the training and awareness? Mortgage providers typically use software to ensure compliance with fair lending practices, as well as internal auditing and quality reviews to identify violations. But it’s nearly impossible to regulate each individual employee’s biases.
That leads to questions around diversity training and awareness, and how that could be lacking at a major mortgage lender.
Employee communications: The CFPB’s use of employees’ internal emails as evidence in the probe brings to mind another trend that is growing within the banking industry. Increasingly, bankers and asset managers are turning to personal devices and services like WhatsApp and Facebook Messenger for job-related communications.
While these platforms provide ease and convenience, operating outside of firm controls opens the door for employees to push the limits of what’s right and what’s wrong. As a result, regulators are stepping in.
Banks will need to step up their supervision of employee communications to ensure they occur within the proper parameters and are not setting off business-related red flags. Financial institutions will also need to ensure that fear of regulatory examination doesn’t lead to employees taking their communications under the radar.
The big takeaway: Discoveries like the messages between employees at Trident will harm the reputations of the firms that employ them. And with calls for equality and inclusion only getting louder, it’s going to be hard for offending companies to recover.
This article originally appeared in Insider Intelligence’s Banking Innovation Briefing—a daily recap of top stories reshaping the banking industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.
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