Magazine article American Banker

Fair-Lending Guidance Too Vague, Lawyers Say

Magazine article American Banker

Fair-Lending Guidance Too Vague, Lawyers Say

Article excerpt

WASHINGTON -- Despite regulators' attempts to clarify how they will enforce antidiscrimination laws, they have left a lot of industry questions unanswered.

Concern, frustration, and confusion about government policy in this area were most recently apparent at a meeting of the American Bar Association's committee on consumer financial services.

At that meeting, regulators, enforcement officials, and fair-housing activists appeared to answer industry questions about fair-lending enforcement. Despite repeated prodding for clarification on a range of issues, regulators were unable to ease many concerns.

Lawyers were particularly concerned about mixed messages from regulators about self-testing: While the agencies have urged lenders to test themselves, they have also warned they will pass on evidence of discrimination to the Justice Department for further review.

Bankers say they want to take pro-active steps to ensure fair lending, but they don't want to incriminate themselves.

Industry members at the meeting suggested that the agencies resolve this conflict by setting a policy of not asking lenders about their self-tests -- a sort of "don't ask-don't tell" policy.

But regulators didn't take to that idea at all. "I find it hard to believe that would happen," said Glenn Loney, associate director of the Federal Reserve's division of consumer and community affairs. "It seems counter to what we're trying to do."

Regulators were also asked about potential discrimination resulting from tiered pricing. If lenders charge higher rates for riskier loans, do they face discrimination problems?

Once again, regulators had no clear guidance.

If enforcement officials find that tiered pricing leads to more minorities being charged higher rates, that could lead to an investigation, said Paul Hancock, who oversees lending discrimination cases for the Justice Department. …

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