Attorney General Janet Reno praised the banking industry Monday for its progress in eliminating loan bias, and said the Justice Department is turning its attention to violations by nonbanks.
"The fair-lending laws apply to all creditors and we must enforce a level playing field," Ms. Reno said in a speech to consumer credit executives.
She said her department is working with the Department of Housing and Urban Development and the Federal Trade Commission to crack down on mortgage and consumer lenders outside the banking industry.
The Justice Department so far has sued only banks, thrift institutions, and their affiliates.
But "we are engaged in reviews right now," Ms. Reno told a highly receptive audience at a conference in Boston sponsored by the American Bankers Association and America's Community Bankers. "This is something we are focused on and very sensitive to."
She declined to name any lenders under investigation. But she said she will convene a meeting shortly with the consumer lending industry to discuss how creditors can satisfy Justice's concerns.
"Working together is far better than filing suits," Ms. Reno said.
The attorney general devoted most of her remarks to complimenting the bank and thrift industries.
"I don't think we have ever had such a rapid response to an important civil rights issue," Ms. Reno said. "I congratulate you. I commend you."
She noted that Maryland's Chevy Chase Federal Savings Bank, which Justice sued in 1994 for failing to serve minority neighborhoods, has since increased mortgage lending to minority areas in Washington by more than 500%.
"The advances made by Chevy Chase are truly remarkable," she said. "The bank has satisfied both the spirit and the word of the consent decree. They should be a model to emulate."
"Bankers were very pleased at the positive message she delivered," said Paul Alan Smith, senior counsel of the American Bankers Association. "They feel they have worked very hard to ensure they are doing fair-lending and they are glad to see it recognized."
Mr. Smith said bankers were particularly satisfied to hear Ms. Reno's promise to examine the lending practices of their nonbank peers.
"We've had a lot of bad press because we have been scrutinized so hard," he said. "But the reality is that because of this scrutiny we are the fairest lenders out there."
In other comments, Ms. Reno said the Justice Department is not unalterably opposed to the use of overages, a compensation system that rewards loan officers for securing higher rates or more points from borrowers. Overages were at the heart of the last two fair-lending suits. But she said lenders risk lawsuits if they don't ensure overages are applied fairly.
She also urged the industry to work closely with community groups, saying they have unique knowledge about neighborhood lending opportunities.
Ms. Reno said she decided in the spring of 1993 to make fair lending a top policy priority. Communities cannot thrive without credit, she said, adding that the enforcement effort has focused on three areas of potential bias: underwriting, pricing, and redlining.
