The Fairness Frontline: Insights in Fair & Responsible Banking

0:02 You are listening to Leaders in lending from Upstart, a podcast dedicated to helping consumer lenders grow their programs and improve their product offerings. Each week, here decision makers in the finance industry offer insights into the future of the lending industry, best practices around digital transformation, and more. Let's get into the show. Hi, this is Lynn and I am here with Nick and Lindsay who are the chair and Vice chair of the Fair and Responsible Banking Committee, and we are here joining you from CBA Lives. Lindsay, Nick, would you like to introduce yourselves tell our listeners a little bit about you. Sure. I'm Nick Rayessler. I'm the Fair and Responsible Banking Officer at US Bank, senior vice president there as well, and I chair the Far and Sponsible Banking Committee based in Minneapolis and been doing fair lending and you to app and compliance for decades now. By I'm Lindsay Yusuf. I'm an executive compliance director and ally financial and I'm also the Fear of Responsibil Banking Officer and the vice chair of the CBA Fear Responsibil Banking Committee working with Neck and I think I'd been in the industry over twenty some years, most of the time focusing on FAAR lending INDI gap as well. Great well, thanks again for joining us here on the podcast. So, Nick, would you tell us a little bit about what the Fair and Responsible Banking Committee does, like who are your members and kind of what tribmission sure. Yeah, So, the Fair Responsible Banking Committee is one of many committees that the Consumer Bankers Association has assembled and put

1:33 together over the years, and it's made up of fifty four banks currently and so we meet monthly and the focus really is about promoting education and the exchange of information ideas about fair lending, UDAPP and at times sort of overlapping compliance requirements. So it's really about sort of bringing a bunch of banks together that are all working on similar risk topics and discussing kind of what's going on. And I think in many cases, you know, that's conversation and dialogue is helpful in especially in areas where there's not prescriptive guidance, and so it's up to the industry to kind of formulate best practices and things like that. Sure, And there's certainly a lot of a lot of things going on in the industry right now as specifically as it relates to to fairness in banking and in lending. So lindsay, when you think about kind of the committee and you're you know, fifty four partner banks who are members of it, how does the committee really influence those external partners maybe vendors that they work with, to have the same sense of importance of fair and responsible banking principles And how do you see that kind of impacting then the industry that partners with banks, great question. So CBE really gives us a platform where we're able to work closely with vendors as well as outsider groups, consultants, attorneys, and especially each

3:04 other to learn best practices. So we really break to the table what we see within our institutions, our experiences, and our many years of learning how to implement programs and services to determine what are some of the best practices that we do as a whole. And what we find is we have the opportunity to really speak with again vendor groups and let them cure voices as to challenges that we have when we're implementing new regulations or if a program isn't working well, what we needed to do to work better for US. So, for instance, we have the new ten seventy one or the Small Business Lending Rule, which is going to require for many institutions to collect data and then submitted on their lar for small business similar to home DAB or CRA. So now we know it will be of vendors that are creating these programs for us, so that we have the latform to create or collect that data, create our war and then submit it to the government on an annual basis. And so what we're doing working together is we can find what are some of the challenges, what are some of the things that we need to do, How can you make this more simple? And making sure that that is part of what's going on with our third parties. But it's also looking at outside is consultants as well. What are the consultants bringing. Are they hearing our challenges, some of our concerns with what we're dealing with on a day to day basis, and how can they help us to be more effective and efficient in the work that we do. Sure, and do you have any consultants on the committee as well? Or are all the committee members bank partners today? All banks? That's why that is what I thought, So I think Nick,

4:36 you mentioned something it was interesting that the guidance isn't always prescriptive, maybe very broad, and then you have to work with with either external partners or consultants too to figure out how to implement that and make sure you're kind of staying within the bounds. So how does the Committee think about kind of advocating with the regulators or advocating in Washington or really just CBA in general to drive towards a little bit more kind of clarity or prescriptive application of the regulations. Yeah, and that's a great point in terms of the Committee being a bit of a feeder for the CBA's advocacy efforts because they're taking sort of the industry brain trust of fair responsible banking and what's important to the group on issues that are arising. Maybe there's a request for information from a regulator, Well then CBA is wanting to know, well, what what should we put in there?

