Serving Limited English Proficiency (LEP) Consumers: An Overview of Challenges, Benefits, & Regulatory Guidance for Community Banks & Credit Unions
Due to recent regulations and financial reforms, community banks and credit unions confront a cornucopia of complex compliance challenges on a daily basis. Recent regulations such as the Bank Secrecy Act (BSA), Dodd-Frank Wall Street Reform, and the Basel Accords (I'm looking at you Basel III!), have disproportionately impacted the lending ability of community Financial Institutions (FI). Add on stiff financial penalties for non-compliance, and it's truly impressive how your FI continues to thrive!
After all, you - as the backbone of the U.S. banking system- are responsible for the investment and growth of small and mid-sized businesses nationwide. Local Financial Institutions's biggest advantage over the Wells Fargos and JP Morgans of the States is your ability to quickly adapt. While the banking giants struggle with new banking operations, you can deftly implement the procedures necessary for compliance.
Another unique reason your FI is well-equipped to succeed is because you are, in fact, "part of the community." Much like the tried-and-true cliché "nothing good in life ever comes easy," the #ShopLocal hashtag is overused because, well, folks like to shop local! Running a regional or community FI is a challenging feat, to be sure, but it is an endeavor that carries profitable opportunities.
From this perspective, one can consider any emerging issue in the U.S. financial services industry as an opportunity for your community FI to triumph over large competitors rather than a complicated challenge.
The Issue? Serving accountholders and members with Limited English Proficiency ("LEP Consumers").
The Challenges? They're complicated and vast, and include issues such as: · Providing Accurate Document and Communication Translations;
· Taking Dialectal Differences into Account;
· Providing Non-English Compliance and Monitoring Resources for LEP Consumers;
· Being Cognizant of (Uncertain and, Sometimes, Unknown) Regulatory Risks, Including Fair Lending and/or UDAAP Violations.
As Skadden, Arps, Slate, Meagher & Flom LLP explains, "The risks associated with LEP policies and procedures can vary significantly depending on the product, market area, reliance on third parties and other fact-specific considerations. Consequently, there is no one-size-fits-all approach for effectively mitigating LEP risk."
Serving or lending to LEP Consumers/Borrowers could be perceived as problematic for two key reasons. First, the question arises whether it is an unfair or deceptive practice to advertise a financial product in a language other than English IF your FI does not entirely service that product in the advertised language. The potential consequences of committing a fair lending or UDAAP violation are major deterrents to serving LEP Consumers.
This issue of fair lending to LEP Consumers has become an actionable concern for the CFPB, as the Agency has reached two consent orders on the topic since 2014. One action claimed that a lender did not offer debt repayment and settlement offers to Spanish-speaking consumers, while the other action was related to deceptive telemarketing to Spanish-speaking consumers.
Second, determining the servicing documents and communications you should give priority to for purposes of translation is complicated (as is the related issue of which communications should be translated into the non-English language in the future).
Regulators could address and absolve these two key issues by providing guidance on serving LEP Consumers; in the past, it's this lack of regulatory guidance that thwarted banks, both big and small, from meeting the needs of LEP Consumers. However, agencies like the Federal Housing Finance Agency (FHFA) and the Consumer Financial Protection Bureau (CFPB) have recently sought and provided information on serving LEP Consumers.
In May 2017, FHSA issued a Request for Input (RFI) on improving language access in mortgage lending and servicing. Representing the banking and real estate finance industries, the American Bankers Association (ABA), the Consumer Bankers Association (CBA), the Housing Policy Council of the Financial Services Roundtable (HPC), and the Mortgage Bankers Association (MBA) replied to FHFA's RFI on the 31st of July 2017. These groups support "a holistic strategy that identifies LEP-specific barriers to homeownership, allocates resources to reduce these barriers in a cost-effective and practical manner, and minimizes confusion among all parties, including LEP borrowers." The letter stresses the lack of clarity on legal liabilities that mortgage lenders face when servicing LEP Consumers.
Likewise, the CFPB has recently published a series of practices that can help FIs lend to LEP Consumers. In the Fall of 2016, the CFPB's Supervisory Highlights discussed marketing and advertising practices in non-English languages "that did not result in any adverse supervisory or enforcement action." The Bureau indicated the potential for FIs to market products in non-English languages without servicing the entire product in that non-English language. In other words, non-English language advertising and marketing may be permissible IF a disclosure is included to clarify what parts of the product servicing experience are available in that non-English language. This would eliminate the concern that the non-English language advertisement would itself imply that the entire product experience would be in the other language. With a clear disclosure, LEP Consumers could make an informed decision about whether they could handle the amount of English servicing attached to the product experience.
The Supervisory Highlights also touches upon which documents and communications of the servicing operation should be prioritized for translation purposes, including: telephone support for customer service with QA monitoring/testing; monthly statements; "payment assistance forms" (loss mitigation documents); and, other "communications and activities that most significantly impact consumers (e.g., loss mitigation and/or default servicing)."
The CFPB also notes that a clear disclosure could minimize risks related to steering, which would arise on account of offering only some of your products in non-English languages. Making the highly probable assumption that the non-English language being serviced is Spanish, the Bureau suggests that FIs revise "marketing materials to notify customers in Spanish of the availability of other credit card products."
However, it is important to note that the 2016 Supervisory Highlights contain a caveat that the LEP issues were dependent on unspecified "facts and circumstances of the reviews." This means that FIs are still required to make some guesses if they are going to make non-English language advertisements. Nonetheless, if you're willing to do some risk-averse guesswork, then you can tap into this burgeoning LEP Consumer market.
The CFPB offered additional guidance in April 2015, when the agency published a Fair Lending Report that encouraged bankers to "provide assistance to LEP individuals in order to increase access to credit and to reach out to the Bureau with ideas of how to promote access."
It therefore follows that one way you can minimize risks related to serving LEP Consumers is by contacting the CFPB and seeking guidance and clarification about advertising and marketing practices. Why not send in your proposed disclaimers and ask for approval? As the old adage goes, "If you don't ask, you'll never know." Consider boosting your community banking business by directly reaching out to the Bureau for guidance. All they can do is say "No, that is unfair or deceptive," and you'll be able to revise your advertisement before actually committing any fair lending or UDAAP violation(s).
In addition, the more lenders who contact the Bureau for individual guidance --> the better. An influx of questions related to LEP Consumer guidance will signal to the CFPB that community banks and credit unions desire to serve other languages and will, in turn, prompt their development of guidance related to assisting LEP Consumers.
Catering to non-English speakers not only highlights a community FI's commitment to quality customer service, but is also, quite simply, good for business. By opening your services up to non-English speakers, especially those who speak and read Spanish, you expand your market of customers. Capitalize on this opportunity, and increase your Institution's profitability.
To learn more about how you can advantages of serving LEP Consumers, attend my webinar on the 10th of April. Registration includes the ability to attend the live webinar, access to the OnDemand weblink for 1-Year, and a complimentary Toolkit. If you register before the 10th of February, you will qualify for the Early Bird-dog Discount price of $199. Thereafter, the standard retail price of $249 is applied.
Editor's Note: This post was originally posted to COO Carly Souther's LinkedIn page.