Disparate treatment, redlining or CRA service/or marketing bias? These are the concerns that I feel may impact our institution if our market executives choose to regionally price our savings/CD products.

Please let me start with the background, our bank is a small community bank, just crossed- over into large CRA. We operate a handful of branches in the Detroit MSA. We do not take the entire MSA as our assessment area. The branches are spread out among several communities and separate counties.

Our Market presidents at these branch locations would like to price our savings products (mainly CDs) regionally at some of these locations, differently from branches in other cities or counties. Of course, these branches are in our affluent portions of our assessment area and we plan to offer higher CD rate spreads for these clients.

I see no justifiable reason for doing this and certainly would have a difficult time in explaining our business necessity for doing this to an examiner. Because this is a pricing issue for a savings product, is it primarily a CRA issue (service/or marketing) or can I site Reg B (disparate treatment) as a source our management group can rely on for for not doing this. Because this is not a credit product, they are going to say that ECOA does not apply and they will ask for regulation reference (i.e., show- me.) Can anyone help me with a direct source that I can quote to discourage this change in pricing practice. I view it mainly as a service issue tied to our CRA rating and perhaps a disparate marketing (redlining) practice.

Thank you for any suggestions!

Since there's no credit involved, the legal prohibitions of disparate treatment and redlining do not come into play immediately. I'd say your biggest concern would be negative reaction from customers in disfavored areas if they should learn about the sweetheart deals offered to their neighbors in the next town. In order to deflect any criticism, you would certainly want to survey the rates being paid by local competitors in your various markets so you could show that higher rates were necessary to meet local competition.

As others will no doubt add to this thread, you DO have some indirect fair lending and CRA risk if the effect of this pricing plan is to promote more agressively in areas that are not CRA-preferred. By limiting subsequent credit promotions to "customers only", you may discover that there's a growing bias toward the affluent areas.

We regionally price between MSAs and towns but they are hundreds of miles apart here in Texas. It doesn't sound like this is the case for your AA. Are there still two major newspapers in Detroit or just the Free Press now ? It seems you will have CRA and reputation risk since your customers will obviously see the disparities in pricing. If you are a large bank for CRA evaluations, this practice is going to impact negatively the Services Test. But I am not sure there is a chapter and verse to quote. Good Luck !

what if loans were involved.. We also operate many branches in some are in the same county but in different cities/towns. The loans are priced based on market conditions and pricing is consistent with in each "market".. do you consider this to be red-lining??

I would review regional loan pricing situations for possible disparate impacts (higher prices in higher minority population areas). Other than that, I think you are free to regionally price deposits and loans based on competitive pressures (documented of course), in any manner you choose fit without worry of fair lending or CRA implications. There is no rule regarding the fact that you have to price your products the same no matter where your branches are located. The law only prohibits you from basing pricing on prohibited factors. Profit is not one of them. Whether or not this may cause heartburn for your customers is a reputational risk that has to be weighed by management not unlike any other decision they make. Don't make too much out of this unless you are really looking for an excuse to squash this idea.

We still have the two newspapers and I feel that our consumer base will eventually catch wind of the pricing issue. So I agree there is a reputation risk and potential pause for concern under the CRA service test. I appreciate all of the helpful comments.

Detroit