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Cyberbanking: a new frontier for discrimination?

I. INTRODUCTION

As cyberspace becomes more accessible to the public, cyberbanking(2) becomes more problematic. In fact, cyberbanking, which is becoming ever more popular, may be America's leading economic and civil rights conundrum, raising issues such as lack of access to online credit opportunities, discriminatory lending practices, and security risks.(3) It would seem that federal banking regulation should address these difficulties and, indeed, some legal scholars have put forth just that proposition, stating that:
 the legal requirements associated with financial transactions will apply to
 those [online] transactions, just as they do for commercial activities in
 the physical world. As long as those cyberspace transactions are managed by
 a financial institution, there is little need for concern about compliance
 with legal requirements as financial institutions have many years of
 experience working within the framework of those requirements.(4)


This is not so, however, since to date, the regulatory banking agencies(5) and financial institutions themselves have largely failed to respond to the challenge posed by cyberbanking. The introduction of computer technology into banking demands a reexamination of the ability of existing legislation to control discrimination in the lending practices of those financial institutions that operate in cyberspace. Regulators must not only re-assess the current legislation, they must act now to prevent further erosion of fair lending and fair access to credit in this country.

Cyberbanking has become the most cost effective and efficient customer contact for banks, both large and small.(6) Not surprisingly, banks are entering the cyberbanking arena in ever larger numbers, increasing the type of services they offer online and enhancing the level of online technological sophistication.(7) A recent survey of the industry reveals that "[a]bout twenty percent of [the nation's financial institutions] offer[ ] fully transactional websites," through which they permit customers to conduct cyberbanking transactions.(8) While Internet banking is a new and growing activity, several risks associated with the activity have already been identified.(9) Several very specific cyberbanking compliance risks will be explored in this Article. These risks will be elaborated upon and explored within the context of the "digital divide" which makes cyberbanking difficult for many consumers.(10) The "Digital Divide" refers to the gap between those with access to the Internet and those without such access. Because cyberbanking requires a computer, telephone service, and subscription to an online network, it is not available to the consumers who cannot afford these items, which translates into millions of United States citizens.(11) Even for those consumers who can access the Internet, however, there are still several important compliance issues involved with online banking.

Legislators have raised the first issue: whether cyberbanking(12) creates opportunities for banks to circumvent traditional safeguards from discrimination (such as the CRA, FHA, ECOA and the HMDA), which were designed to ensure that financial institutions provide services to under-served groups and communities. The second issue involves whether the products financial institutions offer through cyberbanking (credit card and residential mortgage loan applications, lines of credit, and business loans) circumvent or dilute the effect of the federal fair lending laws.(13) If there is no specific requirement that financial institutions comply with these laws in their online lending activities, the purpose for which these anti-discrimination laws were enacted may be defeated. The third issue is whether cyberbanking creates new opportunities for banks to treat consumers differently based on their prospective or existing wealth. More specifically, there is a question whether financial institutions' online banking offerings are creating fair access problems that have a disproportionately negative impact on the ability of individuals of color to obtain consumer and mortgage loans, and thereby discriminate. CRA community activist groups have made just that allegation,(14) and it may simply be a matter of time before an individual litigant successfully makes the same assertion.(15)

Given the complexity of these issues, it is no wonder that those responsible for ensuring equal access to consumer loans have yet to determine how to address them. Financial institutions have not, and will not voluntarily, take responsibility for mitigating the risk of discrimination present in their cyberbanking activities. In fact, regulators are not even certain if a completely online virtual bank is really a bank in the sense that current federal regulations would apply in full and in the same manner as they do in the tradition setting.

Further, because it is so early in the growth of cyberbanking, federal regulators lack the necessary expertise to appropriately review and control the compliance, security and privacy issues tied to the Internet activities of financial institutions.(16) Federal regulators also acknowledge that failure to control compliance is at least problematic, if not detrimental to the non-cyberbanking public who most need the protections of federal antidiscriminatory banking laws. For over one hundred years, African-Americans, members of other racial and ethnic groups, and women have understood that their banking contacts (credit connected or otherwise) are affected by their gender and ethnicity. For at least the last thirty years, Congress has acknowledged that racial bias exists in the interaction between financial institutions and the above-mentioned groups. The FHA in 1968,(17) ECOA in 1974,(18) HMDA in 1975,(19) CRA in 1977, the CRA revisions in 1997, and the FIRREA's amendments to HMDA in 1989(20) were all Congressional responses to this plight.

The application of anti-discrimination laws to cyberbanking, then, is necessary in order to insure a financial institution's fair lending law compliance in cyberspace. Of course, in isolation, neither HMDA data, CRA ratings, ECOA evaluation or FHA compliance is sufficient to determine whether a financial institution's cyberbanking loan activities permit or encourage discrimination, but these laws collectively yield important results and data in the enforcement of anti-discrimination legislation.

The sections that follow will explore in greater detail the challenges presented by cyberbanking, as well as the problems involved with the application and effectiveness of current federal banking legislation to cyberbanking. Specifically, Part II will discuss in detail the problems that arise from cyberbanking. Parts III, IV, V, and VI will examine existing legislation and its failure to adequately regulate discrimination in cyberbanking. Finally, Part VII and VIII will discuss proposed legislation that would help eliminate discrimination in cyberbanking. Because traditional banking appears unable to rid itself of discrimination, it would not be logical to assume that Internet banking can achieve this goal relying solely on existing banking and civil rights legislation.

II. THE CYBERBANKING DILEMMA

A. The Explosion of Cyberbanking Throughout the United States

Cyberbanking, while relatively new, promises to be the way consumers will bank in the new millennium.(21) As of June 1997, based on information from 185 banks surveyed, the United States General Accounting Office ("GAO") "projected rapid growth in online banking over the next year and a half as the number of U.S. banks implementing online systems is expected to increase about fivefold nationwide."(22) Furthermore, the GAO anticipated that by the end of 1998, nearly half of all U.S. banks would offer online services.(23) More recent data suggest that:
 at least 3,610 federally insured depository institutions -- about 17
 percent of all U.S. banks, savings associations and credit unions-offered
 some form of Internet banking services as of February 1999. About 20
 percent of these depository institutions offered fully transactional
 [w]ebsites ... According to FDIC and NCUA statistics, in the 11 months
 ending February 1999, the number of banks, thrifts and credit unions with
 transactional websites almost tripled.(24)


In addition to the explosion in the number of banks offering Internet banking, physical banks are combining forces with virtual banks.(25) In 1998, the Royal Bank of Canada, based in Toronto, purchased the banking industry's first online, virtual bank, the Atlanta-based Security First Network Bank ("SFNB"), which began operations in October 1995.(26) Banks continue to explore "whether virtual banks, as aggregates of `automated teller machines, telephone voice response units, personal computers and the Internet,' can adequately supplant physical banks and branches."(27)

Further, virtual banks are cooperating with other Internet-based service providers. Bank One, a Chicago-based online bank, through "an agreement with Excite, Inc., a leading Internet media company, ... provide[s] an exclusive `full service financial center' for Excite users."(28) The site provides "immediate access to personalized financial information, checking and savings accounts, credit cards, loans, mortgages, insurance, [and] bill payments."(29) Most virtual banks provide a broad range of basic banking services (such as balance inquiries, transaction histories, statements) and products (such as checking and savings accounts, CDs, money market and credit card accounts.)(30) In addition, "loan and mortgage applications, insurance and investment services, bill payment and presentment" are some other available features.(31) Another online banking service allows an account holder to access personal and business accounts, or transfer funds between accounts.(32) Customers can even reorder checks and order check or statement copies.(33)

Where banks traditionally sought a merger as their primary method of expansion, today, they turn to the Internet for the same purpose.(34) For these financial institutions, increased use of cyberbanking has proven to be a successful strategy, since consumers, for their part, are embracing the opportunities offered.(35) According to Department of Commerce estimates, "the number of customers who went online to perform banking transactions increased by 22 percent, from 4.6 million to 5.6 million, in the six months ending April 1998."(36) Thus, commensurate with the growth of virtual banking services, consumers(37) are embracing online banking as never before.

B. The Potential Risks Associated with Cyberbanking

While cyberbanking creates significant advantages in banking convenience and efficiency, certain risks exist.(38) Although risk assessments are not required by federal banking regulations, they help banks determine "whether their security policies protect the integrity, confidentiality, and availability of their online operations...."(39) Despite the apparent benefits to risk assessment, by 1998 only 58% of online banks had conducted formal risk assessments; 17% did not know if they had performed risk assessments; 12% reported holding only limited or informal discussions about potential risks of online banking.(40)

Cyberbanking is also problematic in that consumer credit opportunities, which in theory are available to anyone, may not be so in reality because a great many Americans are effectively shut out of cyberbanking due to a lack of Internet access. As alluded to previously, cyberbanking is attractive to financial institutions, in part because it provides access to new customers, many of whom "tend to have a better [credit] profile, meaning they are more profitable to the bank, than the traditional bank customer."(41) Recent studies reveal that the average Internet user, being an educated male between 18 and 34 with an average household income of $85,000," is, to banks, indeed an attractive potential customer.(42) Greater business opportunities for financial institutions will be available as the ranks of cyberbanking consumers increase in the manner predicted by many. Where only "about 2.5% of U.S. households conducted banking with a personal computer [at the end of 1997],"(43) it is further predicted that by 2002, 20% of all households would conduct their banking via personal computer.(44)

Despite the promise of lucrative benefits for institutions engaged in cyberbanking, danger to consumers lurks beneath, since many Americans lack access to the Internet, and therefore will be shut out from the credit opportunities presented. The gap between those with access to the Internet and those without such access has been referred to as the digital divide.(45) The U.S. Department of Commerce reports, that approximately 20% of rural and urban residents with annual incomes under $10,000 do not have a telephone,(46) which is required for Internet access, and that as of "1995, 6.2 million homes were without telephone service."(47)

A later report issued by the National Telecommunications and Information Association ("NTIA") found that people earning less than $25,000 per year typically cite cost as the factor for not having home Internet access.(48) Further, it reports that households with incomes over $75,000 were over twenty times more likely to have home Internet access than were the lowest income level rural households.(49) This divide has only widened with the growing popularity of home computers, increasing by 29% from 1997 to 1998.(50) The digital divide, by highlighting the Internet access differences among economic classes, inevitably also demonstrates a disparity in Internet access among racial groups.(51) Thus, Whites are more likely to have home access to the Internet than are Blacks and Hispanics to have access from any location.(52) As a consequence, Internet banks and online banking may have a disproportionate discriminatory impact on groups protected by traditional anti-discriminatory banking regulations.

