WASHINGTON - Bankers will find it much harder to keep fair-lending settlements out of the public spotlight during the coming years, industry attorneys and community activists said.
The Christmas-week settlement between a Howard University law professor and First Virginia Bank-Maryland may be a harbinger of things to come.
In that case, both the bank and Professor Spencer Boyer's attorneys issued competing press releases after the settlement was reached. Both sides also talked to reporters, trying to put their spin on the case, which centered on the bank's rejection of a $50,000 home equity loan.
One banking attorney, who has dealt with dozens of these types of complaints, said banks almost always insist that the parties agree to keep quiet as a condition of settlement.
But most of those cases involved private attorneys, who weren't trying to affect public policy.
Now that appears to be changing.
Professor Boyer turned to the Washington Lawyers Committee for Civil Rights, a well-regarded public advocacy group, for his legal work.
John Relman, who leads the group's fair-lending efforts, said the Lawyers Committee never consents to gag orders.
"We have an iron-clad rule that we don't agree to a settlement without full and complete disclosure," Mr. Relman said. "The settlement is only effective as a deterrent if the public knows what the case is about."
The First Virginia consent decree contains several other provisions that should worry bankers, said Andrew Sandler of Skadden, Arps, Slate, Meagher & Flom.
The document requires the bank to subject marketing and loan officers to fair-lending training, to advertise in minority newspapers, and to open loan files to the Fair Housing Council of Washington when requested, although part of the files will remain confidential.
With all these requirements, the Lawyers Committee is trying to carve out a watchdog role that is better left to the government, Mr. Sandler charged.
Mr. Relman said his group is working on numerous other fair-lending cases, all of which he said he will publicize. In addition, other civil rights groups are working on similar cases around the country.
Bankers don't have to view this shift to publicized settlements as a negative, several banking attorneys said.
"If you are really smart and staying ahead of the power curve here, bankers will use the publicity to their advantage," said Thomas Vartanian, a partner at Fried, Frank, Harris, Shriver & Jacobson.
Institutions need to acknowledge the mistake, apologize, and commit to concrete measures to boost their involvement with the community, Mr. Vartanian said.
"That can't happen in every case," he said. "But banks should be on notice now that this is an issue they ought to be in front of."
Warren Traiger, a New York lawyer specializing in fair-lending matters, said banks must frame their settlements properly.
"I think, in most cases, so long as the negotiations are held behind closed doors, both the litigant and the bank have a lot to be gained by going public and saying, we have done these good deeds," Mr. Traiger said. "Too often, banks make the worst out of a good situation.
"When they do make settlements, it makes sense to go public with them."
Not every banking attorney is as supportive. Andrew Sandler of Skadden Arps said he would never advise a client to sign a settlement without a secrecy agreement.
"It is never positive for an institution to be publicly accused of racist practices," Mr. Sandler said. "Institutions are generally better served by resolving matters such as these without public disclosure."
First Virginia spokesman Douglas Church, while not wanting to discuss in detail why the bank settled, did say that the bank agreed to the deal because it "seemed to be a reasonable business decision."
Bankers should expect more fair-lending suits to be handled by civil rights lawyers, especially now that Congress is firmly in Republican hands, said David Roderer, a partner at Winston & Strawn.
"I would expect to see a redistribution of resources to judicial actions, and away from legislative actions," Mr. Roderer said.
Most banks will have to accept these terms or go to trial, something no bank has yet done, he said.
His advice: "Hire a good PR firm, and make sure you don't do it again."
