Ben Giumarra

What is your bank, credit union or mortgage company doing to reach non-English speaking borrowers?

Massachusetts has a large number of persons speaking a language other than English. In fact, 22 percent of Massachusetts residents live in a home where a language other than English is spoken. According to some estimates, 50 percent of all new homeowners will be Hispanic-Americans by the year 2020 (nationwide).

In the banking compliance business – which adores acronyms – we refer to these borrowers as “LEP” consumers, for “Limited English Proficiency.” This includes non-English speakers and hearing- or sight-impaired persons. The Mortgage Bankers Association of America estimates that 9 percent of the U.S. population is LEP.

From a regulatory compliance perspective, there are both federal and state requirements that push financial institutions towards better serving LEP consumers.

But before we look at some of these compliance requirements (below) – I have to wonder whether this is something more driven by business interests? A case where doing good (serving LEP consumers) will lead to your company doing well (tapping into an underserved market).

Anyway, back to technical compliance requirements!

It’s difficult to discuss all federal requirements due to space constraints (besides, I want to zoom in on a particular state issue in a minute). But here’s a quick look:

Serving LEP borrowers is a standard question in CFPB examinations, especially with loan servicing. GE Capital Retail Bank (aka Synchrony Bank) was hit by the CFPB and DOJ in a June 2014 action for selectively offering only certain promotions translated into Spanish. Lesson here? If you translate some advertisements or promotions, make sure that this doesn’t lead to an allegation of preferential treatment.

In a 2013 action against American Express, the CPFB found that American Express’s telemarketing efforts Spanish-speaking consumers in Puerto Rico were improper where all the written documentation was provided only in English despite the sales calls done by Spanish-speakers. Takeaway? If you’re going to tackle the LEP market, make sure salesman don’t outpace “back room” support.

Meanwhile, In Massachusetts

Let’s turn to one Massachusetts regulation that I find intriguing. It reads:

“It is an unfair and deceptive act or practice for the mortgage broker or lender to fail to take reasonable steps to communicate the material facts of the transactions in a language that is understood by the borrower. Reasonable steps which shall comply with this regulation may include but shall not be limited to: (a) using adult interpreters; and (b) providing the borrower with a translated copy of the disclosure forms required by any applicable state or federal law, regulation or directive, in an a language understood by the borrower.”

Before you fall out of your chair, no one interprets this as requiring you to immediately go out and hire Spanish interpreters and translate all your loan disclosures into braille. Actually, guidance from the Attorney General Office’s from 2007 expressly states that this rule does not require “that a lender or broker translate all disclosures into all possible languages, regardless of cost,” nor does it require that they “provide an adult interpreter for all languages, regardless of cost.” But this does require “reasonable steps,” and those are two the regulators would consider satisfactory. So while I’m sure that lesser “steps” would suffice, how many lenders would struggle to point to any concrete “steps” at all? Some will employ a bilingual person. But how many have materials ready to provide to LEP consumers? How many are even monitoring for LEP applications?

This is interesting, because while the written rule appears to have the power to disrupt current business practices, from a practical (and important) perspective, this has not garnered much legal or regulatory enforcement attention – at least none I can find (and this is not a brand new rule).

Is this a tool sitting out there that regulators may choose to use at some point in the future? Is this something not to take seriously? Is trying too hard to comply with this regulation on balance a bad compliance decision, in that we’d overall be increasing risk of noncompliance? (Avoiding errors on mortgages Notes and TILA disclosures is difficult enough in English; is doing them in another language at least doubling the chance for mistakes?)

I won’t pretend to know all the answers, just raising the issue. My personal opinion on best practices? I’d stop short of having everything translated, but would have a simple process for identifying LEP applicants and providing any available resources. Fannie Mae, the CFPB and the National Association of Hispanic Real Estate Professionals provide free and very useful English-Spanish/Chinese/etc. mortgage glossaries and other resources that you could pass along. You might also happen to have bilingual persons already on staff – don’t let that talent go to waste. For example, your process might be that any applicant identifying as Spanish-speaking be assigned to a mortgage processor fluent in both English and Spanish.

Taking these “steps” might reduce compliance risk, and it just might also be a good source of new business.

Ben Giumarra is a risk management consultant with Spillane Consulting. He may be reached at BenGiumarra@SCAPartnering.com.