HONOLULU - Banks that conduct their own spot tests to ensure that loan officers are not discriminating against minorities no longer need fear self-incrimination, a senior Justice Department official said this week.
Deval L. Patrick, assistant attorney general for civil rights, said he wanted to encourage the practice of self-testing, a process in which banks hire actors to pose as loan applicants. Self-testing helps banks identify and correct problems, he said.
"Let me tell you that the Department of Justice will not initiate any enforcement activity solely on the basis of a lender's self-testing information, and we will not ask lenders to disclose their results to us as part of our investigation," he said in a speech to the Independent Bankers Association of America.
While industry representatives welcomed Mr. Patrick's comments, the civil rights chief qualified his statement by saying Justice would reserve the right to seek data from a bank's self-tests under certain circumstances.
First, he said, Justice might seek the test results if prosecutors independently determine that the bank has discriminated and the institution attempts to use data from self-tests as part of its defense.
And, if a lender decides to fight Justice, rather than settle, the government could seek the test data from a bank, he added.
Kenneth A. Guenther, executive vice president of the Independent Bankers, said Mr. Patrick's comments were a "very important" clarification of Justice's policy. It would ease fears among bankers that they might be penalized for trying to eradicate lending discrimination, he said.
"Some of our members have been saying they won't self-test for fear that they would hang themselves," added Diane Casey, the group's executive director.
"What Deval Patrick has done is provide an opening for a better compliance program," she added.
In his speech before the Independent Bankers' annual convention here, Mr. Patrick also tried to alleviate fears raised by his office's prosecution of Chevy Chase Federal Savings Bank for failing to locate branches in minority neighborhoods.
"We view Chevy Chase as an unusual case," he said. "It was at once a classic redlining case and a somewhat novel marketing discrimination case."
Most of Justice's emphasis, he added, will be on cases that involve discrimination in underwriting and pricing.
"We see no other cases like Chevy Chase on the immediate horizon," he added.
