Currently, a copy of picture IDs are kept in the customers CIF file. However, our core system is going to change and a picture of the ID will be visible on every inquiry screen including when viewing a loan (it will be displayed on the side of every screen). Is this a fair lending violation? or Regulation B?

Thank You

Will it be visible to those underwriting an application, or just a loan?

If the applicant is already an existing customer, it will be visible to the underwriter if the underwriter inquires on customers accounts.

Pictures in loan files (as far as I know) have only been identified as an issue by the Western Region of the FDIC. The last time I spoke with an examiner on this issue, about a year ago, they indicated that the Western Region hadn't officially changed its stance but that the examiners had been instructed to let the issue go. So as far as I have seen they regulators won't say this is an issue. That being said if it was me I would prefer to block this to at least the underwriting group just so I could defend it easier.

IMHO, it would only be a fair lending violation if your underwriters (or others) used the picture IDs to discriminate. According to footnote 49 of the FFIEC BSA exam manual (and the 2004 FAQs to the CIP final rule), you are permitted to make copies of IDs, though you should be "mindful that [your bank] must not improperly use any documents containing a picture of an individual, such as a driver's license, in connection with any aspect of a credit transaction."

This is something that some auditors and examiners have made a fuss about for years, but I have yet to find anything that says you can't keep copies of ID in a loan file - as long as the pictures aren't used in a discriminatory manner. That said, it is my experience that many financial institutions keep IDs separate so they don't have to worry about this potential conversation with auditors/examiners.

Also, I should mention that making copies of military ID is prohibited, so this discussion is really talking about DLs (assuming the applicable state permits such copy).

Speaking from a pragmatic view, if photo IDs are visible to loan officers and underwriters, it's nearly impossible to prove they were not used. It also makes those photos available to regulators reviewing files.