Advocacy Group Seeks Fairness In Lending
By Richard Burnett, Sentinel Staff Writer
January 14, 2008


Fair Finance Watch is no stranger to controversy when it comes to the banking industry. The New York-based consumer advocacy group makes a habit of being a thorn in its side, especially when big banks want to merge.

In the past year or so, Fair Finance has filed nearly 10 regulatory protests contesting proposed bank mergers -- the latest being RBC Centura Bank's pending buyout of Alabama National Bancorp., which has a growing presence in Central Florida with its Florida Choice Bank subsidiary.

Fair Finance's central issue -- over and over again -- is that the banks don't do enough to remedy the wide gap between minority borrowers and non-minorities when it comes to access to conventional financing for home loans.

lack and Latin borrowers, the group says, consistently end up with the now-notorious subprime mortgages sometimes two to four times more often than white borrowers.

In the subprime realm -- reserved for people with subpar credit -- that means many minorities are unfairly saddled with mortgages that have more costly fees and are three or four percentage points higher than those of their non-minority counterparts, according to Fair Finance. The group contends such practices violate the banks' responsibility -- spelled out in the federal Community Reinvestment Act -- to provide fair access to credit to all levels of a community.

"We just want regulators to enforce the CRA," said Matthew Lee, Fair Finance's executive director. "We have had some success, even if it is incremental. I've even had bankers come to me and thank me for pressing these issues. They say it's made their banks take the CRA more seriously."

Still, bankers routinely dismiss any allegations the data indicates racial or ethnic bias in mortgage lending. They attribute the disparity to credit score differences, debt-to-income ratios and other economic conditions in society.

RBC recently told regulators that Fair Finance used selective, distorted or flawed data in making its allegations. When all the information is included -- credit score, debt levels, etc. -- it "reveals either no disparity or reasonable credit risk explanations for the disparity in RBC's lending data," the bank said in a filing with the Federal Reserve Bank.

Fair Finance is not the only group to point out the credit gap. The Consumer Federation of America, the ACORN Group and the Center for Responsible Lending, among others, have conducted similar studies. Even the Federal Reserve has acknowledged the disparity, albeit with a caveat that credit scores may contribute to it.

Some industry experts have given Fair Finance plaudits for its work. Unlike some community activists, Fair Finance does not ask for money from the banks to settle or avoid the merger challenges, experts said.

"Because of that, they are probably the most effective in getting the ear of the Fed with their protests," said Kenneth H. Thomas, a Miami-based industry consultant and publisher of "They are objective and have more credibility since they don't have their hands out to the banks."

Fair Finance has been widely credited with winning big concessions from banks such as Citigroup and Wachovia as a result of merger protests, according to Thomas. In one case, the Fed delayed a Citigroup acquisition for a year while regulators worked through the issues.

In its latest challenge, Fair Finance claims that RBC Centura has gotten worse in recent years in the racial disparity of its mortgage lending. The U.S. operation of Royal Bank of Canada denied home loans to black borrowers 4.4 times more often than whites in 2006, Lee said. Latinos were denied almost three times more often than whites.

RBC denied any suggestion that the data reflect racial bias and insisted it complies fully with all federal statutes prohibiting discrimination in lending.

But Lee says Fair Finance doesn't plan to let the issue go. "We're not going anywhere," he said. "Given their track record, if RBC continues to try to expand in the U.S., we're going to contest it."


Copyright 2009 Orlando Sentinel.