Rep. Tom Udall, D-N.M., is a primary sponsor of a bill to provide research data on women and minority business ownership.

The bill, the Access and Openness in Small Business Lending Act of 2001, will amend the Equal Credit Opportunity Act and require depository lenders such as banks, credit unions and thrifts to collect race and gender information for small-business borrowers.

But while the Access and Openness Act requires depository institutions to keep such records, it does not require borrowers to disclose race and gender information if they do not want to, Udall's office said.

The legislation will effectively eliminate the Federal Reserve's "Regulation B," which prohibits lenders from collecting data regarding an applicant's gender or race.

"This legislation will allow us to determine if financial institutions are responding to the credit needs of minority- and women-owned businesses," Udall said in a statement. "From this data, we will be able to determine what is working and what needs fixing. I intend to work with my colleagues on the House Small Business Committee to move this bill forward early next year."

H.R. 3372 is modeled after the Home Mortgage Disclosure Act, which requires banks to report demographic data on home mortgage lending. The bill is actively endorsed by the National Women's Business Council, the Women's Business Development Centers, the National Community Reinvestment Coalition, and the Hispanic Economic Development Corporation.

Let us pray!

Dolly Nugent
VP/Compliance & CRA Officer
Citizens Business Bank

AMEN!

Dolly, I saw that! I cannot even imagine the quagmire that reporting would become. Can you imagine if they made the rules for data collaction as convoluted as the HMDA rules?

Why doesn't the government just tell all financial institutions to start reporting information on each and every loan the bank makes or better still..........get permission from them before we make a loan decision just to make sure we don't step on someone's rights!! I think that's what they really want anyway.

Sorry but this is getting ridiculous!

Good Grief!!!!!!! What are those guys doing? Don't they know that bank employees have other things to take care of in their day at the bank, besides collecting data??

Perhaps, in their next lives they will come back as bank employees. Their specific job would involve data collection....for WHATEVER THE WHIM MIGHT BE>>>>>>>>

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The views expressed, herein, are not necessarily those of my employer

[This message has been edited by Kathy Lafleur (edited 12-26-2001).]

[This message has been edited by Kathy Lafleur (edited 12-26-2001).]

I can understand WHAT it is they want, and they are probably starting out with good intentions - i.e. make sure that discrimination doesn't exist in business lending, but you know the saying about the road to h-ll, it is paved with good intentions!

The part that IRKS me is that something like this will probably becomes another exercise where a confusing set of rules makes 100% accuracy almost impossible. Every small clerical error becomes a sanctionable offense, and unclear instructions are subject to the whim of interpretation by the examiner. The real point of fair lending, equal credit opportunity, etc., etc, gets lost in the byzantine rules that obsure the real picture.

(I'm STILL fuming over an exam criticism from a few years ago that I under-reported a borrower's income one year for HMDA. I reported annual income of $533,000 and the examiner discovered the actual income was $535,000!!!!! Tsk, tsk - an error is an error.)

Bonnie M......do you get the idea that these lawmakers, etc. are just doing something to make sure they have a job and us poor bankers are easy targets and the ones who have to suffer from their half-baked decisions? I don't think I am being unfair when I say half-baked due to some of the half thought-out regulations and rules we have been seeing in recent years. These people don't seem to have a clue how it works out here in the real world.

Data collection is not really the problem you need to be concerned about. It's how the collected data will be used. Collecting Race and Gender information is going to have a significant impact on future CRA exams, as regulators will be able to freely apply Fair Lending criteria to CRA data.

Think about that for a moment. Loans to Small Business by Gender and Race compared to the demographics of an assessment area.

Check out www.ncrc.org to get a better understanding of whats in store, because there is more coming. Look at what they are going to have as work shops in their February 2001 Convention and click on the CRA 101 workshop.

The NCRC is only one of several powerful lobbying groups that work very closely with members of the House Banking Committee. Its one of the organizations listed in Dollys article that endorses the requirement. They have been advocating this for several years, and have sufficient evidence to convience congress that more regulatory requirements are needed.

If anybody wants some recommendations on data collection please contact me direct, as my soap box runneth over.

[This message has been edited by Don Narup (edited 12-26-2001).]

[This message has been edited by Don Narup (edited 12-26-2001).]

Thanks for the link Don. You know, it would be one thing IF businesses were as "cookie-cutter" as consumers. But many business entities are very complex; as complex as the IRS tax codes that is the reason a business might be structured the way it is. So if the business is an LLC with, say, 50 members, and half of those members are other LLCs, partnerships, corporations, and/or family trusts, HOW do you determine the RACE and SEX of THAT entity?

