Fairness Gone Viral: Fair Lending Considerations for Financial Institutions Amid Covid-19

The COVID-19 pandemic has had a disproportionate impact on certain protected classes in the United States, including, in particular, minority populations. Non-white populations have seen higher hospitalization rates, more deaths, and higher unemployment numbers over the past six months as compared to their non-minority counterparts. These and other pandemic-fueled disparities are layered on top of a long history of health, wealth, and education inequality for minorities. The synergistic impact of these two trend lines holds the potential to further deepen the economic divide, positioning minority communities to have decreased access to credit and potentially less favorable terms when such credit is extended. In addition, minority consumers may encounter greater loan servicing needs as they reach out to customer service personnel and seek solutions to address temporary or permanent hardship.

Financial institutions are facing their own very real struggles as they attempt to mitigate the myriad repercussions of COVID-19. Banks are reporting deterioration in expected capital positions, an uncertain economic look, and reduced risk tolerance — classic safety and soundness concerns. Accordingly, it is not surprising that many financial institutions are tightening standards for consumer lending and taking other steps to mitigate credit risk. At the same time, they are juggling the tremendous pressures that come with servicing existing loans in these unprecedented times, including the uptick in the sheer number of consumers who need support.