The U.S. Department of Justice, which to date has focused its fair-lending enforcement efforts on mortgage lending, has made it clear that small-business lending will be a major new fair-lending focus.
Right now there is no source of data on business loan applications comparable to that gathered under the Home Mortgage Disclosure Act. But a Federal Reserve proposal to amend Reg B could provide the statistical underpinning for small-business fair-lending cases.
This development does not mean attention to home lending will be diminished. In fact, recent statements by top Justice officials indicate that the concentration on home lending will be expanded. (And the Department of Housing and Urban Development has stepped up its own fair-lending activity, relying particularly on "matched-pair" testers, as recounted in Compliance Clinic, p.32.)
Speaking before a meeting of the National Community Reinvestment Coalition in late March, Attorney General Janet Reno pledged to continue her department's fair-lending push. However, she said, it was time to move beyond home lending only.
"We want to take the successes that we have had and the lessons learned in home-mortgage lending and apply them to business lending," said Reno. 'Just as the availability of credit to purchase, refinance, and improve our homes is critical to the well being of local communities, so is the availability of credit for small business."
Reno said she has been hearing for years anecdotes about obstacles minority borrowers face to obtaining small-business credit. Studies and reports have shown that minority applicants for business loans are more likely to be rejected," said Reno, 'and, when accepted, they receive smaller loan amounts than white applicants with identical borrowing credentials."
In a speech to a Mortgage Bankers Association fair-lending conference, Acting Assistant Attorney General for Civil Rights Bill Lann Lee noted that little to nothing has been done thus far about alleged discrimination in the consumer-lending and small-business arenas.
Lee said he felt the type of applicant monitoring data permitted for mortgage loans, including gender and race, ought to be expanded to other types of lending. The Federal Reserve's Regulation B governs such reporting requirements. In 1996 the Fed dropped a proposal to expand such reporting on a voluntary basis after ABA and other groups complained that what would start out as voluntary would become de facto mandatory as market and peer pressures forced all banks to comply. Indeed, opponents have also pointed out that the ban on collecting such data was originally imposed specifically as an anti-discrimination move. …