And at what POINT do you have a business application? It's not like Mr/Ms. Banker sits at his/her desk reading the WSJ when Mr/Ms. Business Owner walks up and says "Hi! I'd like a loan."

Nope - usually you have BDO's out roaming the planet looking for any and all prospects. Some of these prospects are quite good at leveraging one bank against the other. If you call on a prospect and the prospect says "Here's my financial statements, what can you do for me?" Is that an application? And if the prospect is a corporation with 500 shareholders, do you use the race and sex of the President? What if the President is simply a titular position and has nothing to do with really running the business because the CFO really runs the thing? How do you account for all the VARIANCES that occur in businesses and business lending????

HMDA reporting on "cookie-cutter" mortgages is bad enough. I cannot even imagine the reporting for businesses. I fear we will end up with data collection rules that won't even begin to COVER all the variations we have. So how do you report something that's not addressed in the rules?

I think that bills such as this one are presented in congress because some congressman's sister's cousin's nephew's mother thought she was treated unfairly by a bank. In fact, many laws come to be because banker's are not treating people fairly. We are all compliance geeks, so we see that side of the equation. However, when I was young and newly married in the 60's, I remember what I had to go through to get a mortgage. The loan officer asked me about my plans to have a family, what kind of birth control I used, and what my child care plans would be if my income ended. (Are you surprised that he didn't ask my husband those questions!) Needless to say, ECOA came along because financial institutions were not treating people as they should.
When we can't police ourselves, laws happen. I'm not defending this new proposal, but it makes me wonder if we as an industry are doing all we should be doing to ensure that minorities and women-owned business' get the credit they deserve.
Leslie

OK, you guys are going to hate what I am about to say, but let me tell you something different than what you are seeing. I know we have more work than we can handle and I also know as audit/compliance officers, we have to "pull" teeth to get stuff done sometimes, but I also know that part of the work that we do is God's "work". This part that I am speaking of is that "all" men and women are the same. If we do a "good" job, we help to ensure that is caried forward. Since I have moved in the last two years, I have seen some things occur in the local communities that are not equal in one way or another. So the way I look at it, at least I can help make this world a "better" place through the bank I work for.

Think about it. How many times have you seen people not fit in or not permitted to fit in because they were different. This goes on in the business world too, not just the personal world, so why should we not monitor to try to stop it. I know it is worse in some parts of the country than others.

Maybe I am looking at it wrong. And yes I still believe in Santa Claus!

Opinions are definitely mine and not my employer.

Good points Bonnie. I have my speculations as to what will be initially required, and while not a cookie cutter requirement, I don't look for to many complications at first. However, you can count on it getting more complicated as time goes on.

Lobbying groups and politicians do not concern themselves with the details. They leave the details up to others to work out. The requirement will containg many of the recomendations of the lobbying groups, and then passed to the regulators to make interpetive decisions. Again, all of them have been working together on this for the past two years.

Data collection can be accomplished regardless of what they ask for, as their is a data collection, reporting and analysis solution.Collection is less a problem than the impact this will have on CRA ratings.

These requirements have come about because the lobbying groups have conducted analysis of CRA and HMDA data, and found hard evidence, which has been presented to congress and regulators, that exams should be more stringent, and institutions are not marketing products and services to all equally. Their findings are on their web sites and is interesting reading.

[This message has been edited by Don Narup (edited 12-26-2001).]

I do commend you guys for being so open-minded and being able to see the good in such regulation. All my years of banking have made me a little cold hearted. Maybe there is good reason behind such regulation but I can't help but worry that the government has just a little too much say-so in how we lend out our customer's money. We are a business as well and it is important that we take the upmost care in making loans. I can't help but feel that we have the government standing over us breathing down our necks to make loans to all the protected groups and at the same time to only make loans that do not jeopardize the safety and soundness of our institution. Kinda like they are talking out of both sides of their mouth if you know what I mean.

Just the personal thoughts of an old veteran banker.

You know what is interesting? We have Safety and Soundness in right now, and when I asked them about these proposed regulations, they just roll their eyes. They ARE concerned that these regs will place banks in a position to make loans that are NOT safe and sound. IOW, in order to appease one group that we are making loans to every "protected group", we will have to lower our credit quality.

Now it's rather chilling that Safety and Soundness would feel this way because, when you get right down to it, Safety and Soundness has the much bigger hammer to hit a bank over the head than Compliance. So which tune do you think a bank will dance to?

