WASHINGTON - Arthur Andersen & Co. and a community group hired by bank regulators to review fair-lending exam policies have recommended 10 sweeping changes.
The recommendations include making banks provide regulators with more data about their consumer and small-business loan decisions, employing community-based testers to root out lending bias, and expanding anti-discrimination coverage to bank competitors.
The suggestions are laid out in an executive summary presented to the regulators by Arthur Andersen and the Greenlining Coalition in May.
Adjunct to Guidelines
The recommendations go well beyond the scope of the original contract, which was to develop uniform fair-lending exam procedures. They were prepared as an adjunct to the exam guidelines in order to emphasize some broader issues, said Robert Gnaizda, general counsel of the Greenlining Coalition.
"These are the reflections of Arthur Andersen as well as the Greenlining Coalition," Mr. Gnaizda said. "Since May this has been a joint position. They feel as strongly as we do about them."
But Arthur Andersen on Thursday distanced itself from the joint summary. While the consultant did present the 10 recommendations along with the community group, said Robert G. Arnall, a partner at the company, they reflect the coalition's positions more than Andersen's.
"I'm in basic agreement with most of the comments that are in there, but it's not Arthur Andersen's public position for a document for public release," he said.
"If I were going to issue something for public consumption, we would have spent a lot more time on it," he added.
Nonetheless, Mr. Arnall said the recommendations "have some bearing on how the procedures are finally developed."
"The purpose of that document is to present some general observations to frame the future effectiveness of the new procedures we put together," he said.
Reflects Activist Agenda
Last year, the banking agencies - through the Federal Financial Institutions Examination Council - hired Arthur Andersen to develop uniform fair-lending exam procedures.
With some minority advocates complaining that the accounting and consulting firm lacked civil rights expertise, regulators required the company to hire a community group to assist it in the review. As a result, the Chicago-based company hired the Greenlining Coalition.
The joint summary reflects the group's activist agenda. The statement recommends full disclosure of data; the development of "regulatory leadership statements"; improving the diversity among examiners, testers, and policymakers; hiring and training community-based testers, and making CRA grades more reflective of objective performance.
The statement also recommends improving community input; developing better analytical tools; expanding anti-discrimination coverage to bank competitors, and expanding the Justice Department's anti-trust activity to include consideration of discrimination.
Finally, it recommends that regulators seek a new contract, using "more expansive and more effective contract guidelines, including more input from diverse community groups."
Some of the steps already have been embraced by regulators, especially Comptroller of the Currency Eugene A. Ludwig. Mr. Ludwig has aggressively. pursued new regulatory strategies for ending lending discrimination.
Mr. Arnall said his group has presented a final draft of the complete Andersen proposal to the regulators.
"We're basically done," he said, adding that the recommendations are "not dramatically different" from the current ones.
But Janice Smith, director of the Federal Deposit Insurance Corp.'s office of consumer affairs, said the regulators have not completed their review of the Andersen proposal.
"What we're going to do is take their product and work with it ourselves," she said. "Anything that is final would definitely have to be agreed to with all the agencies."