5:27 If it's a it's you know, fair lending related or maybe there's a new rule I mean talked about ten seventy one, and so advocating for you know, hey, there's elements here that maybe aren't appreciated, are really like sort of considered in the rule and we want to bring that perspective and so so that's I think through our discussions of you know, changing regulations or new expectations in the challenges that we have or questions that we have, we can bring those perspectives. And then whether it be a one off question directly you know, facilitated through the CBA, or the CBA bringing in regulators as they have to our committee in the past, I think those are all ways that we can have this kind of dialogue. And you know, it brings a greater perspective than just any one of our single banks interacting because we all have you know, government relations, folks, and we all interact in some way, shape or form with our regulators too. So I think that's that's part of the value that I think the CBA in the committee brings absolutely and they really take all of our concerns and prove it as a whole. That really drives the industry and what we're doing from a fair and responsible banking standpoint. And it's great because the CBA really is the voice on the hell for us instead of individual voices, it's the communal voice of fair and responsible banking. Sure and I think that's that's definitely well reflected here at CBA Live, where you've got a number of Bay partners, you've got vendors like us, and then you've also got a couple of the regulators here both presenting and attending the sessions,

7:02 which is great. So then I think, lindsay, when you when you think about so we're working with the regulators, working in the committee, working across partners, like how does the committee then kind of disseminate that out to the membership, Like how are you sharing kind of monitoring techniques and best practices related to fair banking. We're always looking on what's coming out of our regulatory bodies, what are the trends, what are the risks that they're identifying in other organizations, and making sure that when we're meeting, we're talking about that so that we know, hey, this bank has a consent order, what do we need to look for internally or what best practices have you put in place to help address some of these risks? Sure, and I definitely think, you know, just even looking at Q one, I think the number of consent orders has been relatively high across the across the industry. So I think, you know, Nick, just can you maybe just kind of expand on that, like how the committee is looking at those emerging issues or things and new topics that are coming out of whether it's consent orders or even just kind of advisory opinions that come out as it relates to fair banking, Like, how do you kind of stay on top of just the kind of velocity and volume of what's out there right now. Yeah, that's a great question because I think all again, individually, our respective banks and programs monitor for emerging risk. We're looking for guidance or consent orders and things like that that we can learn from and figure out how to implement and sort of our own best practices within our institutions. But what's nice is when you bring together

8:35 the multiple banks and CBA. So often what happens is CBA staff will say, Hey, here's sort of a DC update. Here's what's happened. There's been this proposed rule, there's been this file root issue, there's been this whatever. So that like almost forces us to you know, focus in on those things. But it's not just a Okay, I'm going to wait until the committee to hear about this or something. It's it's the perspective like, hey, you know, how did you read this? Or you know, I don't know if I'm reading into this too much, but what did this sentence perhaps mean? And so it's those kind of conversations that I think are interesting and helpful and and yeah, so it's it's kind of as well as I think the CBA. Again, it's kind of a two way street of going all right, there might be some news article that one of our members saw no one else did, and it's just you know, could have been something specific to their bank and it hit their kind of media tracking. And so those things are are invaluable as well to sort of go, okay, well that that might not have been on my radar, So to sort of use the strength of many to have this more cohesive and but yet still like fair and responsible banking focused to view. And that's the lens of everyone on the committee really, I mean somewhere more more or less hats. But it's one thing to say, oh, you know, this news article came out and the just be like a reputation impact, right, Well, then okay, that's fine's headline risk, but doesn't mean anything for your program. So

