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Effects of the Current US Regulatory Environment on Commercial Lending

The regulatory environment for commercial lenders has grown more complex and more difficult to manage.  This is particularly true for regional and local banks where the requirements for regulatory activities are as great as for major international financial institutions and there are fewer resources available to address the problems that can arise.  Commercial loan portfolio risk management, commercial lending and commercial lending regulations are topics that are required for every bank that is involved in commercial lending. 

What kind of issues can arise for the commercial lender?  There are many regulations that every commercial lender must take into consideration.  Here are some of the issues that you must consider:

CRA – Community Reinvestment Act

Small businesses are a key and growing element in CRA compliance requirements.  Economic development in selected communities require significant data capture but represent a real opportunity to expand business opportunities for the bank.

ADA – Americans with Disabilities Act

Any commercial lending that involves commercial buildings must take into account the provisions of the ADA.  No banker can be involved with a financial transaction that does not fully accommodate the ADA’s requirements.

ECOA – Equal Credit Opportunity Act

In today’s credit markets, ECOA is applicable to many small business loans and the commercial lender needs to ensure that all requirements are met.

Fair Housing

Fair housing is a long standing requirement going back to the Civil Rights Act of 1866.  While not a new requirement, commercial loans can fall under the requirement of these provisions.

What is a commercial banker to do?   Bankers engaged in commercial lending, and especially commercial real estate lending, need to be sure that they are adequately educated about the multitude of non-commercial lending regulations that may apply to their loans or to their borrowers.