A Guide To Fair Lending - Federal Deposit Insurance ...

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

(312) 382-4926

(312) 382-6935 FAX

Illinois, Indiana, Michigan,

Ohio, Wisconsin

NEW YORK REGIONAL OFFICE

Richard Pazereckas

Regional Manager

Federal Deposit Insurance Corporation

452 Fifth Avenue, 19th Floor

New York, NY 10018

(212) 704-1200

(212) 827-4529 FAX

Delaware, District of

Columbia, Maryland,

New Jersey, New York,

Pennsylvania, Puerto

Rico, Virgin Islands

DALLAS REGIONAL OFFICE

Thomas P. Anderson

Regional Manager

Federal Deposit Insurance Corporation

1910 Pacific Avenue, Suite 1900

Dallas, TX 75201

(214) 220-3324

(214) 220-3811 FAX

Colorado, New Mexico,

Oklahoma, Texas

SAN FRANCISCO REGIONAL OFFICE

Jim Densmore

Regional Manager

Federal Deposit Insurance Corporation

25 Ecker Street, Suite 2300

San Francisco, CA 94105

(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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