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An aggressive push by the Justice Department to investigate fair lending claims is prompting a backlash from bankers who claim the government is abusing its authority.
August 1
WASHINGTON — An industry trade group is calling out the Department of Justice for targeting banks' fair-lending activities outside authorized community-reinvestment areas.
Since DOJ launched a new fair-lending unit last year, 60 to 70 enforcement proceedings are said to be under way. In some cases, banks said they are targeted for leaving certain minority communities out of assessment areas used to grade compliance with the Community Reinvestment Act, even if their CRA exams reflect strong minority-lending within an assessment area.
In a letter dated Monday, the Independent Community Bankers of America said the Justice Department is "abusing its authority" by focusing outside a bank's CRA assessment area, has been too secretive about the findings that trigger fair-lending actions and is targeting banks while overlooking their "strong records of serving minority residential areas."
"Instead of targeting only those specific banks that have engaged in wrongful practices that violate federal fair lending laws, DOJ is targeting banks with apparent disregard to a bank's record of lending to minorities in its approved assessment area," Camden Fine, ICBA's president and chief executive, said in the letter to Attorney General Eric Holder.
Fine said requiring banks to lend outside their authorized CRA assessment areas is overreaching. "Threatening to bring suit against banks for not lending outside of their assessment areas would punish banks despite their compliance with their legal obligations under the CRA. Doing so undermines the entire framework of the CRA."
He said while community banks try to understand the legal basis behind DOJ's strategy "in order to assess their own" lending programs, the department has not been transparent about its findings. Investigated banks have agreed to confidentiality, challenging other institutions' efforts to "assess and refine" their policies to make sure they are compliant, Fine said.
A spokeswoman for the Department of Justice said the department will review the letter. She reiterated that past recent court cases — including during the Bush and Clinton administrations — validate targeting institutions where a CRA assessment area "excluded majority minority areas."
She added that only in a small number of instances where an investigated bank requests information about the department's legal basis has DOJ asked for confidentiality in return.
"The Department has not required banks to sign non-disclosure agreements as a condition of settlement. We have been transparent about our legal theories in all the lending cases that we have filed … . In addition to the complaints and settlement documents filed in those cases, senior department officials have made multiple public statements on our theories and will continue to do so," the spokeswoman, Xochitl Hinojosa, said in an email. "In certain limited circumstances, when a bank has requested details of our analysis, the Department has requested that a defendant agree to a confidentiality agreement to allow us to share those details. All settlements are publicly disclosed and it is quite common for parties to the settlement to comment publicly."