I've seen our declined files. I have yet to find a file that I think we should have reconsidered. When an applicant has shown repeatedly that he or she has not paid past obligations, what can you use to justify extending more credit? Also, if the financials of the business clearly show that the business cannot carry the debt load of a new loan, why set them up for failure? There is a major piece of aid that is missing in helping some of these borrowers become credit worthy. Is it the banks' responsibility to make that happen? Or are these so-called activist groups shirking their duties by placing the blame for the situation on the banks?

That is not a popular sentiment, and it is my OWN opinion and does NOT necessarily reflect the opinion of my employer!

Don, I will say that I reviewed some of the articles on the NCRC website. What I found quite interesting is this following lament:

CRA has INCREASED the number of minority homeowners (isn't that a GOOD thing?) BUT NOW, because of the recessionary times, these same homeowners are now prey to Predatory Lenders, therefore the hue and cry goes out that CRA needs to be toughened. No where did I see any acknowledgement that the companies that foster the predatory lending are, for the most part, UNDER-REGULATED entities! You can pass all the stringent CRA/HOEPA, etc., regs in the world. If no one is going to enforce them on "Fly-by-Night" mortgage broker who sells these loans to other mortgage bankers that are NOT insured depository institutions, all you will do is DECREASE the number of legitimate lenders who are willing and able to extend loans to credit-impared borrowers. But I guess its easier to tighten the screws on banks because these groups can claim that they are doing something about the problem. Whether these efforts really address the real problem remains to be seen.

I would draw an allegory. Say someone has a runny nose. Rather than treat the underlying cause of the runny nose with anti-biotics or other appropriate medication, the quick solution would be to cut off the nose. Sure, there is an immediate seccession of the runs, but the disease is still present.

Just my two cents, and again, my own PERSONAL opinion - not my employers!

This is a very large political issue that I have been following for several years. If you send me your e-mail address I will send other information rather than use this forum.

I have contacted Mr Udall's office requesting information on how they propose to handle some of the issues you mentioned. I'll post their response, if I get one.

Several years ago I met with Ralph Nadar to discuss the problems banks would have with some of the legislation he was lobbying for.

Nice guy, and from his perspective banks are the bad guys with the money to take care of themselves. Same thing applies to the non-profit Community Development groups. I have attended their conventions and they are great people just like you and I. The difference is their agenda is backed by facts and analysis that justify their recommended changes to CRA/HMDA.

Here is the initial reporting criteria taken from the bill which can be viewed at thomas.loc.gov/cgi-bin/query

`(2) MINORITY-OWNED BUSINESS- The term `minority-owned business' means a business--

`(A) more than 50 percent of the ownership or control of which is held by 1 or more minority individuals; and

`(B) more than 50 percent of the net profit or loss of which accrues to 1 or more minority individuals.

(3) WOMEN-OWNED BUSINESS- The term `women-owned business' means a business--

`(A) more than 50 percent of the ownership or control of which is held by 1 or more women; and

`(B) more than 50 percent of the net profit or loss of which accrues to 1 or more women.

Instead of banks collecting the monitoring data, I would rather have the requirement that a monitoring data-form is given to every loan applicant (with pre-paid postage, paid by the bank) and the applicant sends the form to the government. Let a government department try to collect, assemble, and house the data.

Just an idea… while I’m trying to find Santa Clause, the Easter Bunny, the Tooth fairy,….

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Comments are mine and not those of my employer.

Some of us recall when one of the proposals in the most recent rewrite of CRA (it's been a while, since they're looking at it again) was to include monitoring data of exactly the type proposed in the legislation.

At the time, we argued long, loud, and successfully that the gathering of such data would be impractical at best. For all of the same reasons as mentioned earlier in this string.

Our arguments in that instance were with regulatory proposals. At least the regulators were reasonable in withdrawing the proposal. One cannot help but wonder whether our legislators, who are always after votes, will be as reasonable and defeat this ill-conceived piece of pandering trash.

William Taylor I think that is a great idea!
(not that it will ever happen in our lifetime) Oh, by-the-way.......my husband told me this week-end that he beleives in Santa Clause and the Tooth Fairy!

John, I loved the way you describe it as the "ill-conceived piece of pandering trash"!!

God help us all. Along with this legislation perhaps they should also pass a resolution to subsidize the banking industry for collecting data that for the most part is worthless...just simply more work and expense for the banking industry. Enough already! I do believe we bankers know by now how to police ourselves i.e. ensure our lenders get it right. Oh well, gives the regulators something else to give us grief about and some bleeding-heart politician more "votes"????. And yes, as a woman, I too have had been through the bad times when we were considered at the very least second-rate citizens, but goodness, most of us have learned how to defend our rights. Raise enough h--l about bad treatment and believe me someone will listen and I don't need any politician to hold my hand anymore. Oh well,if nothing else, give us internal auditors job security?????????/