I have nothing personal against the State of Alabama nor the city of Birmingham. Nevertheless, I did wonder in exactly what country Compass Bank might be doing business, since it apparently hasn't caught onto the Equal Credit Opportunity Act, which has been in effect in the United States since 1975.
The Justice Department launched an investigation into Compass' automobile lending practices after the Federal Reserve Board, in a routine 2003 examination, found "reason to believe that Compass Bank's loan pricing procedures and directives constituted a pattern or practice of discrimination," according to a news release Friday.
In its complaint, the Justice Department alleged the Birmingham-based bank had violated the Equal Credit Opportunity Act by charging car loan co-applicants who were not married to one another higher rates than married couples.
In a consent order filed in federal district court in Birmingham, Compass has agreed to pay as much as $1.75 million plus interest to unmarried co-applicants who were charged higher rates. It also will beef up its equal credit opportunity training for employees who set car loan rates. The bank also is required to maintain changes to its lending procedures already in place that explicitly ban distinctions based on marital status.
I suspect that what really set the feds off was the 10% discount given to married cousins (25% to brother/sister couples).
After 32 years, you'd think you'd be able to get the hang of it, wouldn't you?
On the other hand, 30 years ago, when I was a young sprout toiling as an in-house counsel at a large (and long-since acquired) financial institution in the Rocky Mountain West, the bank's executive vice president thought that it would be a great idea for me to sit on the bank's residential loan committee, obviously believing (correctly, I think) that "real world" experience would bring me up to speed faster than sitting in my ivory tower in the legal department. On my first day with the loan committee, the very first loan application considered was that of an unemployed, unmarried, African-American mother with no income, no assets and no third party guarantor or co-borrower to offer, who had applied for a loan to buy a home. It was a testament to the loan officer's desperate need for income that he'd even submitted such a hopeless case.
A senior vice president looked across the conference table at me, curled his lip, and sneered, "I suppose that ECOA law means that there's no way we can deny this application." I waited a few beats to see if he was joking, but everybody stared at me with brows furrowed, and it was quickly apparent that he, and the rest of the committee, were completely serious.
I asked, "If I had filed that application, and the only thing that was different on it was that I was a married white man rather than a single black woman, would you make the loan to me?"
"Hell, no," he responded.
"There you go," I grinned.
"Unless you were in medical school, that is," I added helpfully. "Everybody knows those doctors are good for it." Everyone else nodded in agreement.
That was a day when it became clear to me that a man would have be pretty damn stupid not to be able to make a living in the banking business.
It's nice to see that over the decades, some things change little, if at all.
It was not that long ago (and after the Australian Human Rights and Equal Opportunity Commission Act passed) that my (now) wife approached a bank here for a loan to buy a car. She was told she needed a guarantor. She was a uni graduate and trainee chartered accountant on a good(ish) salary with no credit history.
Her brother, who had no qualifications, was much younger and had only just got his first job on a lower salary and also with no credit history got a loan a month later for more without a guarantor. It is not only in the US that an Act is sometime ignored.
Posted by: Ozrisk | January 16, 2007 at 03:22 AM
Further proof that Coca-Cola should change the lyrics of its famous song from "I'd like to buy the world a Coke, and keep it company" to "I'd like the world to smoke some coke, and keep me company."
Posted by: Kevin | January 16, 2007 at 06:00 AM
Note also that this was discovered during a routine Federal Reserve Board examination, which occurs annually. So also fault the Feds, not just the State of Alabama, City of Birmingham or Compass Bank.
Posted by: mark b | January 16, 2007 at 08:06 AM
Oh-oh, an offended Alabaman. I didn't mean to insult you or your sister/wife.
Posted by: Kevin | January 16, 2007 at 08:48 AM