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All-borrower race gender data collection considered
WASHINGTON (7/18/08)–A House Financial Services subcommittee continued its investigation Thursday into the value of a public reporting system on race and gender data of for all borrowers. The subcommittee on oversight and investigations, chaired by Rep. Mel Watt (D-N.C.), used as a springboard for this session a recent Government Accountability Office report. The June report took a look at the Federal Reserve Board’s Regulation B, which implements the Equal Credit Opportunity Act (ECOA) of 1974. The Fed’s rule generally bans lenders from collecting certain data from loan applicants, and race and gender are two of the categories of prohibition. The Fed maintains that a voluntary system of data collection, one that is not publicly disclosed, could lead to the very discriminatory practices it would be intended to discourage. However, the GAO report noted others argue that the Fed’s prohibition limits the capacity of researchers and regulators to identify possible discrimination in nonmortgage lending. Sandra Braunstein, director of the Fed’s division of consumer and community affairs, testifying before the subcommittee said the Fed’s concerns about inappropriate use of information relate to data that would be collected and held, not publicly reported. She said it also applied to a system under which there would be no consistent standards or approach to data collection. Under questioning by Watt, Braunstein said that gender and race information collected and reported under the Home Mortgage Disclosure Act (HMDA) for mortgage borrowers is a “useful screening tool in fair lending examinations.” When the chairman asked the Fed representative if HMDA is a deterrent to discriminatory lending practices, Braunstein replied, “I think that is fair to say.” In assessing the cost to the industry of HMDA compliance, Braunstein said she did not have specific figures but added, “it’s pretty significant.” She predicted that that it would take “HMDA costs plus” to “put in a robust system that would valuable to people” for other borrowers. “Small business data might be more complex than that for mortgage loans,” the Fed rep suggested. She noted that it would be the role of Congress, not the Fed, to weigh the benefits, detriments, and costs of a new reporting scheme. Other witnesses included:
* Orice Williams, director of GAO’s Financial Markets and Community Investment; * Ken Cavalluzzo, research analyst, Wisconsin Capital Management LLC; * Robert F. Gnaizda, general counsel, The Greenlining Institute; * Bill Himpler, executive vice president of federal affairs, American Financial Services Association; * Jorge Corralejo, chairman, Latino Chamber of Commerce of Greater Los Angeles; and * Ann Sullivan, president, Madison Services Group.
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