ABA today responded to proposed guidance by the FDIC addressing safety and soundness and consumer compliance measures institutions should follow when engaging in third party lending. ABA asked the agency to clarify the types of third party relationships the guidance applies to, provide greater specificity regarding the risks that are unique to third party lending relationships and be vigorous about ensuring that examiners treat any third party lending guidance as such guidance.
As proposed, the guidance encompasses any involvement of a third party in any part of the lending process, including marketing, underwriting, pricing, servicing, disclosures, compliance collection and other areas—whether the FDIC-insured institution originates a loan on behalf of a third party, uses a third party’s platform or originates a loan through or jointly with a third party. ABA pointed out that the broad scope of covered lending activities could encompass all forms of lending involving a third party, potentially including participations, correspondent lending, indirect lending, mortgage brokers, white label credit card services, marketplace lending and small dollar loans.
The proposed guidance is intended to supplement and expand upon existing guidance regarding third party risk. However, ABA noted that the proposal could have a “tempering” effect on institutions’ ability to innovate and compete in an evolving marketplace, and encouraged the FDIC to permit tailored application of the guidance to reflect the risk profile of each institution and its third parties.