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“Happy Talk” – Casual, yet Troublesome, Conversations with Loan Applicants

A couple of weeks ago, Jennifer Mirus blogged about keeping your interview process free from discrimination or even the appearance thereof by asking appropriate questions of interviewees. As a follow-up to that, it’s a great time to stress the importance of taking steps at the outset of a lending transaction to avoid discrimination (or the appearance thereof) by limiting happy talk” with applicants. Happy talk”, as former colleague and friend referred to it, is the seemingly innocuous conversations loan officers engage in with applicants. How’s that husband of yours doing?”; How are the kids?”; Traveling anywhere this summer?” These conversations are especially prevalent in community banks where personal interactions and long-standing relationships with customers are a differentiator. While personal interactions with customers will continue to be a bedrock of community banking, it’s important to understand how these simple, and seemingly benign conversations, can quickly become inappropriate from a fair lending standpoint.

Fair lending issues – those anti-discrimination laws and regulations, including the Equal Credit Opportunity Act (ECOA) and Fair Housing Act (FHA) – have received increased attention from regulators and litigators alike, and raise both a financial and reputational risk for banks. Importantly, these fair lending laws and implementing regulations govern the entire lifecycle of a credit transaction – marketing, application process, rates and terms, account servicing, and collections, for example. Generally speaking, a creditor is prohibited from discriminating against an applicant on a prohibited basis – including, for example, race/​color, religion, national origin, or sex. Other prohibited bases in the ECOA include marital status, age, the fact that all or part of the applicant’s income derives from public assistance, or the fact that the applicant has exercised any right under the Consumer Credit Protection Act. Other prohibited bases in the FHA include a handicap/​disability or familiar status. 

It’s in the application process where happy talk” – and the potential for discrimination – often creeps into the lending transaction. Let’s take an example. Jessica goes into her local community bank on a Monday morning and meets with a loan officer to apply for a car loan. Engaging in casual conversation, the loan officer asks How was your weekend?” Jessica says Great. Enjoyed a picnic Saturday and went to church on Sunday.” To continue the conversation, loan officer asks Wonderful. What church do you go to?” Jessica responds The Mormon church just around the block.” The loan officer just asked about Jessica’s religion. If Jessica is denied for the loan, she may very well remember that she was asked about her religion, even though she might have been denied for legitimate reasons.

Here are some questions for your loan officers, along with other staff who may come in contact with an applicant, to avoid:

  • What a beautiful accent. Where are you from?” 
  • I wish I had your skin tone. What is your heritage?” 
  • After an obviously pregnant woman walks into a loan officer’s office. Congratulations. When are you due?” 
  • Capitini, that’s a fun last name. Are you Italian?” 
  • A family with two children walks into a loan officer’s office. Your children are precious. Planning for more?” 
  • I heard about the car accident. Any long-term damage?” 

Casual, friendly conversations are important. It’s equally important, however, to train staff to understand the various protected bases for discrimination and identify when happy talk” can become problematic.

DISCLAIMER: The information provided is for general informational purposes only. This post is not updated to account for changes in the law and should not be considered tax or legal advice. This article is not intended to create an attorney-client relationship. You should consult with legal and/or financial advisors for legal and tax advice tailored to your specific circumstances.


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