Based on this, the question of whether these anti-discrimination regulations (i.e., CRA, FHA, HMDA, and ECOA) can be appropriately enforced in cyberbanking is of compelling importance. Although the average cyberbanking consumer, assuming he falls within the above mentioned "average Internet user profile,"(53) does not need further protection, women and people of color, who have limited Internet access and lower incomes, do need legislation that will prevent economic and technological discrimination.

Moreover, despite the fact that online banking services present the possibility of providing a cash cow for financial institutions, no attempt has been made by federal banking agencies to apply existing compliance standards of traditional banking institutions to cyberbanking, let alone implementing new regulations specifically designed for cyberbanking. Compare the inaction of federal banking regulatory agencies with respect to cyberbanking with the millions of dollars already spent by these same agencies prosecuting fraudulent or negligent bank managers during the savings and loan crisis (the "S&L crisis"). This inaction is particularly noteworthy since cyberbanking is a multi-billion dollar banking activity with a greater potential than the S&L crisis had for breeding bank policies that are illegal and discriminatory. In a recent report, the GAO found that among the risks associated with traditional banking services, which are magnified by Internet banking, were compliance risks, defined as "the risk arising from violations of, or nonconformance with, laws, rules, regulations, required practices, or ethical standards."(54) The GAO concluded that the risks associated with cyberbanking "should be managed through implementation of risk management systems that emphasize, among other things, active board and senior management oversight, effective internal controls, and comprehensive and ongoing internal audit programs."(55) If these GAO standards are applied to today's transactional web sites, neglecting, refusing or overlooking the possibilities of discrimination associated with cyberbanking is a financial institution compliance issue.

Indeed, regulators openly acknowledge the lack of clear legislative and regulatory guidance in the area of cyberbanking, but have yet to fashion a resolution.(56) For instance, the Community Reinvestment Act ("CRA") presents a challenge in application to cyberbanking because the "regulations are written for the physical world."(57) Under the CRA, banks are required to provide loans and services to a wide array of customers in the communities which they serve.(58) Communities, however, are difficult to define with online banking, making assessment of such a bank's CRA compliance "tricky."(59) Not only are aspects of the CRA "tricky" to apply to cyberbanking; but, as will be further discussed below, the application of HMDA, FHA, and ECOA face similar hurdles.(60)

The National Financial Institution Anti-discrimination Cyberbanking Act (NFICA), proposed later in this paper,(61) would aid in the resolution of the issues raised above. The NFICA would require financial institutions that maintain web sites for consumer access to bank services to apply existing anti-discrimination regulations embodied in the Equal Credit Opportunity Act of 1974, the Community Reinvestment Act of 1977, the Fair Housing Act of 1968, and the Home Mortgage Disclosure Act of 1975 to loans initiated or completed by consumers over the Internet. The alternative - permitting financial institutions to conduct lending in this forum without accountability with regard to anti-discriminatory legislation, as well as failing to address the issue of unequal access to cyberbanking opportunities - may well have a disproportionate discriminatory impact on the very groups anti-discriminatory legislation was designed to protect.

III. TRADITIONAL FEDERAL FAIR LENDING LAWS AND CYBERBANKING

For at least thirty years, Congress has acknowledged racial bias in the interactions between financial institutions and these groups, as evidenced in the passage of several key pieces of antidiscrimination legislation.(62) Specifically, Congress responded to this inequity by passing fair lending laws, which include the Fair Housing Act ("FHA") in 1968,(63) the Equal Credit Opportunity Act ("ECOA") in 1974,(64) the Home Mortgage Disclosure Act ("HMDA") in 1975,(65) and the Community Reinvestment Act ("CRA") in 1977.(66) These laws, and their potential applicability to cyberbanking, will be discussed in greater detail below.

A. Cyberbanking and the Fair Housing Act

The Fair Housing Act (FHA)(67) was intended to bar housing discrimination on the basis of race, sex, family status, disability, color, national origin, and religion in the sale, financing, rental, and advertising of housing throughout the nation. The legislature anticipated that the FHA would prevent "discriminat[ion] against any person in the terms, conditions, or privileges of sale or rental of a dwelling, or in the provision of services or facilities in the connection therewith...."(68)

An action based on the FHA requires evidence to exist that similar non-protected loan applicants have received dissimilar treatment.(69) Therefore, to invoke the protection of the FHA, there must be a determination that cyberbanking, specifically taking loan applications online, has a discriminatory impact on members of a protected class. Thus, the "FHA does not create a cause of action for bungling a deal, failing to follow industry custom [or] violating the Equal Credit Opportunity Act.... The FHA instead prohibits a lending institution from using race, or any other prohibited factor, as a basis for making a lending decision."(70)

Although the FHA aims to prevent disparate housing practices, it is not a panacea, as evidenced by recent data demonstrating a disturbing disparity homeownership between persons of color and whites. According to U.S. Census Bureau statistics:
 [i]n 1997, the nation's home ownership rate hit a record high of 65.7
 percent. However, while the home ownership rate was 72.5 percent in the
 suburbs [in 1997], it was only 49.9 percent in cities, where low-income
 residents and minorities are disproportionately concentrated. [In
 addition,] the home ownership rate [that year] was 72 percent among whites,
 but only 45.5 percent among African Americans and 43.3 percent among
 Hispanics.(71)


There is also evidence that people of color were also more likely to be denied a home loan than whites in the same economic class. In one report, the mortgage loan denial rate for whites near median income levels was ten percent, while Hispanics and African Americans in the same range were denied twice as often.(72) Other data reveal that overall, whites and Asian Americans enjoyed a seven percent increase in residential mortgage loans between 1995 and 1996, while loans for African Americans and Hispanics declined by 1.5 and .5 percent respectively.(73) According to a report complied by the Association of Community Organization for Reform Now (ACORN),(74) "blacks were more than twice as likely to be rejected for a home loan, and Latinos were 70 percent more likely than whites to be rebuffed."(75) Additionally, the Fair Housing Alliance has found that housing insurance discrimination is common in middle-class black and Hispanic neighborhoods.(76)

Two specific instances of such discriminatory lending practices were recently addressed, respectively, by the Department of Justice and the Department of Housing and Urban Development. The Department of Justice investigation established that Albank, a Buffalo-based financial institution, had refused to make home loans in five Connecticut cities.(77) Further, the bank refused to grant mortgage loans for properties along Interstate 95 and the Long Island Sound, which were known to have majority populations of African-Americans and Hispanics.(78) However, Albank was otherwise willing to make loans in other areas in Connecticut and on Long Island, and exceptions to Albank's policy were made predominately for white borrowers.(79) In response to these findings, a consent decree was entered into in order to counteract these discriminatory lending practices. The bank denied a discriminatory intent, but otherwise agreed to underwrite $55 million worth of residential mortgage loans, at an interest rate of 1.5% below market to the excluded communities (at a cost of $8.2 million to the bank).(80) Further, Albank agreed to contribute "$700,000 for home buying counseling programs," and initiate a fair lending action plan with the bank to both monitor its lending practices and "educate its employees, mortgage brokers and bankers with whom it does business."(81)

The Department of Housing and Urban Development also alleged that a bank had engaged in discriminatory lending practices by pre-approving white applicants for larger loans than minorities in similar financial positions.(82) The bank involved, the Dallas-based mortgage lender Accubanc Mortgage Corp., agreed to make $2.1 billion in loans to minorities and low- and moderate-income applicants over three years to settle the discrimination complaints.(83)

Private groups have also aggressively sought to expose and eliminate unfair lending practices. For instance, after media reports of discriminatory lending practices and negotiations with community groups pushing for fair banking practices, the Detroit unit of First Chicago NBD Corp. agreed to lend "more than $3 billion in the city of Detroit between 1999 and 2001."(84) NBD also agreed to "employ 25 Detroit high school students during each of the three years and to actively recruit [students of color] from local colleges."(85) The $3 billion will be spread in various directions, including business loans, home mortgages, consumer loans and community development projects.(86) The group will invest over $50 million in at least one project in downtown Detroit, will finance $10 million in neighborhood retail and commercial projects, will give the Detroit Alliance for Fair Banking (which represents 102 community, religious and civic organizations) a seat on NBD's advisory board, and will increase spending for goods and services with primarily African-American owned city-based companies.(87) As the above statistics and examples demonstrate, even with FHA protections, there continues to exist great disparities in credit and loan services. It is likely that these trends would only be exacerbated by offering new credit and loan products via cyberbanking that, absent at least FHA regulation, could circumvent anti-discriminatory protections.(88) Extending credit via cyberbanking without regard to the proscriptions of the FHA further complicates lending disparities that would foster even greater inequality.

