Does Your Lending Policy Discriminate Against The Disabled?  

July 27, 2020 at 9:53 am Leave a comment

That’s the question that Bank of America (BOA) had to grapple with in recent years as it was investigated by Federal prosecutors over allegations that its policies regarding guardianships and conservatorships had the effect of discriminating against disabled individuals in violation of federal law.  It’s one of the most unique cases I’ve seen in several years and underscores the importance of understanding the impact your credit union’s policies will have on individuals subject to guardianships and even Power of Attorneys.

Between 2010 through 2017 BOA had a nationwide policy of refusing to give first lien mortgages or home equity lines of credit to persons who were subject to conservatorships or guardianships.  Specifically, for more than half of the last decade, BOA had a written policy that prohibited making first lien mortgage loans to adults represented by legal guardians or conservators.  It also had a policy that prohibited lending to adults seeking home equity lines of credit where the property to secure the loan was owned by the guardian or conservator.  BOA defined a conservatorship as “created by a court order that appoints a person or entity (the conservator) to manage the financial affairs and/or the personal care of a mentally and/or physically incapacitated adult (the conservatee).” The policies also stated that guardians and conservators may be appointed to manage the affairs of individuals “ruled incompetent.”

Needless to say, BOA is a pretty sophisticated operation and I’m assuming that its policies were designed in part to prevent financial abuse.  The problem is of course that a policy such as this will have the effect of denying loans to otherwise qualified mentally or physically disabled individuals who are otherwise qualified applicants.  This violates section 42 U.S.C. § 3604(f)(2) of the Fair Housing Act.  It also runs afoul of New York’s Fair Lending Laws, which were not at issue in this case.

The bank changed its policy three years ago and denied any wrongdoing in its settlement agreement.

New York Primary Results Lead to an Even More Progressive State Legislature

It took more than a month to confirm, but the “AOC Effect” is having a particularly pronounced impact on the State Legislature.

In perhaps the most striking example of the ideological and generational shift which is taking place, 36 year old Emily Gallagher defeated Brooklyn Assemblyman Joseph Lentol who was part of a wave of young Democrats elected to the Assembly in 1973 as the burgeoning Watergate scandal ended Republican control of the State Assembly.  You can bet that lending policies and procedures will be under even greater scrutiny in the years to come.

Entry filed under: Compliance, Legal Watch, Mortgage Lending, New York State. Tags: , , , , , .

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Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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