10:07 it's those things that's like, Okay, this isn't a conclusion yet, but is it something to be worried about in the future. Yeah. Actually, and it seems like the last what two three years with our current administration, it is non stop throwing all kinds of information at us, and sometimes it's repeated, sometimes it is against previous guidance, and so we're trying to figure out is this important to us now and what do we do with it? And I definitely think that it is kind of an interesting point you made, Nick, that that there may be something that comes out that seems related but is unrelated. I think we certainly see that being on THEI side of the world that uh, the industry tends to get kind of painted with a pretty brong brush that you know, is uh. I think we find are fond of saying and trying to like we we may not live in the same house as some of those other partners, but we're certainly on the same street, and so we're we're feeling some of that reputationally where you have to worry about those things that may not really directly directly impact you. So I think the idea of fair and responsible banking certainly is is new, but I do think that it's really I think expanded more asset classes and traditionally thought mortgages a lot and lending and traditional banking, but now with a kind of variety of vendors out there and different products, that the stature of fair and responsible banking has really become much more important and visible within many banks. So I think lindsay, like, how do you think about like working with your member banks,

11:39 and so one of the best parts of being part of CBA is that you're really working with the best in the industry when it comes to fair and responsible banking. We worked at all different sized institutions and we have different experiences, but we're also able. We've become friends outside of just a committee, so we've worked at each other's institutions before some of us had worked together on the same team, and in the future we may again. And so you know, there's often times where we're calling each other or communicating outside of the committee because we can't always wait them until they're exollutely leading to talk. And if there's a consent order that comes out or something that's a concerned or I'm in the middle of an examination and I'm being asked these questions and anytime you can call or contact anyone else in our committee Gkirk and they're always available to talk to you. And it really is helpful because being in fair and responsible banking, it's it's not an easy position all the time. We have the honor and privilege to working in this position, and I always tell my team we are honored to have this role. However, we have a lot of regulatory expectations and we have to make sure we're doing the right thing by our bank and our customers, and so it really can be a difficult position at times, so we lean on each other for information guidance, you know, sometimes is just an encouraging word. But I also find that I like to benchmark my program at least annual, so I can contact anyone with the committee ask them what are they doing within their programs, so I can look to see if there's any gaps in my program. And the gentleman to my writing,

13:11 I am called them many times over the years to say, hey, you're now my pure bank. What kind of things are you putting in place that I could consider it with in mind? So it really gives us that strength again in numbers because I know I have that ability to talk to someone at any time that could help me with whatever situation I'm going through. And on top of that, we also have a CBA of course, so we always have the ability to reach out to anyone at CBA anytime, get feedback, get assistance, and it really is a great platform and kind of it's a friendship groove, like we're all friends now we're cheer at each other on no matter which brain we're at. Hey there, former host Jeff calviner here to let you know about an exciting opportunity to strengthen your understanding of artificial intelligence and financial services. If you want to better understand the fundamentals of how AI models work and how they will impact the financial search versus industry, your luck, Upstart is launched an online course and certification designed to do just that. This course will give you the knowledge you need to lead the conversation about how your organization can best leverage and manage this revolutionary technology. If that sounds interesting, check out the course as it's currently free for a limited time. You can learn more at upstart dot com Slash AI Certification. Again, that's upstart dot com slash AI certification. Thanks and now back to the show. Do you think the banking industry is very large but is very small in certain pockets and everyone seems to know each other. I definitely liked your point about not being really want to be out on an island. If you're doing something really novel in the area of fair and responsible banking, maybe that's not a great risk

14:43 to take good and you get, you know, and we talk a lot about that at Upstart. I deal with a lot of our bank and credit union partners and we innovate in a lot of areas and compliances area that we want to be part of the pack, not necessarily innovating exceptionally there. So I think that you know, as you think about, you know, working with the members across the CBA and within the committee, can you share some maybe examples of some of those best practices. So maybe like specific more tactical things that the committees promoting to their members, as like the fair and responsible banking continues to throw kind of evolve and challenge the industry. Yeah, there's there's definitely a lot of different dimensions where again there's not a lot of prescriptive guidance or exactly like your program should have this, this and this. Okay, maybe maybe the big blocks are there, but what it actually means there's a lot of wiggle room on what you decide to implement at any particular institution, and rightfully so, size and complexity bank all that suck. But I would say, you know, one thing that comes to mind is the area of redlining risk and so longstanding examination expectations and exams, long history of settlements in the area. I think the the general sort of risks and the types of things that are being analyzed have been there's there's a consistent baseline, but