Despite the importance of the FHA as a remedial tool utilized to eliminate discriminatory practices in lending, it may not be enough to eliminate discrimination via cyberbanking. As discussed earlier, cyberbanking will be a significant part of America's Internet future. The potential for adverse effects on protected classes in this realm is overwhelming, and is a key reason why the prospect of discrimination in this forum must be addressed. Lack of access to the Internet and its consumer and credit opportunities raise the question of whether current legislation, designed to ensure fairness in lending, protects traditionally disadvantaged groups from institutional discrimination in the cyberbanking realm. Is it fair to offer cyberbanking mortgage credit products that tend to have better terms, only to account holders that are Internet accessible, leaving out in large part members of a protected class? Certainly not, but the FHA, without adopting a specific legislative application to cyberbanking, offers no relief either to the question of fair access or to the possibility of Internet discrimination.

B. Cyberbanking and the Community Reinvestment Act

Unlike the FHA, the Community Reinvestment Act (CRA)(89) is designed to prevent unfair banking activities by "encourag[ing] [financial] institutions to meet the convenience and needs of the community in which they were chartered.... includ[ing] ... credit [and] deposit services."(90) The CRA is a critical tool for ensuring that financial institutions continue to fulfill the needs of individuals within their neighborhoods, particularly its less wealthy members.(91)

Recently, however, there have been numerous assaults by legislators on the fair lending and housing laws, with the CRA in particular being targeted. Texas Senator Phil Gramm,(92) for one, during debate over the then proposed Financial Services Modernization Act ("FMA"),(93) repeatedly attacked CRA, calling it "legalized extortion" and threatened to stifle the passage of the Financial Services Modernization Act (FMA) if it contained new CRA provisions.(94) This put Senator Gramm at direct odds with the Clinton Administration, which objected "to any weakening of the CRA."(95) In the end, this controversy prevented FMA from passing in the Senate in 1998.(96) Though the FMA was re-introduced and became law in 1999, Senator Gramm's personal objections(97) to the expansion of fair lending laws nearly derailed the legislation.(98)

The version of the FSMA that was eventually enacted, however, has drawn the ire of CRA advocates, who warn that, because the FMA lowers the asset levels of banks subject to CRA, the CRA's effect will be diminished.(99) According to Julie Williams, acting Comptroller of the Currency, the FMA "would have resulted in banks moving their financial innovation to bank holding company affiliates. Consequently, banks would be required to make fewer loans pursuant to the CRA because the Act's requirement is based on the asset size of the bank."(100)

The desire of the Clinton Administration to streamline the CRA regulations was also met with much resistance.(101) After thousands of comment letters, several drafts and extensive hearings in May 1995 the four Federal financial supervisory agencies collectively published their regulatory revisions to CRA.(102) The CRA revisions reveal a shift in focus, concentrating primarily on bank performance vis-a-vis an examination into actual money spent and credit extended in communities and the creation of an assessment process that is more objective, consistent, but less burdensome to the institutions.(103) The purpose of this final rule was to help the CRA achieve its full potential in that financial institutions should be motivated to better monitor every loan dollar.

As the above discussion illustrates, the CRA, while perhaps limited in its effectiveness, nevertheless, provides one of the few safeguards regulators have to ensure banks provide for the financially underserved. As such, it must be applied to cyberbanking, since the functional differences between cyberbanking and traditional banking activities are purely formalistic. Specifically, cyberbanking, similar to traditional banking, accepts deposits and extends credit. Therefore, the CRA provisions that regulate the "deposit and credit" activities of financial institutions remain the same whether applied to a brick-and-mortar banks or cyberbanking.(104) Consequently, the obligations born by brick-and-mortar banks in virtue of the CRA ought justly be borne by cyberbanking.

Admittedly, despite the similarity in function between cyberbanking and traditional banking, applying the CRA to banks that lend online is problematic in at least two ways.(105) First, the CRA protections are rooted in the concept of "community," which includes low-to-moderate income (LMI) community members. In the context of cyberbanking, the question of how such a community can be defined and monitored emerges. Secondly, cyberbanking may prove problematic in that the lending products available online may prove to be inaccessible to "community" members, or delivered in a manner that fosters discrimination.

In June 1999, Office of Thrift Supervision Director Ellen Seidman clearly recognized and addressed just these potential problems, observing that the CRA, even with its 1995 revisions, still "challenges an examiner's ability to measure the CRA performance of ... institutions" which deliver bank services via alternative methods, such as the Internet.(106) Seidman noted that "we need to guard against implicitly fostering a perverse, unintended outcome of actually lessening the CRA obligations of those who operate more and more in nontraditional ways."(107) She suggested that in order to keep pace with technology, it may be time to revise the traditional notion of "community" as defined by the CRA, expanding the definition of "assessment area" to allow an institution to include areas where they make "a substantial portion of their loans."(108) The current CRA definition of community encompasses only areas where an institution maintains its main office, branches and ATMs.(109)

Seidman dismissed the potential for discrimination in the delivery of cyberbanking services, announcing that "[i]t makes no sense to create a system of CRA evaluations that distinguishes, not on the basis of the credit products offered by an institution, but on the method by which the products are delivered."(110) However, as noted above, in cyberbanking, it is the method of delivery that creates a new frontier where discrimination can occur. The information that a financial institution requires for certain mortgage and consumer loan applications submitted through web sites are apparently limited in scope, merely requesting limited information, such as name and address, telephone number, e-mail address, "are you a first time home buyer", etc.(111) Moreover, redlining is multifacted. As a consequence, any legislative response must address a variety of different issues, such as: disparities in the credit granting process; mortgage loan limitations in areas known to be places where numbers of people of color reside; discriminatory lending practices; and credit imbalances in small business lending. Thus, online applications appear less scrutinizing than traditional face-to-face application processes.

In sum, in order to abolish potentially discriminatory lending practices, the CRA must also apply to cyberbanking. Also, the suggestion by the OTS to adopt a more expansive, standardized definition of "community" is one, which if enacted, could reduce the number of reporting discrepancies between traditional and online lenders. Therefore the proposed NFICA would incorporate the CRA in general as well as the OTS's proposed change of the definition of "community." The inclusion of the CRA in the cyberbanking enforcement schemata is crucial since, although not a cure-all, certain aspects of the Act have proven to be very effective.

C. Cyberbanking and the Equal Credit Opportunity Act

Much like the CRA, there are significant obstacles to applying ECOA's protections to cyberbanking. For instance, ECOA can only protect those who actually apply for credit.(112) With the emergence of cyberbanking, many individuals in the classes protected by ECOA may effectively be shut-out of online credit opportunities.

For instance, in 1996, Matthew Lee, a New York community activist, sought to overturn orders of the Board of Governors of the Federal Reserve System and Directors of the Offices of Thrift Supervision (OTS) permitting the merger of Chase Manhattan into Chemical Banking Corporation.(113) Among other allegations, Lee asserted that Chase's policy of waiving transaction fees "for electronic banking programs" for high minimum balance customers "amounted to `disparate impact discrimination under ECOA.'"(114) These policies created a "disproportionate impact on low and moderate income customers who ... are disproportionately minorities."(115) The Federal Reserve Board examined this very question and found that such programs had no discriminatory effect on lending.(116) The Board concluded these programs operated with "no evidence of discriminatory effect...."(117) As the court noted, the Board determined "[this] type of discount is expressly permitted by the applicable regulations."(118) The Second Circuit dismissed Lee's claim, in part for lack of standing, and alternatively on the merits; however, the Second Circuit also emphatically asserted that "discrimination in lending has nothing to do with ... electronic banking...."(119) Given the explosion in cyberbanking since this opinion was delivered, one cannot help but wonder whether the court's statement remains accurate today.(120)

As the Lee case demonstrates, access disparities exist in cyberbanking.(121) Not only does requiring low income customers to pay banking fees hinder minority access to cyberbanking, but also broadens the "digital divide." Moreover, even if the obstacle of Internet access is overcome, the evaluation process of creditworthiness may be inherently flawed. These two discreet difficulties are treated below.

1. ECOA and Internet Access

As noted, cyberbanking requires Internet access, which is itself dependent upon a computer terminal, telephone or cable access and a service provider. Not surprisingly, lower income individuals and households, as well as rural dwellers, face significant obstacles in acquiring the tools needed for Internet access.(122) So, while the classes protected by the ECOA are to be ensured equal credit opportunities, a significant portion of these classes is effectively denied Internet credit opportunities. Indeed, credit opportunities abound on the Internet, many of which provide the convenience of surveying and comparing multiple credit opportunities, as well as rapid responses to credit inquiries.(123) Due to the exploding popularity of online credit, one research group predicts that by 2003, "consumers will obtain nearly nine million loans and credit cards over the Internet, representing over $167 billion in receivables."(124) By 1998, over 500,000 applications for the Internet credit card, Nextcard Visa, had been logged, with its issuer, Heritage Bank of Commerce, receiving about $15 million per month in balance transfers.(125)

Internet lending has also branched out into other areas as well, such as home, auto and personal loans,(126) and even student loans.(127) Specifically, Bank One of Chicago, recognizing that "e-commerce is going to change the way business is done," has established a new website that will offer online student loan applications and preapprovals that can be granted within five minutes.(128) Certainly, these opportunities bode well for the credit consumer capable of shopping around for the most favorable loan terms. However, by catering to one class of customers but excluding a broad spectrum of consumers, banks are effectively allowed to operate outside of the regulations and protections granted by the ECOA. In effect, entire classes of Americans are simply shut out of the proconsumer, competitive world of Internet credit shopping because they cannot afford or readily obtain access.

