Appeal of Fair Lending Referral (Third Quarter 2023)

Background

A bank supervised by the Office of the Comptroller of the Currency (OCC) appealed to the Ombudsman the supervisory office’s (SO) determination that the OCC has information suggesting that the bank engaged in a pattern or practice of discrimination on the basis of race, color, and national origin in violation of the Fair Housing Act (FH Act). Under Executive Order 12892,¹ the OCC is required to notify the U.S. Department of Housing and Urban Development (HUD) and U.S. Department of Justice (DOJ) of the potential violation.

Discussion

The appeal disagrees with the OCC’s decision to make a referral to the HUD and DOJ. The appeal contends there is no evidence suggesting the bank engaged in a pattern or practice of discrimination.

Supervisory Standards

The Ombudsman conducted a comprehensive review using Executive Order 12892, “Leadership and Coordination of Fair Housing in Federal Programs: Affirmatively Furthering Fair Housing,” January 17, 1994, and “Identifying Lender Practices That May Form the Basis of a Pattern or Practice Referral to the Department of Justice,” 1996, as primary supervisory standards. The “Fair Lending” booklet of the Comptroller’s Handbook (January 2010) was a secondary supervisory standard.

Conclusion

At this juncture, the OCC is only required to have facts or information suggesting a possible pattern or practice of violations of the FH Act pursuant to Executive Order 12892. The OCC is not required to meet the evidentiary standards that would be applicable in a court of law. Further, because the DOJ conducts its own investigation before determining whether to pursue litigation, the DOJ directs regulatory agencies that they do not need to have overwhelming proof of an extensive pattern or practice of discrimination before making a referral.

The Ombudsman concurred with the SO’s decision to refer this matter to the HUD and DOJ. Pursuant to Executive Order 12892, the OCC is required to notify the HUD and DOJ when it has facts or information suggesting the bank engaged in violations of the FH Act and that such facts or information indicate a possible pattern or practice of discrimination in violation of the act.