16:17 then we're seeing an evolution of additional type of investigatory requests and things like that that are that are happening or just hearing from other consultants or other legal Council external external parties about working on cases that are not public and some of the insights from there that then get fed to the committee we discussed them. I think that's that's, you know, an example to me where and even getting into like for example, just this morning, we're talking about redlining and got kind of deep into some of the quantitative aspects of how do you define what you're your group is how do you and then what sort of analysis should you kind of start at a broad brush level or dive right into specific products?

17:07 So those types of things that you know, you really won't find a lot of sort of a guidebook, so to speak, or a you must approach it this way. And so that's where you know, the dialogue of like okay, well, yeah, well where do you get this data from? Or you know work you know? Okay, well for redlining, it starts with humda data. Well, maybe not everyone has done an analysis of a particular product. Now we have small business lending gaining prominence, I guess eventually even more so with ten seventy one. So then it's like, okay, maybe some member banks have done some fair lending analysis in the past and and others have been kind of waiting for ten seventy one. So it's sort of like there's a how to approach a risk management lens of fair lending as well as some of the pract to collect Well, how do I know where to go for this data? You know what sources are there? You know, and not really divulging anything confidential or anything like that. You know, within our institutions that we can't share. I mean, we're very mindful of that, but I think just having those those conversations to Lindsay's earlier point, it's like, if you don't, you're just sort of saying, well, I'm a smart person. I guess I'll make the decision based on this, and it could be right, but having that additional context could lead you down a different path and different opportunity. Sure, that actually kind of raised another question for me, is that you're thinking about like the I think the fair lending

18:38 testing, fair banking testing, there's always been utive quantitative for getting more quantitative, acquiring different levels of kind of expertise and skills. How do you think about hiring for that, Like is it hard to find people who really have that expertise? And then and this is a little bit of a question for both of you, both higher huring kind of on the bank side. And then you know, are you seeing some challenges particularly of banks that maybe don't have as much, aren't as large, and don't have the resources to really hire that expertise, And if you have any advice on how they could support that without really being able to then maybe hire a large team internally. That's a great question. We were giving this discussion yesterday during our committee. You know, I said, I feel like a dinosaur and the fair lending industry because we kind of started it when it really came out fifteen twenty years or sure, and so we're always looking for the next generation that it's going to come on and be those fair lenning officers and fair responsible and banking officers.

19:37 It is very difficult nowadays for just complyance to general to be hiring new persons that really are excited about it and want to do it. It seems like they're kind of staring away. But I think from a fair responsible banking perspective, we're really focusing a lot more on AI and models, and so that might help to drive bringing in new people who really want to look at model validation, how to build models, and really on the technical side. And so I think there's opportunities there. It's just making sure that it's an attractive part to them sharing that they understand again with that data, what are the results? What are we achieving here? For a reson's a little banky. What is our goal, which is to do the right thing by our customers, to bring new products and services and make it an even fair ground for all customers to have access to your products and services. So I think it really is that it is a difficult right in hew, It really is because on the other side, you need people that really understand the regulations so that they can understand where there's true fair learning risk. I find oftentimes people want to join compliance by starting and fair lending, and I always say, this is not really the easiest play share to start. You kind of go there midway or ending your career when you understand the basics that we your compliance programming.

