Today's Laws Require Lenders to Play Cop

By Siegel, Myron E.; Vilim, Donald J. | American Banker, February 12, 1993 | Go to article overview

Today's Laws Require Lenders to Play Cop


Siegel, Myron E., Vilim, Donald J., American Banker


These days lenders must be concerned with more than federal and state regulations for banks and thrifts. Workplace relations, lending practices, and public access to lending institutions, for example, are directly affected by various new rules.

The following is a look at three areas of concern that may once have been alien to banking operations but are now anything but.

Employee Training

Sexual harassment in the workplace is no longer legally tolerated, and the "good ol' boy" banker must change his act, as must his customers, both corporate and individual.

Various laws (including the Civil Rights Act of 1991) have been instituted at the federal and state level to combat sexual discrimination, of which sexual harassment is legally considered a subcategory. Under these laws certain actions or inactions can constitute sexual harassment.

An important given is that individuals exercise good judgment when dealing with others in the workplace. This puts the burden on the employer to provide employees with adequate training on how to avoid both sexual harassment and being sexually harassed.

Screening Borrowers

Banks have an additional burden: They must carefully scrutinize applicants for corporate loans to make sure these training programs are in place. Lack of such programs can lead to large judgments against the companies, which can adversely affect their fiscal condition.

Individuals applying for loans should be examined to ensure that they have satisfactorily completed such a training program. An employee, after all, can sue not only her company but also individual managers in the chain of command. These defendants often have to pay their own legal costs, which can average $50,000 and up for such a suit.

This cost, combined with an adverse judgment; can affect the defendant's creditworthiness and ability to repay any loans your institution may have made.

Defining Harassment

This screening should begin with a clear understanding of what constitutes sexual harassment. Explicit advances, of course, should be avoided at all costs, but certain kinds of physical contact that may not appear to be sexual can also be actionable.

Such contact might include putting an arm around a co-worker, kissing him or her on the cheek as a greeting, or even grabbing an elbow while shaking hands.

Sexual harassment can also take a verbal form, such as sexually explicit language directed toward a co-worker.

Indirect speech can also constitute harassment -- for example, conducting a sexually explicit conversation in the presence of a coworker.

Laws prohibiting sexual harassment and sexual discrimination are designed to deteractions or inactions that are based on an individual's sex. Women have used these regulations in attempts to break through the "glass ceiling" that limits career advancement.

Statistics suggest, however, that shattering this ceiling will require bigger guns than the legal remedies currently available.

Women are popularly assumed to be the victims of sexual harassment and discrimination -- and the primary beneficiaries of the regulations prohibiting it.

But there may very well be an increase in the number of cases filed by men against women as more and more women reach decision-making positions.

Some supervisors have taken to keeping their office doors open and having another person present when meeting with a subordinate of the opposite sex. This type of overreaction is a double-edged sword. It too may be considered actionable behavior.

Environmental Regulations

The Clean Air Act and the Clean Air Act Amendments of 1990 have an especially strong impact on lending practices today, because they significantly affect even businesses not ordinarily thought of as "polluters."

The costs of compliance with these regulations can be considerable. …

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