Regulators haven't given up on their promise to clarify the March 1994 fair-lending policy statement, which was supposed to provide the industry with a blueprint for fair-lending compliance.
You remember that, don't you?
The leaders of 10 federal agencies held a press conference back then to announce that - after nine months of debate - they had agreed how to enforce fair-lending laws.
But after the big announcement, little happened.
That's because the regulators hadn't really agreed on much. During their interagency discussions, the Justice Department and the Department of Housing and Urban Development had wanted to get specific. For example, these two had wanted to write down how a bank's advertising or marketing can be discriminatory or how it pays its loan officers can lead to bias.
But the Federal Reserve Board and other agencies refused to sign on, which led to a bare-bones compromise criticized by bankers and community activists alike.
The policy statement "has had zero impact," one fair-lending expert. "From the industry's perspective, it has been really frustrating."
The statement "was supposed to provide some guidance," the expert said, 'but it is much too general and is too much a compromise. It really hasn't had that kind of utility."
In fact, the policy statement was eclipsed last summer by the government's landmark settlement with Chevy Chase Federal Savings Bank.
Some observers contend any policy statement is irrelevant.
The agencies don't even follow the few concrete policies they have managed to agree upon, said Kenneth Thomas, a Miami-based author on fair- lending issues.
"It is all on paper," he said. "But as far as actual performance, they haven't done anything."
When the fair-lending policy statement was released early last year, regulators vowed they would issue a follow-up to add more meat to the document.
In an interview last week, Deval Patrick, assistant attorney general for civil rights, said the top people at the 10 agencies have met twice in the last three months to hammer out the long-awaited follow-up. However, he said, no deadline has been set.
At a minimum, it will incorporate the information the Justice Department released in February.
In the 10-page letter it issued then in response to a series of questions from industry trade groups, the department pledged not to use the fair-lending laws to enforce the Community Reinvestment Act.
The other big news in the letter was that the Justice Department would not base a prosecution on a bank's self-testing results. Niche marketing was deemed acceptable as long as all customers are treated fairly. Finally, the department said it wouldn't scrutinize compensation policies unless there was a lending bias case pending against the bank.
Once the Justice Department's promises have been officially adopted by the other agencies, banks will have a better idea what's expected of them.
"In fairness to the industry, it is important that we be coordinated," Mr. Patrick said. "It is important that the guidance be the same from the Justice Department as it is from the OCC, as it is from HUD. So this exercise is as much to ensure consistency and coherency as anything else."
Policy Statement II has to go over better than its predecessor.