2. Disparate Impact Created by Conventional Credit Scoring

The "digital divide" is only one of the difficulties raised by cyberbanking in the ECOA context. Even if ECOA protected classes were fully able to access the Internet, additional limitations on credit shopping still persist. One such limitation is the factors and criteria used in cyberbanking to determine whether or not to extend credit because discrimination might exist in the evaluation process.(129) The traditional lending computerized credit scoring systems have become increasingly popular and prevalent, but have generated much controversy.(130) Some observers have argued that these systems produce a substantially larger percentage of credit denials for people of color.(131) This is particularly ironic, since the purpose of ECOA was to ensure that credit transactions would take place without regard to "any applicant[`s] race, color, religion, national origin, sex or marital status, or age ... [or if] part of the applicant's income derives from any public assistance program."(132)

For instance, the California-based Greenlining Institute has called the system flawed, noting that it was too rigid and based on a white-suburban paradigm of good credit customers that does not reflect the ability of people of color and other minority groups to remain current with home mortgage payments.(133) The Institute's general counsel, Robert Gnaizda, suggests that while persons of color and other minority groups do not meet the scoring standards, "they're just as good credit risks" as whites for home loans.(134) Peter Zorn, an economist with the Federal Home Loan Mortgage Corporation, concedes that "minorities on average are likely to have worse scores," but contends that these low ratings are justified.(135) Further, Zorn states that "`[t]hese models work well and are racially blind,' ... but they do have this disparate effect."(136) However, Nicholas Retsinas, head of the Office of Thrift Supervision and the Federal Housing Commission, is not quite in accord, recognizing that "computerized credit-scoring techniques are designed to make the loan process more efficient, but [stating] the price of efficiency has been standardization and I believe we are turning people away who are creditworthy."(137) Finally, Angelo R. Mozilo, Chairman of Countrywide Home Loans, one of the nation's biggest home mortgage lenders, also adds his concerns to the chorus, lamenting that "`[t]he scoring formulas leave out the most important ingredient: an individual's motivation and what sacrifices will be made by them' to ensure the loan payments will be made."(138) Wholesale transference of these troublesome credit scoring formulas used by traditional banks to cyberbanking would likely have the same, if not more severe, impact than in the traditional lending market.

Credit access difficulties might be alleviated to a degree if lenders were required to gather and report background data on non-mortgage loan applicants similar to that required by the Home Mortgage Disclosure Act.(139) Currently, ECOA banks are barred from collecting race and gender data from credit applicants,(140) although the Clinton Administration has sought to allow such a procedure.(141) By allowing the accumulation of applicant race and gender data, the Administration hopes that it would lead to lending innovation and a greater access to credit for traditionally disadvantaged groups.(142)

On the other hand, there is also the danger that permission to collect such data could just as well backfire and serve to allow lenders to use the information gathered to lessen credit availability for certain groups or communities. Further, people of color may be hesitant to support such a policy, since the requirement to disclose gender and race information might create apprehension on the part of African Americans and other people of color, who are likely to believe that race is a crucial factor used by lenders to deny credit. However, this policy has, in the Home Mortgage Disclosure Act, served to provide better statistics on the scope of lending disparities. It is only when the existence and extent of lending disparities and/or discrimination are identified that proper action can be taken.

D. Cyberbanking and the Home Mortgage Disclosure Act

The Home Mortgage Disclosure Act (HMDA) requires that depository institutions collect and provide information to "citizens and public officials of the United States ... to enable them to determine whether depository institutions are filling their obligations to serve the housing needs of the communities ... in which they are located...."(143) In passing the HMDA, Congress sought to ensure that private banks dispersed "public sector investments in a manner designed to improve the private investment environment."(144) The impetus for the Act was the Congressional finding that some institutions "contributed to the decline" of lower income communities by failing to extend credit on reasonable terms to certain applicants who were otherwise qualified for home mortgages.(145)

Further, the HMDA requires banking organizations to collect certain information regarding mortgage loan applicants and report the information related to loan approvals and denials to both banking agencies and the public.(146) The information provided by banks is then analyzed by the Federal Financial Institutions Examination Council, which produces public reports "for individual institutions for each metropolitan statistical area ("MSA"), showing lending patterns by location, age of housing stock, income level, sex, and racial characteristics."(147) The gathered information provides a statistical basis for establishing the existence of lending disparities between applicants of color and white applicants, which in turn may indicate a financial institution's potential discriminatory lending practices. One study concluded that "differential treatment [of persons of color] could occur at many stages in the lending process," which might include actively discouraging mortgage applications from persons of color.(148) Despite the HMDA safeguards, the data gathered may not always statistically demonstrate racial discrimination in mortgage or credit lending.(149)

1. Federal Reserve Analysis of Fair Lending in Boston

A well-known study (The 1992 Federal Reserve Bank of Boston Study) demonstrated that the data collected under the HMDA is an imperfect mechanism for spotting discrimination in mortgage lending.(150) This study concluded that rampant discrimination existed in the Boston MSA.(151) However, many criticized this study for failing to account for economic differences between applicants, while focusing primarily on the race of applicants.(152) This failure to utilize comprehensive economic information related to minority applicants led many lenders to claim that the conclusions made by the study (i.e., rampant lending discrimination in the Boston MSA) were unwarranted.(153)

Addressing these concerns, in 1996, a group of economists reevaluated the Federal Reserve Bank of Boston's 1992 study and published their interpretation of HMDA data used in the original study in the Boston MSA.(154) The study explored various questions, including "whether discrimination based on the applicant's race occurs in mortgage lending."(155) The study conceded that minority applicants, on average, do have less wealth, weaker credit histories, and higher loan-to-value ratios than white applicants, and that these disadvantages do account for a large portion of the difference in denial rates [in the 1992 study]."(156) Nevertheless, "white applicants with the same property and personal characteristics as minorities would have experienced a [lower] rejection rate than the minority [rejection] rate."(157) Therefore "statistically and economically[, a] significant gap between white and minority rejection rates remains."(158)

The study suggested a cause for this disparity in rejection rate is manifested when one looks at the profiles for "imperfect" borrowers of all applicants. The "vast majority of applications -- by both whites and minorities - are not `perfect;' ... [l]enders, therefore, have considerable discretion over the extent to which they consider `compensating factors' for these failings."(159) So, while applicants considered "imperfect" may indeed be granted a mortgage, white applicants enjoy a favorable presumption of creditworthiness when compared to applicants of color.(160)

In fact, the study further found that "high income minorities in Boston were more likely to be turned down than low-income whites."(161) This leads to the conclusion "that given the same property and personal characteristics, white applicants may enjoy a general perception of creditworthiness that black and Hispanic applicants do not."(162) This statistically significant gap between white and minority rejection rates "suggests that a serious problem may exist in the market for mortgage loans."(163) So, while the HMDA requires a great deal of data to be collected, it is not entirely certain that the data adequately identifies racial discrimination. Given this weakness by the HMDA to eliminate discriminatory lending practices by conventional banks, surely the same weaknesses would persist if the HMDA alone were applied to cyberbanking. That is why NFICA is necessary to supplement preexisting regulation.

2. HMDA Difficulties for Internet Banks

There are other difficulties with applying the HMDA to cyberbanking. One such difficulty is that because a loan officer or bank employee may never see a cyberbanking applicant, the applicant's race or gender is unknown unless it is voluntarily disclosed. Therefore, it is more difficult for a cyberbanking operation to compile the statistics necessary for the HMDA review to take place. Another difficulty is that the HMDA applies only to depository institutions' obligations to the "housing needs of the communities and neighborhoods in which they are located."(164) The statutory language clearly applies to traditional brick-and-mortar institutions; it is unclear, however, whether it applies to the activities of a financial institution that only exists in cyberspace. Cyberbanking is not conducted in "communities or neighborhoods," unless one defines the Internet as a "community" of cyberspace users. However, the HMDA itself suggests that this was not the intended legislative definition of "community" as it is used in the statute.(165) And, it is unclear whether the HMDA applies to home mortgage loan transactions conducted exclusively over the Internet.

Under the HMDA, where a "depository institution [maintains] a home office or branch office located within an HMDA Area," it is required to "compile and make available ... to [both] the public [and federal financial supervisory agencies by census tract,] the number and total dollar amount of mortgage loans [it] originate[s or] purchase[s]."(166) This obviously applies to the traditional brick-and-mortar institution that does not conduct any mortgage activity in cyberspace. More unclear is whether a bank, when it begins to conduct mortgage transactions online, must compile information relating to its online transactions. However, the real difficulty involves the wholly virtual institution that exists only in cyberspace and maintains no `home office.'

