Magazine article American Banker

Reno Cites Shawmut Agreement as Blueprint for Entire Industry

Magazine article American Banker

Reno Cites Shawmut Agreement as Blueprint for Entire Industry

Article excerpt

WASHINGTON -- In announcing the Justice Department's settlement with Shawmut National Corp. on lending discrimination, Attorney General Janet Reno suggested Monday that the lending industry study the agreement carefully.

That settlement, which ended a yearlong investigation into discrimination at the New England lender, provide a blueprint that the department views as innovative and pro-active, she said.

"We cannot tell all banking industry leaders what exactly they must do to rid racial factors from their decision-making process -- it is up to them to review their own policies and determine if race plays a role in their lending practices," she said.

"But the remedial actions taken by Shawmut long before the Justice Department came on to the scene can serve as a guidance to the lending industry," she added.

Somewhat in the Dark

The settlement comes as industry leaders are expressing growing frustration with the uncertainty they have about what is expected of them by regulators and law-enforcement officials.

The attorney general's comments on the Shawmut decision provide the first clear guidance for the industry of what the department during her tenure will be expecting.

The Shawmut settlement included a $960,000 commitment by the lender to compensate black and hispanic applicants who were unfairly denied mortgages between January 1990 and October 1992. Each victim will get $10,000 to $15,000.

|Guidance to Lenders'

Joel Alvord, Shawmut's chairman and CEO, urged lenders Monday to take "pro-active steps" to satisfy law-enforcement officials. "We believe this agreement offers guidance to lenders who are genuinely unsure about somee of the things they should be doing," he said.

The 24-page consent decree lays out the many fair-lending initiatives Shawmut has taken in the last few years that have appeased the Justice Department. …

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