20:51 So ideas on hiring is related. There is a talent committee that's a broad yeah at CBA. But yeah, now, yeah, no, it is is a difficult one. I think one thing that is a selling point is the mission of a responsible banking right. This is not a checkbox exercise, you know, and not to diminish any other compliance requirements, but it has a very emotional and sort of struggling for the word, but you know, it's very meaningful and I think can impact people in a deeper way than perhaps other risk disciplines. You know, maybe you're you're super skilled quantitative analysis a person and you could be used in a credit risk capacity. It's like, Okay, that's cool, we're you know, we're evaluating credit risk.

21:47 I mean that has that more exciting than you know, defending against illegal discrimination. I don't know. Personally, I think the discrimination pieces a little a little bit more meaningful at times. But so so I think that's a selling point, but it really is a struggle. You know. On the flip side, there's a lot of exciting things happening with machine learning AI, and so if I'm you know, a very experienced and educated quantitative analysis person, you know, there might be this allure of like, ooh, you know, the shiny objects and like something that's really kind of cutting edge. Well, you know, you're not really going to be doing cutting edge work in a compliance shop, like I mean, I'll just say, I mean maybe not entirely, right, So so I think so I think that's what makes it difficult at times. But I do think there are some individuals that really, you know, are looking for change and it might just be a short term kind of Hey, I want to be more well rounded and use my quantitative skills for something different. And so that's where I think sometimes we luck out and get you know, folks that have some experienperience, but yeah, by and large, I mean there's very well tenured positions and then they have built that knowledge over the course of ten plus years. So it is it is a risk. And one thing that I'm noticing is so my background is

23:18 I started in compliance with the Federal Reserve Bank of Minneapolis. The question wasn't really about examiners, is more about you know, analysts. But I'm seeing that sort of the examiner route is less taken in the compliance realm. I'm seeing more people sort of graduate or maybe they have a lot of degree they'll jump right into banking. And I don't know why that is, but I think it seems like dating myself a bit. But like twenty years ago, as a baby examiner, I was there like okay, at some banking experience, just graduated from college. I'm learning about compliance right out of the chute to kind of straight up from college. And I was there with others and I can, you know, I work with some folks that US Bank, for example, that I've worked with at the FED you know. So it's like this progression and I think it's invaluable sort of to Lindsay's point, I mean having that well rounded knowledge of compliance and perspective. I guess I'm not one observation about talent pool is like it doesn't seem like there's that experience level of like, Okay, you've been an examiner for five years and now you're looking to join a bank, right. But that's a good point though.

24:36 We do draw on audit teams a lot of times a little over a compliance or compliance when we moved to Honish, and so I think that's a good way to get the experience and examiners as well. So I have a couple forwer examiners on my team and then really bring great insight because they know the behind the scenes of what examiners are looking for during your examination and kind of the trends are kind of great reports how to create your analysis a little bit differently than what you're used to doing. So it really is such a great way to bring people from different parts of the industry. But makes that I think if you if you have a passion to help people and to make a difference with what your organization is doing, fair responsible banking is really the place to do that because you are you have to be passionate, You need to feel good every day that you're doing the right thing for other people, you're advocating for them, and you're really protecting other customers, and so it really that's why I always say it's a privilege and an honor to work in fair responsible banking. I think that's kind of a great end for the comment.

25:37 And you know, privilege and honor to work in in fair and responsible banking is a great way to uh uh to close things out today, So appreciate Nick and Lindsey, both of you being here. I'll start partners with banks and credit unions to grow households and expand consumer lending through its leading AI lending platform. Off Start powered banks and credit unions leverage AI to offer higher approval rates and experience lower loss rates while simultaneously delivering the exceptional digital first lending experience that consumers demand. Whether you're looking to grow and enhance your existing personal and auto lending programs or you're just getting started, Upstart can help. Upstart offers an end to end solution that can help you find more credit worthy borrowers within your risk profile. With all digital underwriting, verification, loan closing, and servicing. It's all possible with upstart in your corner. Learn more about finding new borrowers, enhancing your credit decisioning process, and growing your business by visiting upstart dot com slash lenders. That's Upstart dot com slash lenders.