It is possible that the HMDA was enacted only to measure the performance of specific financial institutions within their physical neighborhoods. Nevertheless, it seems more plausible that the legislative intent was to command the itemization and disclosure of a large amount of statistical data to determine whether a bank was prone to redlining.(167) Consistent with this objective, Congress intended the HMDA to extend to all mortgage transactions of both traditional financial institutions that offer cyberbanking and financial institutions that operate exclusively in cyberspace. In fact, only after the HMDA extracts comprehensive mortgage loan information from a high percentage of lenders, will such information be usable by regulators. If the public and regulators lack the HMDA data generated as a result of cyberbanking, it may be impossible to safeguard against systematic disparate treatment by financial institutions. Thus, the extension of HMDA protection to cyberbanking customers would further the anti-discrimination goals envisioned by Congress.

IV. PROPOSED LEGISLATION

Federal regulators failed to address discrimination in cyberbanking. The NFICA would provide both a solution to these applicability gaps and an expansive regulatory regime to administer cyberbanking in the future. In a perfect world, the tour federal financial supervisory agencies would each regulate the cyberbanking activities of those financial institutions that fall under their jurisdiction. The Department of Housing and Urban Development, the Federal Trade Commission and the Department of Justice, who also have the authority to enforce fair lending laws, would also operate to regulate cyberspace transactions.(168) Yet the involvement of all of these agencies has not eliminated redlining or discriminatory lending practices in the traditional financial services.(169) As a result, current regulation cannot be reasonably expected to eliminate discrimination in cyberbanking. While it is vital that the regulation of web-based banking develop in a manner that protects the public interest by preventing discrimination against those with less wealth and access to the Internet, any future regulation must also advance the cultivation and progression of electronic commerce. Although the argument for less government intervention into cyberspace is compelling, the need to protect those on the difficult side of the digital divide is overwhelming.

In response to the regulatory and Congressional failure to protect those consumers not participating in the surge of cyberbanking activity, and those who might remain unprotected from discrimination in cyberspace should they avail themselves of Internet access, I propose the National Financial Institution Anti-discrimination Cyberbanking Act or NFICA. This Act should be separately enacted and specifically applied to all financial institutions, supplementing the current fair lending and anti-discrimination legislation that applies to such institutions.

NFICA is consistent with the five key policy principles and the nine unresolved major Internet commerce issues identified by the United States government on the future of Internet regulation articulated in a policy statement released in 1997.(170) It is also consistent with the recent OTS decision to evaluate the CRA performance of financial institutions "that deliver their products by non-branch systems [or non-traditional retail operations] throughout the markets where [these institutions] do credit business, not just in the main assessment area."(171)

The NFICA is intended to serve as both a vehicle to apply current anti-discrimination legislation to cyberbanking and to provide a legislative framework for the future enactment and implementation of laws that will control all facets of Internet banking between consumers and financial institutions.

V. THE NATIONAL FINANCIAL INSTITUTION ANTIDISCRIMINATION CYBERBANKING ACT [NFICA]

SYNOPSIS:

This Bill is proposed to regulate telecommunication database system transactions conducted over the telephone, and interactive computer banking transactions conducted over the Internet between financial institutions and consumers. This Bill would require all financial institutions that maintain web sites by which consumers can access banking services, including mortgage credit and consumer credit, to apply existing anti-discrimination regulations. Further, it would compel financial institutions to adhere to the requirements of the Equal Credit Opportunity Act of 1974; the Community Reinvestment Act of 1977; the Fair Housing Act of 1968; and the Home Mortgage Disclosure Act of 1975 for all loans initiated or completed by consumers cyberbanking over the Internet. Further, it is designed to compel adherence to all anti-discrimination regulations promulgated by authorized federal entities.

DECLARATION OF POLICY:

It is the policy of the United States, within constitutional limitations, to promote fair lending in mortgage and consumer loan transactions conducted over the Internet, throughout the United States.

SHORT TITLE:

This Act may be cited as the "National Financial Institution Antidiscrimination Cyberbanking Act of 2000," the "NFICA".

SECTION 1. CONGRESSIONAL FINDINGS AND STATEMENT OF PURPOSE

(a) The Congress finds that regulated:

i. financial institutions are required to demonstrate their lending programs made available through cyberbanking on web-based Internet sites are made available on a non-discriminatory basis without regard to race, gender, color, national origin, religion, marital status, or age; and are required to serve the housing, convenience, credit and depository needs of all the communities in which they are chartered to conduct business; and

ii. financial institutions have a continuing and affirmative obligation to apply antidiscriminatory legislation such as FHA CRA, ECOA, HMDA to their cyberbanking loan applicants; and

iii. financial institutions have a continuing and affirmative obligation to provide cyberbanking access to the communities in which they are chartered to conduct business;

iv. a financial institution's cyberbanking community consists of all who may have possible access to a financial institution's web-based Internet site, including account holders and low-to-moderate income cyberbanking users; and

v. financial institutions have a continuing and affirmative obligation to provide cyberbanking access to the communities in which they are chartered to conduct business.

(b) It is the purpose of this Act to:

i. require each appropriate Federal financial supervisory agency, the Department of Justice, the Department of Housing and Urban Development, and the Federal Trade Commission to require financial institutions to comply with the CRA, HMDA, ECOA and FHA in all web-based Internet banking activities; and.

ii. require each appropriate federal financial supervisory agency to use its authority when evaluating any application for operations, or examining and regulating financial institutions, to encourage such institutions to provide for fair lending in mortgage loan and consumer loan transactions conducted over the Internet; and

iii. require each appropriate federal financial supervisory agency to use its authority to help financial institutions meet the credit, housing, depository, and convenience and needs of their cyberbanking communities, consistent with the safe, sound, and fair operation of such institution.

SECTION 2. REGULATION OF TELECOMMUNICATION DATABASE SYSTEMS AND INTERACTIVE COMPUTER BANKING TRANSACTIONS CONDUCTED OVER THE INTERNET BETWEEN FINANCIAL INSTITUTIONS AND CONSUMERS.

(a) Granting a mortgage or other consumer loan without application of the fair lending regulations promulgated by the FHA, ECOA, CRA and HMDA is prohibited.

(1) IN GENERAL. - A financial institution shall not extend mortgage or consumer credit through a cyberbanking transaction without the application of fair lending laws promulgated by FHA, HMDA, CRA and ECOA.

(2) To assess the extent of compliance with this Act, the Federal financial supervisory agencies, the Department of Justice and the Department of Housing and Urban Development shall, pursuant to HMDA, annually collect data on the racial, gender and ethnic characteristics of persons who have been granted mortgage or consumer credit through a cyberbanking transaction.

(3) Not later than 12 months after the date of enactment of this Act, the Board of Governors of the Federal Reserve System in consultation with the Comptroller of the Currency, the Chairman of the Federal Deposit Insurance Corporation, the Director of the Office of Thrift Supervision and the Chairman of the National Credit Union Administration, shall submit a report to Congress comparing residential and consumer credit loans made over the Internet, by insured depository institutions in their respective cyberbanking communities, to such lending in the depository institution's physical communities in which it is chartered to do business.

(b) Contents of report. The report required by subsection (a) shall:

i. compare the risks and returns of web based Internet mortgage and consumer lending with the risks and returns of conventional mortgage and consumer lending;

ii. compare the risks and returns of mortgage and consumer lending in the cyberbanking community between low and moderate income individuals, and average Internet users, to the risks and returns of conventional mortgage and consumer lending to persons in distressed neighborhoods, persons of low to moderate income and people of color.

iii. analyze the reasons for any documented differences in (c) i-ii.

iv. if the risks of mortgage and consumer lending in the cyberbanking community between low and moderate income individuals, persons of color living in distressed neighborhoods, and low and average-income Internet users exceed the risks of conventional lending, recommend ways financial institutions can mitigate those risks.

v. Each appropriate Federal financial supervisory agency shall include in its annual report to Congress both a section outlining the actions it has taken to carry out its responsibilities under this Act, and a summary and evaluation of data collected by that agency under subsection (a)(2) of this Act during the preceding year.

SECTION 3. DEFINITIONS:

FOR PURPOSES OF THIS ACT --

(a) "account holder" for purposes of this Act means any consumer who holds an open deposit, savings, checking, loan, investment, or any other type of bank account at any regulated financial institution;

(b) "application for operation" means an application to the appropriate Federal financial supervisory agency otherwise required under any Federal law or regulations thereunder for:

(1) a charter for a national bank or Federal savings and loan association;

(2) the establishment of a domestic branch, virtual bank, or other facility with the ability to accept deposits of a regulated financial institution;

(3) deposit insurance in connection with a newly chartered State bank, savings bank, savings and loan association or similar institution;

(4) the relocation of the home office or branch office of a regulated financial institution;

(5) the merger or consolidation with, or the acquisition of the assets, or the assumption of liabilities of a regulated financial institution requiring approval under any Federal law or regulation;

(6) the acquisition of shares in, or the assets of, a regulated financial institution requiring approval under any Federal law or regulation.

(c) "appropriate Federal financial supervisory agency" means--

(1) the Comptroller of the Currency with respect to national banks;

(2) the Board of Governors of the Federal Reserve System with respect to State chartered banks that are members of the Federal Reserve System and bank holding or financial holding companies;

(3) the Federal Deposit Insurance Corporation with respect to State chartered banks and savings banks that are not members of the Federal Reserve System and whose deposits are insured by the Corporation and Section 8 of the Federal Deposit Insurance Act;

(4) the Director of the Office of Thrift Supervision, with respect to savings associations whose deposits are insured by the Federal Deposit Insurance Corporation) and a savings and loan holding company;

(d) "Average Internet User" is a college-educated white male between the ages of 35-54, earning $75,000 per year or more, as defined by the United States Department of Commerce, National Telecommunications and Information Administration's 1999 Report, Falling Through the Net: Defining the Digital Divide.

