Perception?Becomes Reality

"Perception?Becomes Reality"

Credit discrimination was the subject addressed at the opening general session of the ABA National Compliance Conference in Atlanta in June.

A panel made up of a community advocate, a regulator, an attorney and a banker discussed ways financial institutions can be guilty of discrimination without being aware they are doing anything wrong. And that "accidental" discrimination can be damaging to the bank.

As Leonard Springs, Assistant Director of Community Reinvestment at First Union Corp. said, "If there is a perception of discrimination by a financial institution in the community, that perception most often becomes reality."

Loan brokers become gate-keepers. If they have trouble placing certain borrowers, they steer them away-as do real estate agents, who quickly learn which financial institutions discriminate.

Discrimination originally was determined to apply to race, color, national origin and sex. In 1988 it was expanded to include handicaps and family status.

Carole Wilson, Associate General Counsel for Equal Opportunity and Administrative Law of the U.S.Dept. of Housing and Urban Development cautioned the bankers in attendance that, "The Government is going to be looking over your shoulders."

Robert Chamness, Esq., a partner of the firm of McKenna & Fitting in San Francisco, challenged the panel that, "If this problem is so widespread, where are the lawsuits? Where is the evidence?"

The response to those questions was offered by Deborah Goldberg, Neighborhood Revitalization Specialist from the Center for Community Change. She said that, incredibly, a case of race discrimination has never been found by examiners! She suggested the possibility that the examiners tend to find documents in order-"problems" having possibly been screened out before the document-taking process. She went on to point out that usually when an applicant is turned down, they tend to accept the decision. The individual doesn't know how to fight the rejection, doesn't know to apply to Fair Housing and Equal Opportunity for help.

Leonard Springs pointed out that training has to filter down to the teller and the customer service representative, not just to the top levels. All the employees have to know about non-discrimination policies and Community Reinvestment Act requirements. It is not enough to stop at the top.

The film used by the panel to illustrate prescreening discrimination was effective and well received by the bankers present. Using the initial interview of a mortgage loan, the very subtle differences in the attitude of the loan officer toward two different applicants made very clear the discrimination in the prescreening process.

A question and answer session finished up the session, moderated by Phil Gay, Vice President, Regulatory Compliance from First Union Corporation. Subjects covered included lending practices, redlining, CRA examinations, housing discrimination complaints, and customer interviews.

The cassettes from this session are available, and could be of great help to the compliance officer that is concerned with preventing discrimination. They can be ordered from Chesapeake Audio & Visual, 6330 Howard Lane, Oak Ridge, MD 21227. Telephone: (301)796-0040. They are $12.50 each for ABA members, and $15.00 each for non-members. Order cassette numbers 9103601 & 9103602.

Copyright © 1991 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 2, No. 6, 7/91