Business News
Non-Mortgage Credit Applications Should Remain Race, Gender Neutral, AFSA Testifies
2008-07-17 14:50:00
Requiring Creditors to Collect this Data Would Raise Concerns WASHINGTON, July 17 /EMWNews/ -- Access to affordable credit will not be enhanced by requiring non-mortgage creditors to collect race or gender data, testified American Financial Services Association (AFSA) Executive Vice President for Federal Affairs Bill Himpler in a hearing held today by the House Financial Services Subcommittee on Oversight and Investigations. "We must be careful not to undo the progress that has been made in creating a credit granting system that is race and gender neutral," Himpler told the subcommittee, which was examining the findings of a recent Government Accountability Office (GAO) report on Regulation B implementing the Equal Credit Opportunity Act (ECOA). In general, Regulation B prohibits the collection of race, gender and other demographic data for non-mortgage loans. Himpler expressed the association's belief that current regulations under the ECOA and Regulation B contain the necessary restrictions and enforcement tools to end discrimination in lending. Today, most non-mortgage credit is underwritten and priced by creditors using objective, risk-based credit criteria, without face-to-face interaction or any information regarding the applicant's race or other prohibited characteristics, he said. "While both the government and the industry have strived to make the credit application process as colorblind as possible, we believe the proposed requirement being discussed today goes against this goal," Himpler said. In his testimony, Himpler cited a 2007 Federal Reserve Board study that concluded credit scores accurately predict credit risk for the population as a whole and for all major demographic groups. "From our experience with HMDA reporting, we also know that a mere correlation between race and pricing, without consideration of detailed credit worthiness factors, cannot tell us whether illegal discrimination has occurred," he added. Himpler also pointed out that the collection and reporting of non-mortgage data would involve costs that will be passed on to consumers and significantly increases the risk that a consumer's sensitive personal information will enter the public domain. Based in Washington, D.C., AFSA (http://www.afsaonline.org) is the national trade association for the consumer credit industry, protecting access to credit and consumer choice. Its 350 members include consumer and commercial finance companies, auto finance/leasing companies, mortgage lenders, credit card issuers, industrial banks and industry suppliers.
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