WASHINGTON -- The six major bank and thrift trade groups are calling on the Department of Justice to clarify its fair-lending enforcement policies.
In particular, the groups are concerned that the new Justice Department policy will force banks and thrifts to begin booking loans that may not meet an individual institution's credit standards.
"A bank should not be in violation of the fair-lending laws if it adopts a strict or high-creditworthiness underwriting standard in accordance with its own assessment of and tolerance for risk," the trade groups said in an Oct. 31 letter.
"With that in mind, what weight does the Department of Justice attach to the requirements of bank safety and soundness" in terms of profitability targets on products and services and regulatory restraints on branching or other geographic expansion, the bankers asked.
The letter follows an Oct. 12 meeting between the trade groups and officials from the Justice Department's civil rights division. At that meeting, the department asked the trade groups to specify their concerns and questions on its fair-lending efforts. Justice has not replied to the trade groups' letter. The Justice Department said, "This is all pan of our continuing effort to work with the industry to achieve voluntary compliance with fair-lending laws."
The letter was signed by the American Bankers Association, the Bankers Roundtable, the Consumer Bankers Association, the Independent Bankers Association of America, Savings and Community Bankers of America, and the National Bankers Association.
"Our members are uncertain about the department's overall objective in its recent actions toward the banking system, unclear whether or not those actions are consistent with existing law, and unsure about what the future implications of those actions are for the industry," they wrote.
The trade groups also asked for a description of the relationship between the Justice Department and the federal banking agencies in enforcement of fair-lending laws, and an explanation of the role of the Community Reinvestment Act.
Bankers have complained that Justice's fair-lending standards are unclear and are being applied in areas that bank regulators have not scrutinized before. The Justice Department has said it is simply enforcing long-ignored rules that have always applied to banks.
"Much of the confusion existing in this area could be eliminated by the clarification of the specific points most unclear and uncertain to bankers," the trade groups wrote.
They asked Justice to explain whether banks that self-test for lending discrimination could find the results used against them later if regulators bring a case against them.
The bankers wondered whether they were expected to hire or recruit a certain number of minority lending staffers to comply with the Fair Housing and Equal Credit Opportunity Act. They also asked how loan officers' compensation plans will be judged under fair-lending laws.
Finally, the trade group asked whether a single instance of discrimination can warrant a referral from bank regulators to the Justice Department.