Senate Banking Committee Republicans challenge to Reg B proposal leads to removal

WASHINGTON-On the eve of Halloween, three Senate Banking Committee members wrote the Federal Reserve objecting to amendments to the regulation implementing the Equal Credit Opportunity Act (ECOA). The Fed quickly removed the proposal-which would allow the voluntary collection of borrowers information concerning sex, race, color, national origin, religion, etc.-from the agency's agenda for the October 31 meeting. A legal memorandum attached to the letter to Fed Chairman Alan Greenspan also included analysis from the committee's legal staff "concluding that there is an absence of a legal basis for the proposed changes." The letter pointed out that ECOA restrictions regarding inquiries by financial institutions into the sex, race, color, national origin, religion, etc. of a borrower must be enforced by the Fed by statute and, if the proposal goes ahead, financial institutions "would not receive any safe harbor from the anti-discrimination prohibitions of the Equal Credit Opportunity Act, including the Act's ban on identifying the sex, race, color, national origin, religion, and so forth, of a loan applicant, which the Act comprehends as the essential first step of any such unlawful discrimination." "To the extent that changes along the lines suggested by the proposed amendment may be deemed advisable, the decision to so revise the law must be made by the Congress," Senate Banking Committee Members Mike Enzi (R-Wyo.), Rick Santorum (R-Pa.), and Senator Mike Crapo (R-Idaho) wrote. Senator Phil Gramm (R-Texas) sent the same legal memo to the Fed two years ago.