When a consumer applies for an ATM/Debit Card our branches are making a copy of the drivers license and filing it with the application. A credit feature is not tied to either card. Even though a credit feature is not tied to the cards could this become an equal treatment problem?

It is my understanding that the collection of race and sex is only prohibited in connection with credit. I believe it is common practice at many banks to copy driver’s licenses for new account operations. As long as your lenders are not reviewing the files with driver’s licenses in them when making credit decisions, I think you will be fine.

This has always aggravated me. Know Your Customer encouraged me to ensure you are who you say you are. This is not limited to deposit operations, but includes lending. So what - a loan officer copies a drivers license to provide documentation of ID. I DIDN'T request or document your race and sex. I copied a drivers license.

I know that many examiners cite this, so I'm not suggesting that everyone ignore the advice Pat gave. I was with the FDIC and we were told NOT to cite this. As a consultant, I now try to argue out of this when a client bank is cited for this practice, but admittedly, I don't always win.

Well, someone has to take the opposing view so it might as well be me. As a consultant I cringe when photocopies of licenses are taken to document identification and strongly urge others to avoid the practice. Yes, it is not a violation for a deposit product - or is it. You may think it a long stretch but if the account becomes overdrawn (which the FDIC considers a loan) the possibility that the person who decides to pay or not to pay might be influenced by the photo. As for loans, there are a lot of small banks in New England who are not subject to HMDA. In this situation, FDIC has stated that by taking a copy of the license you are collecting information that is not allowed - home equity loans and second homes are examples.

I urge my banks to document the identification used to establish the identity of the borrower(s)by recording the information from the license and certifying that they viewed the ID.

Lastly, many people are not happy when you ask to copy the license - especially now with GLB.

Well - that's my two cents worth.

There is no up side to copying the license. It serves no purpose other than to create areas for some examiners to question. Also David, by copying the license, you are documenting the race and sex of the customer.

A D's suggestion is the most prudent. Document the license info and certify that you saw it.

I have never been cited on this, but we stopped the practice many years ago.

A few points:
1) If collectors have access to the copies they could "use" the info and it could contribute to a discriminatory practice even if it is not collected or used by the lenders.
2) If may take more time to copy the thing and handle the paper than to record the number or check a box that it was reviewed.
3) Many copiers are so poor you can't get the race or sex off of just the photo.
4) We often can't avoid seeing the customer at least once. That is a part of customer service. In my opinion it is dumb to think that a copy of the license makes any real difference in discrimination.
5) This can be argued so many ways. If it is seen as a problem, somebody is not looking at the bigger picture. A copy of a license doesn't mean you do or do not discriminate and that is what this is all about. The focus here is improper.
6) All this could change if the "voluntary collection of data" that has been cussed and discussd finally passes. In fact, I think the proposal from '99 or '00 is technically still alive.
7) If you think it is important to do this, ask your regulator how they feel about it and document the answer.

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Andy Zavoina
Opinions stated are not necessarily that of my employer.

De Vonne said "A D's suggestion is the most prudent. Document the license info and certify that you saw it."

And pray that whoever documents the license info does so properly, does so legibly so it can be read way down the line.

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David J. Mulkerin
Opinions expressed are mine and not my employers, who gets them whether they want them or not.

Gee, security experts used to always recommend getting a copy of the driver's license.

Years ago, we were getting these for deposit accounts (for security reasons). Then some loan officer decided it was a good thing for the loan department too. Fortunately, this pratice began just as an exam was underway. The FDIC caught it before it became an official practice or pattern.

While no discrimination was intended, the collection of racial information for loans, outside of the monitoring section of loan applications, certainly raises compliance risk. This is an issue where it is best to play it safe and just write down information.

The above opinion is my own - not my employer's opinion.

[This message has been edited by Doug (edited 05-03-2001).]

I agree with David. Using the overdraft example provided in the earlier post, the potential to discriminate is always there. In my mind, if we have a bank employee that decides to pay or not pay an overdraft based on a black and white copy of a DL in a file, that person - in all likelihood - is just as likely (or even more likely) to pay or not pay based on the address of the customer or the spelling and pronunciation of the customer's last name. How do we prevent that type of discrimination? Where do you draw the line? On the deposit side, a photo of a DL is low risk in my mind.

A D stated "In this situation, FDIC has stated that by taking a copy of the license you are collecting information that is not allowed - home equity loans and second homes are examples."

Has the FDIC issued this interpretation? I was a FDIC examiner - and so was Trent Sorbe, the last commentor before me - and I was trained to not worry about this. In fact, we were told to not cite this.

Once again, I have seen examiners bring this up myself, so I'm not encouraging it, but if you want to copy them, I don't want to discourage you either. It's a business decision. I also think that it is very low risk.

In response to David's post I like to edit my statement. The bank was cited for a Reg B violation for collecting monitoring information prohibited under Reg B. If the bank were subject to Reg C which it is not, there would not be a violation. We argued the issue but the cite remained in the exam report. There are possible explanations for this. The EIC was on first assignment as lead. Also, FDIC examiners in New England have a history of citing issues not ordinarily cited. I get nervous when they put it in writing as a "Fair Lending" violation.

As for the deposit side, I agree the risk is low, but I also think the experience taught me that to be conservative on issues like this plays better, especially when alternatives exist.

