I know this has been discussed before but I can't find the thread. What are others opinions regarding identification in the actual loan file? What about for brand new customers, i.e. we have no other identifying info on file? Any thoughts are appreciated.

We are still keeping our ID in a separate log with the loan number written on it.

For those of you keeping identification with the acutal loan...don't you see a fair lending issue that could arise from this practice?

For those of you keeping identification with the acutal loan...don't you see a fair lending issue that could arise from this practice?

For those of you keeping identification with the acutal loan...don't you see a fair lending issue that could arise from this practice?

oops sorry that was excessive

For those of you keeping identification with the acutal loan...don't you see a fair lend

There is not a fair lending issue with keeping a copy of the ID in the loan file. There is only a fair lending issue if the information contained on the ID is used to discriminate. Do you keep your lending staff blindfolded so they can't see the applicants? I didn't think so. So, why would having a photo of the borrower be any different than seeing them face-to-face? OK.... end of rant!

Our loan officers not only take the application but they also approve/deny the loans as well. For CIP purposes, we keep a copy of the borrower's driver's license in their loan file. I documented where I received confirmation (from my POC at the Federal Reserve Bank) this practice is acceptable. I agree with anon’s rant and I feel that it is extremely ignorant to have to consider fair lending issues for keeping a copy of a driver’s license in a loan file. I do not need a picture to tell me what race/sex/etc. an individual (well maybe on a few borrowers!) is. I know from my own personal observation and if I wanted to discriminate against a protected class, I could do so without ever looking at a driver’s license. I wish the Fed would come out and say if this is acceptable or not instead of continuing to confuse the hell out of most of us on a subject that I do not consider to be in any way in violation of any fair lending issues.

We are the same as Texas Boy. Our officers both take the app and approve or deny. The FDIC has said that keeping the ID in the loan file will not be a concern to their examiners in regard to a discrimnation issue.

Keeping a driver's license in a file for a loan that is subject to Government Monitoring collection is not that big of a deal...you ask for the information anyway!

However, keeping a copy of a photo ID in a loan file where GMI collection is prohibited could be construed as requesting/collecting GMI when not permitted and be considered a violation of Reg. B

Any thoughts on this perspective?

Scroll down to Q34

Cowboy Fan, Thanks for the link. Even though I respect David's opinion and advice, like I mentioned earlier, I have confirmation from my POC at the FED that this is an acceptable practice. I would still love for someone to explain the logic in having fair lending issues with keeping a copy of the driver's license in loan files. There is nothing I can get from a drivers license that I could not get from my own personal observation.

The new BSA Exam manual has muddied the waters on this issue. In footnote 40 on page 34 it says:

"Banks are not required to make and retain photocopies of any documents used in the verification process.
However, if a bank does choose to do so, it should ensure that these photocopies are physically secured to
adequately protect against possible identity theft. In addition, such photocopies should not be maintained with files and documentation relating to credit decisions to avoid any potential problems with consumer compliance regulations."

This is one of those issues that drives us all crazy. But we all need to recognize that individuals DO discriminate. Discrimination can occur at any time during the term of the loan. If the loan goes south, someone in the collection department may give customers of a certain race a harder time.

Dolly, I hear what you're saying. All I'm trying to communicate is we need to push back on this attitude that the fact that ID photo documentation appears in the file is, in itself, a Fair Lending problem. It's not.

I agree with you 100% that in itself it is not a Fair Lending problem. But I think Dolly hit the nail on the head when she said that discrimination can occur anytime...so why add fuel to the fire by keeeping the ID in the file? The problem is it MAY BE construed as a Fair Lending issue with the ID in the file.

Just to play devil's advocate here, wouldn't photo IDs in denied application files be more of a Fair Lending concern? After all, loan files represent loans that you made, not loans that you denied.

Good point, Steve!

Here's my .02...I personally think that there are valid arguments for keeping the drivers license in a loan file, as that information is needed for CIP and also the LO can tell by their observation whether or not the borrower is male, female, black, white, etc.

However, where it becomes a potential fair lending issue is when something goes wrong on a loan where the bank is not permitted per Reg. B to collect information about ethnicity, race, sex, etc.. If a customer who is a member of a protected class is charged a higher rate (or other unfavorable terms), goes into default, or the loan is denied (for some examples) and decides to raise a stink about it, the bank is left with information in their loan file that they are not permitted to have in relation to that credit transaction. It could be argued by the customer (or their attorney if its ugly) that the bank used this information in making decisions about their credit account. This is, IMO, where potential fair lending problems come into play.