WASHINGTON -- The Federal Deposit Insurance Corp. has tabled a proposal to test banks for lending discrimination by hiring undercover testers to pose as mortgage applicants.
The lack of a permanent chairman and a decision to focus on other fair-lending initiatives prompted the FDIC to put the project on hold, agency officials said.
"One of the things, of course, is that we don't have a permanent chairperson yet," said Ken Quincy, a senior compliance officer at the agency. "There is some thought as to [the implications of] committing to that without some input from the designated chair."
Self-Testing Urged
Until recently, banking regulators unanimously opposed the idea of testing for discrimination. It would be unethical, they said, for the government to try to "catch" lenders through misleading practices. Instead, they urged banks to implement testing projects on their own.
That changed a year ago, when Comptroller of the Currency Eugene A. Ludwig announced that his agency planned to begin using testers as part of its stepped-up attack on lending discrimination.
At about the same, FDIC officials said they, too, were considering using testers, though no decision had been reached. Staff members worked for several months last year preparing a plan for consideration by acting chairman Andrew C. Hove Jr.
They went so far as to decide that if the policy were approved, they would contract out with a private organization instead of using government employees to do the actual testing.
But earlier this year, agency officials gave up on the plan, at least for the time being. Instead, they decided to focus on preparing guidelines for banks that want to test themselves. The guidelines for banks that want to test themselves. The guidelines will also suggest programs smaller banks can implement without hiring outside consultants for a full-blown review.
"From the agency's perspective right now, we felt we could get more testing done by encouraging institutions to do their own self-testing than by us trying to do it," said Bobbie Jean Norris, deputy director of the FDIC's consumer affairs office.
Other Initiatives
In February, Mr. Hove told Congress the agency would release these guidelines in March. FDIC officials now say they hope to have them out sometime this summer.
The agency has several other fair-lending initiatives in place, including a widespread investigation of several hundred banks whose Home Mortgage Disclosure Act data raised questions about their lending records.
That investigation is continuing. After reviewing more detailed information, officials have closed some of the investigations, Mr. Quincy said. Some others - but not all of those still under investigation - have had on-site visits from FDIC officials.
