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New Regulatory Guidelines Due on Lender Discrimination

March 08, 1994|From American Banker

WASHINGTON — After months of heated negotiations, regulators are set to spell out precisely what lending behavior they consider discriminatory, providing guidance to banks and thrifts on how to avoid government investigations.

Regulators are expected to release today a joint policy statement on lending discrimination. The document will address issues such as how lending data will be evaluated, what lending patterns will be referred to the Justice Department for investigation and how regulators will respond to industry self-testing.

It is also expected to address how regulators will scrutinize various bank policies--such as underwriting standards--in investigating possible discrimination.

The 21-page statement, while not carrying the force of law, will nonetheless be recognized by 10 federal agencies as the definition of discrimination in their efforts to enforce fair-lending laws. It will provide the most explicit notice to date of the practices bankers must employ to avert government investigations of illegal lending discrimination.

Negotiations on the breadth of the plan have continued up to the last minute and have worked their way up to the highest levels of the agencies.

Earlier drafts of the statement included much more strenuous requirements, which probably would have engendered industry cries of micro-management and credit allocation. Much of the harshest language was deleted after strong opposition by Federal Reserve Board officials.

Drafting of the document comes after repeated complaints from bankers that the agencies are stepping up enforcement of fair-lending laws without spelling out the ground rules. For example, bankers have complained that they do not understand what credit decisions, underwriting standards and lending patterns constitute illegal discrimination.

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