(e) "Board" means Board of Governors of the Federal Reserve System

(f) "community" for purposes of CRA and HMDA compliance by a virtual bank means that bank's cyberbanking community. To determine the members of this community banks would be required to collect data on those who visit their cyberbanking website and use this data to define their" community."

(g) "community" for the purpose of CRA and HMDA compliance for all other financial institutions includes both account holders of that financial institution plus any member of the general public who accesses the institution's physical facilities and the institution's website;

(h) "cyberbanking" means the use of a financial institution's web-based Internet site to conduct a cyberbanking transaction initiated by a consumer, account holder, or other financial institution via a computer or other telecommunications database system.

(i) "cyberbanking community" encompasses every consumer physically located within the United States of America when she engages in cyberbanking or any United States citizen who engages in cyberbanking from anywhere in the world, including low to moderate income cyberbanking users;

(j) "cyberbanking transaction" means any web based banking activities initiated by a consumer with a financial institution, and includes, but is not limited to, online access to personalized account information such as account balances, online funds transfer between accounts, online bill paying, online account establishment, and online application for credit cards, loans and mortgages.

(k) "electronic banking" includes any computer-based banking such as Internet and website banking, including the use of bank issued debit and credit cards.

(l) "facility" as applied to this Act and expressed in 12 U.S.C. section 2901 of the CRA means any virtual web or Internet dependent site on which banking services such as, but not limited to, online access to personal financial information, insurance account information, online bill payments, online checking and savings account balances, online application for credit cards, loans or mortgages, online account establishment, or transferring funds between accounts or to other banks, can be conducted.

(m) "financial institution" means--

(1) any bank, as defined at 12 U.S.C. [sections] 1813 (a) (1), commercial bank, mortgage banking subsidiary of a bank holding company or financial holding company; and

(2) any savings association, (including cooperative banks, as defined at 12 U.S.C. [sections] 1813 (b)(1), savings bank, savings and loan association, building and loan association, homestead association, savings and loan holding company; and

(3) any credit union that makes federally related mortgage or consumer loans as determined by the Board, or savings and loan service corporation that originates or purchases mortgage loans; and

(4) any other lending institution, as defined in paragraph `p', other than any institution described in subparagraph `1'; and

(5) any non-banking entity that accepts demand deposits and makes mortgage or consumer loans.

(n) "interactive computer service" means any information service that provides computer access to multiple users via modem to the Internet.

(o) "Internet" means a matrix of networks that connects computers around the world, including the international computer network of Federal and non-Federal inter-operable packet switched data networks. It is an electronic facility, not considered to be a branch office.

(p) "mortgage loan" means an extension of credit that is secured by residential real property or a home improvement loan;

(q) "other lending institution" means any person or entity engaged for profit in the business of mortgage or consumer lending but not identified by the term "financial institution."

(r) "regulated financial institution" means an insured depository as defined in 12 U.S.C. [sections] 1813(c)(2).

(s) "telecommunications database system" means a telephone based information network that connects account holders and consumers to financial institutions for the purpose of providing banking services to such individuals.

(t) "Secretary" means Secretary of Housing and Urban Development.

(u) "Virtual Bank" means a completely online financial institution that serves its account holders only through the use of a computer, and the institution's web-based Internet site.

SECTION 4. FINANCIAL INSTITUTIONS; EVALUATION

In connection with its Community Reinvestment Act examination of a financial institution, the appropriate Federal financial supervisory agency shall --

(a) assess the institution's record of compliance with the application of HMDA, CRA, FHA and ECOA regulations to its cyberbanking transactions; and

(b) assess the financial institution's record of meeting the housing, credit and depository needs of its entire cyberbanking community, including its low-to moderate income web users, consistent with the safe and sound operation of such institution; and

(c) take such record into account in its evaluation of an application for any operations by such financial institution.

SECTION 5. REGULATIONS

Regulations to carry out the purposes of this Act shall be published by each appropriate Federal financial supervisory agency, and shall take effect no later than 180 days after this Act is enacted.

SECTION 6. ENFORCEMENT AND RELIEF

(a) Penalty for failure to carry out the purposes of this Act shall be promulgated by each appropriate federal financial supervisory agency, and shall take effect no later than 180 days after the enactment of this Act;

(b) Each appropriate federal financial supervisory agency, the Department of Justice, the Department of Housing and Urban Development and the Federal Trade Commission shall have the authority to examine and investigate a financial institution's facility, cyberbanking transactions, and transactions conducted via any telecommunication database system to determine whether such financial institution has been or is engaged in any act or practice prohibited by this Act.

(c) ADMINISTRATIVE ENFORCEMENT -

(1) COMPLAINTS AND ANSWERS -- An aggrieved person may, not later than one year after an alleged discriminatory cyberbanking loan practice has occurred or terminated, file a complaint with the appropriate Federal financial supervisory agency or the Department of Justice alleging such discriminatory cyberbanking practice. In addition, the appropriate financial supervisory agency or the Department of Justice, on its own initiative, may also file such a complaint.

(i) Such complaints shall be in writing, made under oath or affirmation, contain such information and be in such form as the agency or DOJ requires.

(ii) Upon the filing of such a complaint, the appropriate agency or DOJ shall serve notice upon the aggrieved person acknowledging receipt of such filing and advising the aggrieved person of the choice of forums provided for under this Act. Such Agency shall also serve notice on the involved financial institution identifying the alleged discriminatory cyberbanking practice; make an investigation of the alleged discriminatory cyberbanking practice; complete such investigation within 100 days of the filing; and inform all parties of the finding of such investigation.

(iii) The appropriate Federal financial supervisory agency or the Department of Justice may, after completion of the investigation, and to the extent feasible, negotiate a conciliation agreement between the complainant and respondent to provide appropriate relief (including monetary relief) from the dispute arising out of the complaint.

(iv) Failure to comply with a conciliation agreement shall result in a recommendation to the Attorney General that a civil action be filed under subsection (2) of this Act for the enforcement of such agreement.

(v) Conciliation agreements may be made public unless the complainant and respondent otherwise agree and the financial supervisory agency or DOJ determines that disclosure is not required to further the purposes of this Act.

(d) RELIEF-

(1) CEASE AND DESIST ORDER - If any appropriate federal financial supervisory agency, the Department of Justice or the Federal Trade Commission determines a financial institution through its telecommunication database systems or cyberbanking transactions has been or is engaged in any act or practice prohibited by this Act, such agency may issue a cease and desist order as if such service were in violation of the Community Reinvestment Act.

(2) CIVIL ACTION - Any consumer engaged in cyberbanking transactions conducted via a telecommunication database system or facility aggrieved by a violation of Section 2 may obtain appropriate relief in a civil action.

VI. CONCLUSION

Congress and other governmental bodies have responded swiftly to previous legal concerns raised by Internet transactions. For example, when Congress recognized that "anonymous card-to-card systems, or those digital money systems that utilize numbers only and provide a high level of privacy, could be used to facilitate money laundering," the Bank Secrecy Act(172) was applied to electronic banking.(173) Application of the Bank Secrecy Act to electronic banking was a reasonable and timely governmental response. When privacy issues such as the use and disclosure of personal information collected by web site operators and the interception of electronic messages by employers became matters of public debate, there was an immediate movement to apply the Privacy Acts to Internet exchanges.(174) When questions of fraud arose in connection with cyberbanking, "the FDIC designed a `Suspicious Internet Banking' web site where consumers may reference legitimately chartered banks and receive special information on unauthorized banking operations in the U.S."(175) In addition, "Congress introduced several bills ... to further develop electronic security."(176) Finally, "[t]he FBI has established a cyberbanking working group dedicated to identifying and preventing fraud in electronic banking, increasing government awareness of the potential for fraud, and reviewing cyberbanking systems for adequate detection, investigation and prosecution tools."(177)

Should different standards apply when the rights of the poor, women, and African-Americans and other people of color are negatively affected by the growth and flexibility of the Internet? Are the bank regulatory agencies less concerned about the discriminatory implications of cyberbanking than the Treasury Department was about the use of electronic money over the Internet?

In the last year cyberbanking issues have been recognized and debated, yet little has been accomplished to address the implications of its growth and popularity, as well as those for whom Internet access is currently impossible. Other than the study on Internet banking assisted by outside technological firms commissioned by the five federal financial supervisory agencies through the Federal Financial Institutions Examination Council (FFIEC) in November 1998,(178) these agencies have not arrived at any consensus concerning how cyberbanking will be managed and regulated.

Individually, the financial supervisory agencies have only minimally addressed the issue of cyberbanking. The National Credit Union Administration (NCUA), for instance, has spent the majority of its time, attention, and resources on negating the impact of the Y2K computer crisis.(179) NCUA has not yet attempted to introduce regulations either for its cyberbanking activities or examination policies of its members. OTS has only peripherally touched upon cyberbanking, releasing of a final rule on electronic operations.(180) While laudable in that the Internet banking issues are discussed much more comprehensively than in the past, the only "real" law to come out of this effort was the establishment of a formal authority for federal or state savings associations to establish and maintain a transactional web site (as distinguished from an informational web site) from which to conduct cyberbanking. Pursuant to the Rule, such savings associations are now required to give OTS thirty (30) days notice prior to establishing such a website, observe safety and soundness concerns, report its website address in quarterly filings, and ensure compliance with other federal laws and requirements.(181)

Recently, the FDIC has taken "baby steps" in addressing cyberbanking, developing a centralized electronic database that contains information, collected as part of the examination process, on a financial institution's Web-based banking participation or plans to offer cyberbanking.(182) While this information could help regulators plan and manage the risks associated with cyberbanking and develop criteria to conduct examinations, it does not begin to address many of the societal issues arising in the Internet forum.

