A Guide To Fair Lending
A Guide To Fair Lending
Federal Deposit Insurance Corporation
Office of the Director Division of Compliance and Consumer Affairs
FIL-36-96 June 6, 1996
FAIR LENDING GUIDE
TO:
CHIEF EXECUTIVE OFFICER and COMPLIANCE OFFICER
SUBJECT: Revised Edition of SIDE-BY-SIDE, A Guide to Fair Lending
The FDIC has revised its 1994 edition of SIDE-BY-SIDE, A Guide to Fair Lending (see FIL-47-94). The new edition is enclosed. The guide offers suggestions on how an institution can compare its treatment of loan applicants through self-assessment. Self-assessment can help prevent and detect illegal discrimination.
The FDIC revised the guide due to the overwhelmingly positive response it received after issuing the 1994 edition. The FDIC also wishes to continue promoting self-assessments as a means of achieving fair lending goals.
The guide's only significant change is the FDIC's policy concerning an examiner's request for the results of self-testing, in which testers are used at the pre-application stage to determine differences in treatments. Under the new policy, FDIC examiners will not ask to review the self-testing results. However, if an institution voluntarily provides documentation of its self-testing efforts, the examiner will consider the results.
At the end of the guide, you will find selected references. We encourage institutions to explore these and other writings on equal credit opportunity.
If you have questions about the guide or request additional copies, please contact the Regional Office of the FDIC's Division of Compliance and Consumer Affairs shown on the attached address list.
Enclosure Distribution: FDIC-Supervised Banks (Commercial and Savings)
FDIC Regional Offices - Division of Compliance and Consumer Affairs
ATLANTA REGIONAL OFFICE Jimmy R. Loyless Regional Manager Federal Deposit Insurance Corporation One Atlantic Center, Suite 1600 1201 West Peachtree Street, N.E. Atlanta, GA 30309-3449
(404) 817-1300 (404) 817-8806 FAX Alabama, Florida, Georgia, North Carolina, South Carolina, Virginia, West Virginia
KANSAS CITY REGIONAL OFFICE John P. Misiewicz Regional Manager Federal Deposit Insurance Corporation 2345 Grand Avenue, Suite 1500 Kansas City, MO 64108
(816) 234-8000 (816) 234-8088 FAX Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota
BOSTON REGIONAL OFFICE Carl Schnapp Regional Manager Federal Deposit Insurance Corporation Westwood Executive Center 200 Lowder Brook Drive, Suite 3100 Westwood, MA 02090
(617) 320-1600 (617) 320-1298 FAX Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont
MEMPHIS REGIONAL OFFICE Sylvia J. Plunkett Regional Manager Federal Deposit Insurance Corporation 5100 Poplar Ave., Suite 1900 Memphis, TN 38137
(901) 685-1603 (901) 821-5272 FAX Arkansas, Kentucky, Louisiana, Mississippi, Tennessee
CHICAGO REGIONAL OFFICE David K. Mangian Regional Manager Federal Deposit Insurance Corporation 500 West Monroe St., Suite 3600 Chicago, IL 60661
DALLAS REGIONAL OFFICE Thomas P. Anderson Regional Manager Federal Deposit Insurance Corporation 1910 Pacific Avenue, Suite 1900 Dallas, TX 75201
(312) 382-4926 (312) 382-6935 FAX Illinois, Indiana, Michigan, Ohio, Wisconsin
(214) 220-3324 (214) 220-3811 FAX Colorado, New Mexico, Oklahoma, Texas
NEW YORK REGIONAL OFFICE Richard Pazereckas Regional Manager Federal Deposit Insurance Corporation 452 Fifth Avenue, 19th Floor New York, NY 10018
SAN FRANCISCO REGIONAL OFFICE Jim Densmore Regional Manager Federal Deposit Insurance Corporation 25 Ecker Street, Suite 2300 San Francisco, CA 94105
(212) 704-1200 (212) 827-4529 FAX Delaware, District of Columbia, Maryland, New Jersey, New York, Pennsylvania, Puerto Rico, Virgin Islands
(415) 546-0160 (415) 896-2879 FAX Alaska, Arizona, California, Guam, Hawaii, Idaho, Montana, Nevada, Oregon, Utah, Washington, Wyoming
A Guide To Fair Lending
Federal Deposit Insurance Corporation
FOREWORD
The Federal Deposit Insurance Corporation recognizes the efforts undertaken by many financial institutions to improve fair lending performance. Every day our examiners and community affairs staff work with compliance officers, loan officers and others who want to ensure equal opportunity in lending. Although few lenders believe that intentional discrimination is prevalent, we know that they all share a genuine concern about the other more subtle or inadvertent forms of discrimination. People treat other people differently and differences in treatment can lead to illegal discrimination. We are also aware of the questions asked by lenders when they begin to address this concern. Does it happen here? How do we know? What can we do?
In this guide, which we first distributed in August of 1994, we provide alternative means that an institution may use to discover uneven customer service or inconsistent lending practices that may be discriminatory. This guide is not about finding discrimination, that is, violations of the fair lending laws. It's about tools that a lender can use to compare the treatment of loan applicants, identify differences and correct potential problems. Financial institutions may decide to use other methods or take a different approach to those we outline here. The process is not mandatory nor are the tools that are discussed in this guide all inclusive. A self-analysis program of detecting and preventing potentially discriminatory practices should not be undertaken to placate regulators or others. Instead, it should be used to help assure equal access to loans. We encourage institutions to employ whatever methods may work best for them to detect and prevent lending discrimination.
The Federal Deposit Insurance Corporation wants to help financial institutions seek ways to know whether discrimination occurs. We have distributed over 35,000 copies of this guide to financial institutions -- compliance officers and senior executives --, to community organizations, and to others. The guide was originally developed to provide a place to begin, take some of the mystery out of the process, and help answer some of the more basic questions. Based on the demand for the guide, we believe the procedures and processes described herein continue to be appropriate tools for financial institutions.
Carmen J. Sullivan Director Division of Compliance and Consumer Affairs
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