Privacy, Compliance, and Disclosures Lucy Griffin, BOL Guru Guru BIOS
The pending implementation of the expanded HMDA Loan Application Register, together with other interesting compliance developments, has given this editor an interesting trip down memory lane. What we now know as HMDA was in its pre-conception days back in 1975 when I started in this business. My first project at the Federal Home Loan Bank Board was to deal with the analysis and publication of data that the federal financial agencies had collected from regulated financial institutions during a six month period in 1974.
The agencies had used three different methods to collect information, including voluntary and mandatory, geographic information only, and applicant information including race and income. The analysis process in 1975 was focused on determining what information was useful and what was not. Needless to say, knowing that this information had been collected, certain public interest groups wanted access to it. And there began the redlining-CRA-HMDA-fair lending debate that we still carry on today. It is also the beginnings of the HMDA LAR as we know it.
There were interesting arguments about what information was useful (address, loan type, loan amount) etc. and what information did not justify the burden of collection. In the opinion of the industry, not much if any was useful. In the opinion of the public interest groups all of the information was valuable - and then some.
Today, the debate about how much data is enough rages on. But there was another debate back in 1975 that is no longer in the picture. In today's environment, the old, lost issue takes on new significance. That debate was about privacy - the privacy of those who borrowed money to finance their houses.
There were a lot of privacy concerns in making the collected information public. In one collection format, both the borrower's income and the property address had been collected. Disclosing that information could have revealed information that should have been considered private. If only one loan was made in a census tract, it was theoretically possible to use the collected information to identify a specific individual by using local government's property recordings.
Whether to make this information public was a long and passionate debate. At the time, the concerns seemed valid and significant. The debate was finally settled using Bureau of Census reporting standards which required a minimum number of responses per reporting unit before releasing information.
In the intervening years, much has changed. We have become used to HMDA reporting and accept it. The old privacy debate has faded away. But some of us with long memories find some interesting ironies here.
Look at today's privacy issues which center on the use of personal financial information. The current privacy concerns of consumers are not triggered by HMDA reporting and publication of lending data. Instead, they are triggered by the desire for not being bothered by aggressive marketing (those bothersome telemarketers) and the concern about preventing identity theft.
These privacy issues are very different from the 1975 concern for revealing personal information by public loan reporting. And yet, I'd be willing to bet that - if they are still in the business - many of the people who argued passionately against revealing lending data because of customer privacy concerns would not have thought twice about using information in the institution's database (private, financial information about customers) for profit.
BankersOnline is a free service made possible by the generous support of our advertisers and sponsors. Advertisers and sponsors are not responsible for site content. Please help us keep BankersOnline FREE to all banking professionals. Support our advertisers and sponsors by clicking through to learn more about their products and services.
Print Friendly!
Email This Article!
Discuss NOW!