While certain regulatory responses have been noted, little of this response has been directly connected to the risk that discrimination in cyberbanking will reduce compliance with fair lending laws in cyberspace. Instead of developing a uniform response to the issues and challenges raised by cyberbanking, the federal financial supervisory agencies have tentatively addressed cyberbanking piecemeal, which given the explosion in popularity of cyberbanking, is woefully inadequate. This leaves financial institutions engaging in cyberbanking the opportunity to do so in an almost self-regulatory mode. This is unacceptable. While "too few examinations of Internet banking [have been conducted to identify the extent of potential] Internet banking-related problems industry wide[,] ... [those that have been completed] reveal[] that some depository institutions [have] not always adhered to risk mitigation guidance provided by the regulators."(183) The proposed NFICA, then, is necessary in order to effect the application of fair lending laws to cyberbanking, to minimize compliance risks, and to instill anti-discriminatory safeguards to lending opportunities made available by banks over the Internet. The NFICA also requires that non-banks adhere to the fair lending and housing laws because "[v]irtually every aspect of the banking business has been under attack by non-bank providers."(184) For example, AT&T launched a credit card bank in 1991 and has since become one of the top five credit card issuers.(185) Mutual fund companies such as Fidelity "have cannibalized the deposit side of the balance sheet, attracting more funds than the total amount of deposits in commercial banks in the country."(186) The Internet has also become a very popular place to secure a mortgage from a non-bank entity.(187) These firms are using technology, including the Internet, to establish their presence and, simultaneously, decrease the role of banks in the American financial system. Therefore the NFICA requires compliance with federal anti-discrimination legislation by nonbanking entities as well.

The goal of the fair lending laws has always been, and must continue to be, equal access to credit opportunities for all consumers, in all communities in this country, without regard to race, gender, age, marital status, religion, computer availability, and geographic location. Using the NFICA to enforce existing legislation will enable regulatory agencies to prevent discrimination in cyberbanking. Fair lending and fair access to banking services must survive on earth, and in cyberspace.

(1.) B.S., Northeastern University; J.D., Duquesne University School of Law. Professor Lee is a Visiting Associate Professor at Thomas Jefferson School of Law, San Diego, California. Professor Lee wishes to thank Steven Iacullo, Thomas Jefferson School of Law, Class of 2000, for his earnest research assistance.

(2.) Banking transactions initiated by an account holder or a financial institution using an online connection with a computer or other telecommunications database system is known as "Cyberbanking."

(3.) This article will focus on one risk cyberbanking poses to the consuming public: the risk that lending institutions will not adhere to federal fair lending laws in their online transactions and discriminate against borrowers based upon their race, gender or national origin. See infra, Section II, The Cyberbanking Dilemma.

(4.) GEORGE B. DELTA & JEFFREY H. MATSUURA, LAW OF THE INTERNET [sections] 9.03(0)(4), at 9-146 (Supp. 1998) [hereinafter DELTA & MATSUURA] (emphasis added).

(5.) The banking agencies responsible for the enforcement of antidiscriminatory lending laws are the Board of Governors of the Federal Reserve System ("Fed" or "Board"), the Federal Deposit Insurance Corporation ("FDIC"), the Office of Thrift Supervision ("OTS"), the Office of the Comptroller of the Currency ("OCC") and, for the credit union industry, the National Credit Union Administration ("NCUA"). The non-banking federal agencies also authorized to enforce anti-discrimination lending laws include the Department of Justice ("DOJ") and the Department of Housing and Urban Development ("HUD"). The Federal Trade Commission ("FTC") would have enforcement responsibility for lending activity conducted over the Internet.

(6.) It has been estimated that banking transactions involving human tellers cost banks approximately $1.07 per transaction to process. Similar transactions using the telephone cost approximately $0.54 per transaction, whereas those using the Internet cost banks approximately $0.01 per transaction. See Kathryn Haines, Fund Firms See Savings on Web Trades, WALL ST. J., Jan. 2, 1997, at 35, available at 1997 WL-WSJ 2404127. In addition, "the cost of maintaining an Internet presence is very low: roughly $4,000 for page design, and $500 per month to maintain a page." Headlands Target Alternative A, MORTGAGE MARKETPLACE, Jan. 4, 1999, at 1, available in 1999 WL 6421252.

In January 1999, Headlands Mortgage Co. began using a retail Internet site to target "`Alternative A borrowers,' typically self-employed people with good credit who lack full documentation of their financial activities" for online loan applications. Id. The web site CBS Market Watch contains a button that allows Market Watch browsers to link to the Headlands web site. See id. This advertising "costs about $20,000 a month and should result in 850,000 ad impressions" as compared to direct mail "for which the same $20,000 would buy only 75,000 to 100,000 pieces." Id.

(7.) For example, Wells Fargo is aggressively pursuing a strategy relying on a significant online presence to expand both customer base and service variety. See Ilan Greenberg, Battle of the Banks: Case Study: Wells Fargo and Bank of America, The Red Herring, (visited Feb. 7, 2000) <http://www.herring.com/hits/04/bank.html>. Wells Fargo intends to employ its Internet banking availability to become their customers' "gateway" to all financial services, including brokerage houses and insurance companies. See id. Bank of America appears to be using online banking services to increase their number of customers. See id. For Bank of America, thirty percent of their newly opened online checking accounts are from locations where they do not even have a branch. See id.

(8.) GENERAL GOV'T DIV., GEN. ACCT. OFFICE, (GGD-99-91), ELECTRONIC BANKING: ENHANCING FEDERAL OVERSIGHT OF INTERNET BANKING ACTIVITIES, at 3 (July 6, 1999) [hereinafter ENHANCING FEDERAL OVERSIGHT OF INTERNET BANKING]. "Fully transactional web sites" are sites that offer not only information about that financial institution, but permit customers to make account inquiries, transfer funds between accounts and pay bills. Id.

(9.) See id. at 7-8. The GAO identified several risks to financial institutions and consumers posed by Internet banking. They include security risks ("potential unauthorized access to a depository institution's networks, ... and databases that could compromise internal systems ...), transactional risks ("risk of financial losses arising from problems with service or product delivery."), strategic risks ("risk to earnings ... arising from adverse business decisions") and reputation risk ("significant negative public opinion that results in a critical loss of ... customers."). Id. For the purposes of this Article, the most significant risk identified by the GAO is "compliance risk [which might arise] from violations of, or nonconformance with, laws, roles, regulations, required practices, or ethical standards." Id. at 8.

(10.) "Digital Divide" describes the demographic situation in which access to computers and the World Wide Web is strongly correlated with wealth and education, which consequently leaves many citizens without Internet access. See Thomas P. Novak & Donna L. Hoffman, Bridging the Digital Divide: The Impact of Race on Computer Access and Internet Use (visited Apr. 8, 2000) <www.ecommerce.vanderbilt.edu/papers/race/science.html>. At its most basic level, the "digital divide" refers to those who can afford Internet access ("the haves") and those who cannot ("the have-nots"). See id. These authors concentrated on exploring a specific aspect of the divide, those between whites and blacks. See id. Other "divides" exist, such as the one between rural residents and all other Internet users; regardless of income, rural residents are behind all other groups in Internet access. See Nancy Weil, `Digital divide' still separates tech haves, have-nots, Computerworld, Jul. 8, 1999, (visited Feb. 5, 2000) <http://www.computerworld.com/home/news.nsf/all/9907084divide>.

(11.) See National Telecommunications and Information Administrations, Falling Through the Net 11: New Data on the Digital Divide, Section III (visited Apr. 8, 2000) <http://www.ntia.doc.gov/ntiahome/net2/falling.html>. While 93.8% of American households have a telephone, only 18.6% reported having online access in this 1997 study. See id. And, while the rate of computer ownership in homes has grown significantly, NTIA noted "the `digital divide' between certain groups of Americans has increased between 1994 and 1997 so that there is now an even greater disparity in penetration levels among some groups." Id. (second emphasis added). "Blacks and Hispanics now lag even further behind Whites in their levels of PC ownership and online access." Id.

(12.) See Nell Ma'luf and Deepika Reddy, Note, Electronic Banking, in Developments in Banking Law: 1998, 18 ANN. REV. BANKING L. 51, 59-60 (1999). The authors note that both "federal and state lawmakers face new consequences of expanding the legal definition of banking" to keep pace with the new popularity of online banking. Id. "IT]he challenge is how to identify and assess the community served by an Internet bank and whether online banking invoke fair access issues." Id. at 60.

(13.) The term "fair lending laws" hereinafter refers to the following antidiscrimination legislation: the CRA, ECOA, FHA and the HMDA.

(14.) See David E. Teitelbaum et al., Developments in Fair Lending, 53 Bus. LAWYER 957, 960-61 (1998). Teitelbaum refers to Lee v. Board of Governors of the Federal Reserve System, 118 F.3d 905 (2d Cir. 1997), in which community activists unsuccessfully sought, under the CRA, standing to stop the proposed merger of Chemical and Chase Manhattan Banks. See id. at 960. See also, discussion, infra Section III, Part B, Cyberbanking and the Community Reinvestment Act.

