Top Clinton administration officials are urging the Federal Reserve Board to let banks voluntarily collect data on the race and gender of all borrowers.
"The current regulatory prohibition needlessly inhibits the ability of financial service providers to learn about and respond to market opportunities to provide credit for underserved communities," Treasury Secretary Robert E. Rubin, Attorney General Janet Reno, and five other top regulators wrote.
"Allowing creditors to collect data for business and consumer loans will likely lead to innovation and increased access to credit, a greater level of voluntary compliance, and more effective fair-lending enforcement."
The remarks were included in a comment letter filed in response to the Fed's proposed rewrite of Regulations B and C, which respectively implement the Equal Credit Opportunity Act and the Home Mortgage Disclosure Act. More than 275 letters were filed, most from bankers who objected to any effort to expand data collection and disclosure requirements. Currently, the fair- lending laws bar collection of race and gender data, except for mortgages.
"We oppose the proposal to allow voluntary data collection on consumer credit," wrote Marian E. McDonald, senior counsel at Norwest Corp., Minneapolis. "Collection of such data is burdensome on both the lender and the applicant."
"We do not believe that the case has yet been made for requiring this data, and it is not at all clear that the potential benefits outweigh the costs," said Pat L. Camerier, vice president at Northern Trust Co., Chicago.
The administration's request, however, picked up support from several big banks. Patrick M. Frawley, director of regulatory relations at NationsBank Corp. in Charlotte, N.C., said banks could use the data to ensure they are serving all segments of the market.
But he urged the Fed to give banks "maximum flexibility" in deciding how to collect the data and said the agency should not require new data collection until after 2001 to give the industry time to deal with the millennium bug.
Alan E. Ball, vice president and senior counsel at Wells Fargo & Co., San Francisco, supported letting banks collect the data, provided they did not have to publicly release the results. "It would be difficult for community groups to meaningfully compare small-business minority lending results amongst different banks or even to ascertain market demand for minority small-business lending since not all lenders would be required to collect the data," he said.
The Fed also asked if it should bar the use of race and gender data in bank marketing studies. Steven Alan Bennett, general counsel at Banc One Corp., Columbus, Ohio, supported the use of race and gender data, saying it lets banks target underserved communities.
But Richard Ritter of the Washington Lawyers Committee for Civil Rights and Urban Affairs urged the Fed to ban the use of race and gender data, saying banks use the information to decide which markets to avoid, not serve. "Marketing strategies such as these operate no differently from racially discriminating advertising that discourages minority applicants from applying for loans," he wrote.
Bankers also objected to proposed Home Mortgage Disclosure Act changes. One would require lenders to indicate in their Home Mortgage Disclosure Act data which loans are for mobile homes. Douglas C. Webb, general counsel of Citibank, New York, complained that the proposal would require significant reprogramming of computers. That would divert resources from fixing year- 2000 problems, he said.
The Fed is expected to analyze the comments this summer and issue more detailed proposals in the fall. Any changes are unlikely to take effect until next year.
