Appeal of Fair Lending Referral (Third Quarter 2024)

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/or national origin in violation of the Fair Housing Act (FH Act). The bank also appealed the SO’s determination that the OCC has reason to believe that the bank engaged in a pattern or practice of discouraging or denying applications for credit on the basis of race, color, and/or national origin in violation of the Equal Credit Opportunity Act (ECOA). Under Executive Order 12892 and ECOA, the OCC is required to notify the U.S. Department of Housing and Urban Development (HUD) and U.S. Department of Justice (DOJ) of this information.¹

Discussion

The appeal disagrees with the OCC’s decision to make a referral to the HUD and DOJ. The appeal contends that the facts in this matter do not support the OCC’s conclusion that the bank engaged in a pattern or practice of discrimination, discouraging, or denying applications for credit; therefore, a referral is unwarranted. The appeal asserts that the peer groups used in the OCC’s statistical analysis do not accurately reflect similar institutions. The appeal also asserts that the bank’s delineated assessment area meets the legal requirements of the Community Reinvestment Act. Additionally, the appeal asserts that the bank’s branching has not changed, staffing levels and available resources to serve the market are limited because of asset size, and the bank did not disadvantage any individual or class of individuals because the bank lacked a targeted marketing program.

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 15 USC 1691e(g), “Civil Liability,” of ECOA as the primary supervisory standards. The “Memorandum: Identifying Lender Practices That May Form the Basis of a Pattern or Practice Referral to the Department of Justice,” dated 1996 and “Fair Lending” booklet of the Comptroller’s Handbook (January 2010 and January 2023) were secondary supervisory standards.

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 and reason to believe the bank engaged in a pattern or practice of discrimination in violation of ECOA pursuant to 15 USC 1691e(g). 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 pattern or practice of discrimination in violation of the FH Act. Under ECOA, the OCC must refer matters to the DOJ when it has reason to believe a lender has engaged in a pattern or practice of discrimination in violation of ECOA.