In the Federal Reserve System’s most recent publication of Consumer Compliance Outlook there is an informative article that addresses fair lending implications of targeted Internet marketing. In an effort to avoid the negative implications associated with redlining and steering, the article provides guidance that may reduce fair lending concerns in credit union marketing. Some key takeaways to help protect credit unions were as follows:
- Lenders should ensure that they understand how they are employing targeted, Internet-based marketing and whether any vendors use such marketing on their behalf. Advertising filters that exclude predominantly minority neighborhoods or groups of individuals based on a prohibited characteristic or another trait that is correlated with a prohibited characteristic raise fair lending concerns and could result in legal violations.
- Lenders that use online advertising services or platforms can take steps to ensure that they monitor the terms used for any filters, as well as any reports they receive documenting the audience(s) that were reached by the advertising. It is also important to understand whether a platform employs algorithms that could result in advertisements being targeted based on prohibited characteristics or proxies for these characteristics, even if the result is not the intention of the lender.
- Lenders should closely review any geographic filters in use and include the monitoring of all marketing and outreach activities as part of their larger fair lending risk management programs.
- Be sure that when a consumer applies for credit, they are offered the best terms they qualify for, regardless of what marketing channel or platform was used to target marketing to the consumer or collect the application.