Whether or not the FDIC tells its examiners to enforce this is not the issue. This is Regulation B and the Federal Reserve's say so is what goes. And the Federal Reserve says don't make copies of driver's licenses in any file or document that is related to credit. That includes overdrafts.

As for security, making a copy of a license can give the bank officer a false sense of security. The officer should be looking at the information and considering whether it is consistent with the customer's statements and application.

I have too often found, when auditing files, that the copies have an unfortunate tendency to migrate to the wrong place. They may move from a deposit file to a loan file, or from one customer's account file to another customer's file. This leads to more than Regulation B problems. In our new environment of privacy, I think it is even more important to safeguard information and one way we safeguard it is by not creating copies of information that we don't need.

Thank you, Lucy. This was a spirited dialog and I felt like I was odd man out. I knew that there was a reference for it but couldn't think of it.

This is a great forum - the discourse of ideas and opinions is invaluable.

Allan

Any time!

The challenging thing about compliance is that you can be the lone voice in the wilderness and be the one who's right!

This thread is very interesting. We do have a policy at our bank that the branch folks must copy driver's licenses and send the copy to Security when the license is an out-of-state license. I believe this is because our Security department verifies that it is a valid license for that state. However, I do find that often when these same people are on Chex systems and we decline the account, that the copy of the license is attached to the copy of the adverse action letter that is sent to me in Compliance for retention. I have wondered, in connection with FCRA, if this is a violation? Does anyone know?

The reason for not copying the driver's license is that it contains information (race, sex) that you are prohibited from asking in connection with a non-mortgage extension of credit. Therefore, copying the license in connection with a deposit-only transaction (no overdraft lines of credit, no loan payments) would not violate Regulation B.

You described the process as driven by the branch manager wheneve an out-of-state license is produced. If the transaction is deposit-only (cashing a check, opending an account, or the like) the practice would not violate Regulation B. It would, however, if there was any connection to credit.

We should also look at this another way: know your customer and suspicious activity reporting. Clearly you need to collect enough information to establish the bona fides of this person at the bank's window and you need to know enough to file the SAR if appropriate. Because of the possible Regulation B issues, it is necessary to look at what information you really need and what is a shortcut. For example, does the security officer need a copy of the driver's license to verify its validity? Or will certain information copied off the license (name, addressm state, and license #) suffice? Copying the license may be overkill and lead to Reg B violations when a lesser collection of information would do the trick.

Add me to the list opposed to copying. It especially becomes a problem when institutions begin imaging their documentation - now both the loan officers and deposit officers have access to the same imaged copy of the driver's license.

Another point - although there are currently no rules on collecting race and sex information for deposit accounts, if could become one if there is abuse. There didn't use to be prohibitions against collecting it on loans, either. By example of abuse, suppose activist groups start noticing patterns of willingness to waive service charges based on race or sex. Let's not give them the rope to hang us with.

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Opinions expressed are my own, and do not necessarily reflect those of my employer.

Lucy, you stated:
"Whether or not the FDIC tells its examiners to enforce this is not the issue. This is Regulation B and the Federal Reserve's say so is what goes. And the Federal Reserve says don't make copies of driver's licenses in any file or document that is related to credit. That includes overdrafts."

Can you tell me where this is stated by the Federal Reserve? Is there a section to Regulation B or a memo that came out?

I had the same question as David. Was anyone able to identify a specific statement from the Federal Reserve or a section to Regulation B?

Sorry for the delay in responding. I've been in a mad round of travel and training. No, the FRB has not issued a clear, irrefutable interpretation or commentary paragraph making the statement that the copying of driver's license can violate Regulation B. They have not done so because they believe the Regulation is sufficiently clear on when you must and must not collect information. And clearly (to them) copying the driver's license is collecting information. This is as much of a statement as we are going to get, but I can assure you that it came straight out of Dolores Smith's mouth.

I worked for a bank where the credit administrator was adamant about keeping copies of driver's licenses for loan files if the applicant was not a current customer of the bank. My opinion was overruled.

Come exam time, the FRB cited the practice as a violation.

Once this prohibited information is made a part of the credit file and thus a violation, what can be done? If the information is removed, does this potentially create a violation of record retention requirements. If information is gathered by an outside agent (broker) is it still a violation on the part of the bank to have a copy of the DL included in the file?

There is no record retention requirement for information that shouldn't be there in the first place. I'd remove the items if they are there in error. As to getting this from a third party, the files should be screened and these items removed.

By having the data unnecessarily you have violated the Reg. If it stays there and is used in collection actions or subsequent loans, you are making your position worse.

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Andy Zavoina
Opinions stated are not necessarily that of my employer.

In looking at the Suspicious Activity Report (SAR), it asks for "Forms of Identification for Suspect" and driver's license is one of the items but it only asks for number and issuing authority. So would it be incorrect to have had a copy of the license as part of the SAR?

This gets really interesting. The SAR probably overrides other concerns. However, I am more comfortable saying that making a copy of the driver's license is ok as long as no credit is involved. Also, if you make copies, you should have a discrete file for the SAR material that is kept totally separate from anything else and is also secure. I guess that as long as the information is clearly separate from any credit activity, the picture doesn't violate the Reg B restrictions. I am also taking into account the fact that when a situation or concern rises to the level of filing the SAR, the information for law enforcement should be the priority concern.