Financial service institutions are still struggling to understand the implications of the government's action against Southern California's Long Beach Mortgage.

"I'm scared to do business now," one executive from a major home equity and consumer finance company said after a forum on legal matters at the American Financial Services Association conference here.

The session featured Laurence Platt, a lawyer with Kirkpatrick & Lockhart in Washington who represented Long Beach Mortgage in the case brought by the Department of Justice.

Long Beach was accused of predatory pricing. Mr. Platt said the Justice Department was, in effect, trying to hold wholesalers responsible for the interest rates charged by their brokers.

Long Beach opted to settle the case, in part because it would cost less than going to court, he said.

Mr. Platt said one of his main qualms with the much-discussed case was with the Department of Justice's advice to lenders on preventing price discrimination.

Lenders have been encouraged to prevent pricing bias by rejecting loans to minorities that carry higher rates, Mr. Platt said. But, he added, that would be a fair-lending violation, because it would constitute turning down applicants on the basis of personal characteristics.

The settlement requires Long Beach to monitor its statistics and pay for consumer education. But the terms left the executives here confused about what their next step should be to prevent such lawsuits.

"I'm thinking about pricing every borrower as an A borrower," one home equity executive joked. "Of course, I don't know how I'll make any money on that."

Involvement by federal banking agencies is critical to developing an acceptable statistical model that lenders can use as a guide, Mr. Platt said.

He doubts that the Department of Justice will file additional fair- lending cases, as has been rumored. Instead, he said, the Long Beach case will most likely be used as a blueprint for class actions.

Companies facing such litigation got a few words of advice from the second speaker, Joseph Rice, a former clinical psychologist and president of the Jury Research Institute.

Jurors are more interested in litigation and more knowledgeable about the process than they were in the past, he said, adding that the O.J. Simpson case, in particular, caused them to lose respect for the system.

Class actions are generally seen by the public as a way to effect change against an unfair system, he said.

Finding an unbiased jury for a financial lawsuit is particularly difficult, Mr. Rice said, because almost everyone has had an experience with a financial institution, "and few view those experiences as positive."

The law panel's moderator, General Motors Acceptance Corp. general counsel Richard Wagner, said there is a public bias against financial institutions.

Jurors deciding race-related suits in the South don't focus on the issue of hatred but rather on wealth redistribution, he said. Finance companies are often hit with high payouts, in part because they are perceived as large entities that can absorb the putative damages.

"We work hard," he said, "but as an industry, the initial impression is, 'Let's hit them.'"

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