(15.) See Teitelbaum, supra note 14, at 963. In a related case, Lee v. Federal Deposit Insurance Corp., No. 95 Civ. 7693 (LMM), 1997 WL 570545 (S.D.N.Y. Sept. 15, 1997), Teitelbaum notes that the court "did not completely foreclose the possibility that a sufficiently specific and individualized allegation could be made to satisfy the `injury in fact' criterion for standing" but it would be difficult indeed. Id. at 963.

(16.) See generally Jennifer Weitzman, Regulators See Alterations in CRA Because of Changes Forced by Online Banking, AM. BANKER, June 19, 1998, at 2, available in 1998 WL 13321540 (noting the confusion and problems associated with applying the CRA to Internet banking).

(17.) See 42 U.S.C. [sections] 3601-3631 (1996).

(18.) See 15 U.S.C. [sections] 1691(a) (1996).

(19.) See 12 U.S.C. [subsections] 2801-2810.

(20.) See 12 U.S.C. [subsections] 2901-2907.

(21.) The number of online banks may grow to 4,500 by 2002, from 184 in June 1998. See generally Neo Ban Seng, The reality of banking.com [sic], Bus. TIMES (SINGAPORE) May 27, 1999 available in 1999 WL 18750547.

(22.) GENERAL GOV'T DIV., GENERAL ACCT. OFFICE, (GGD-98-34) ELECTRONIC BANKING: EXPERIENCES REPORTED BY BANKS IN IMPLEMENTING ON-LINE BANKING, (1998). [hereinafter IMPLEMENTING ONLINE BANKING]. For the GAO's study, "a bank was considered to offer on-line banking if its customers ... had access to bank services through the computers equipped with dial-up or Internet access." Id. Conversely, banks with web pages, which merely provided information about bank services, were not considered to offer online banking.

(23.) See id.

(24.) ENHANCING FEDERAL OVERSIGHT OF INTERNET BANKING, supra note 8.

(25.) For instance, in June 1998, there were 184 Internet banks that provided account balance and transaction details in the United States, and 57 "true Internet banks" outside the United States. Casey Bryan-Low, Credit Issuers Dangle Hot Deals And Convenience To Net Surfers, THE WALL ST. J., May 3, 1999, at 1.

(26.) See Ma'luf and Reddy, supra note 12, at 58-59.

(27.) Id. at 59.

(28.) Id.

(29.) Id.

(30.) Kenneth Kiesnoski, Cyberbanks: Carving a Market Niche?, BANK SYS. & TECH. May 1, 1999, available in 1999 WL 3505494.

(31.) Id.

(32.) Bank of America, Online Banking (visited Feb. 12, 2000) <http://www.bankofamerica.com/onlinebanking/?statecheck=NJ> [hereinafter Bank of America]. This is further demonstrated by the fact that First Union has created an online financial institution where customers can establish accounts, apply for loans and credit cards, and transfer funds between accounts. See DELTA & MATSUURA, supra note 4, [sections] 9.03(E), at p. 9-75 (1999). First Union worked with MCI and Open Market to develop this online financial institution. See id.

(33.) See Bank of America, supra note 32.

(34.) See Ellen Seidman, Remarks, Challenges to Measuring CRA Performance, (June 17, 1999), (visited Feb. 4, 2000) <http://www.ots.treas.gov/docs/87066.html> [hereinafter Seidman Remarks], at 2. Seidman provided First Union as an example of an institution which has "announced its intention to use the Internet to expand its business rather than its previous strategy of mergers." Id.

(35.) See Walter A. Effross, Logos, Links, and Lending: Towards Standardized Privacy and Use Policies for Banking Web Sites, 24 Ohio N.U.L. Rev. 747, 747-49 (1998). Effross notes that by the middle of 1995, only 79 banks set up web sites, but for some time, most only displayed information, and did not have the ability to complete transactions. See id. at n. 2, n. 3. However, by early 1998, one survey reported that one third of American banks had established transactional web sites. See id. at n. 4. For example in 1997, a bank that served a town in Nebraska with a population of only 346 was able to serve the community via its web site for the cost of only one bank employee's salary. See id.

(36.) ENHANCING FEDERAL OVERSIGHT OF INTERNET BANKING, supra note 8. Among the services offered by banks online are: reviewing account information, transferring funds, paying bills and accepting loan applications, "reviews of account information and funds transfers between a customer's accounts were the most common services reported to be available to bank customers." Implementing Online Banking, supra note 21.

(37.) "It is estimated cyberspace consumer purchases will grow from $3 billion in 1997 to $41 billion by 2002, with the number of online retailers reaching 58.4 million by 2004, up from 10.1 million in 1997." Bryan-Low, supra note 24, at 1.

(38.) See IMPLEMENTING ONLINE BANKING, supra note 22. Speaking of troublesome Internet questions vis-a-vis cyberbanking, there is some question as to what constitutes a valid contract in a wholly electronic transaction. The National Conference of Commissioners on Uniform State Laws have attempted to address these concerns in proposing the Uniform Computer Information Transactions Act (UCITA). See generally UCITA [subsections] 101-904 (1999). Concretely, the UCITA addresses questions related to when an exchange of electronic information constitutes a binding contract. See id. The Uniform Computer Information Transactions Act ("UCITA") "represents the first comprehensive uniform computer information licensing law. This act uses the accepted and familiar principles of contract law, setting the rules for creating electronic contracts and the use of electronic signatures, for contract adoption -- thereby making computer information transactions as well grounded in the law as traditional transactions." The National Conference of Commissioners on Uniform State Laws ("NCCUSL") Home Page (visited Feb. 13, 2000) http://www.nccusl.org/factsheet/Ucita.html). This particular difficulty with Internet banking is beyond the scope of this piece. [Editor's note: For a more comprehensive discussion of the UCITA, please see Adapting Contract Law to Accommodate Electronic Contracts: Overview and Suggestions by Donnie L. Kidd, Jr. & William H. Daughtrey, Jr., which is contained in this volume].

(39.) IMPLEMENTING ONLINE BANKING, supra note 22.

(40.) See Id.

(41.) Laura Turner Beyer, North Carolina Banking in 1997: The Year in Review, 2 N.C. BANKING INST. I. at xxiii, April 1998.

(42.) Holly Actman, Net Results: Sporting Goods Industry Links Up With the Internet, SPORTING GOODS BUS., at 36 (June 1, 1995).

(43.) Weitzman, supra note 16, at 2.

(44.) See id.

(45.) See supra Part I.

(46.) Nat'l Telecomm. & Info. Admin., U.S. Dept. of Com., Falling Through the Net: A Survey of "Have Nots" in Rural and Urban America, (July 1995) <http://www.ntia.doc.gov/ntiahome/fallingthre.html>.

(47.) See id.

(48.) See Nat'l Telecomm. & Info. Admin., Fact Sheet: `Digital Divide' Widening at Lower Income Levels (visited on Mar. 31, 2000) <http://www.ntia.doc.gov/ntiahome/digitaldivide/factsheets/income.htm>. This "fact sheet" summarizes the findings of the NTIA's 1999 report, Falling Through the Net: Defining the Digital Divide, which may be accessed via the NTIA's web site at http://ntia.doc.gov/ntiahome/fttn99/contents.html.

(49.) See id.

(50.) See id.

(51.) Senator Barbara A. Mikulski, a Democrat from Maryland, has introduced the Digital Empowerment Act in Congress to increase access to technology and help American children cross the digital divide. The bill, endorsed by the NAACP, was designed to accomplish the following: double resources for teacher training and school technology; create one thousand new community technology centers; enable for Head Start and other after-school programs to be eligible for Internet and wiring discounts; and create an E-Corps within the Americorps program for volunteers to work in schools and community centers. See NAACP, NAACP Backs Digital Empowerment Act, (visited Mar. 31, 2000) <http://www.naacp.org/presidenffreleases/empact.htm>.

(52.) See Nat'l Telecomm. & Info. Admin., Falling Through the Net: Defining the Digital Divide (Part II - Internet Access and Usage) (last modified Nov. 1999) <http://www.ntia.doc.gov/ntiahome/fttn99/part2.html>.

(53.) See Actman, supra note 42, at 36.

(54.) See ENHANCING FEDERAL OVERSIGHT OF INTERNET BANKING, supra note 8.

(55.) Id.

(56.) See, e.g., Jennifer Weitzman, supra note 16, at 2. For instance, as early as 1998, Stephen M. Cross, Deputy Comptroller for Community and Consumer Policy, acknowledged that "we recognize this [attempting to determine how the CRA would be applied to on-line banking] is a major issue, and we are struggling with that question." Id.

(57.) Id.

(58.) See id.

(59.) Id. The issue of CRA applicability is discussed infra Section III, Part C.

(60.) See infra Section III, Parts A, B, and D.

(61.) See infra Section V.

(62.) See infra notes 63-66 . For example, in enacting the Home Mortgage Disclosure Act, see 12 U.S.C. [sections] 2801 (1994), Congress found "some depository institutions have sometimes contributed to the decline of certain geographic areas by their failure ... to provide adequate home financing to qualified applicants on reasonable terms and conditions." Id. at [sections] 2801(a).

(63.) See 42 U.S.C. [subsections] 3601-3619, 3631 (1994).

(64.) See 15 U.S.C. [sections] 1691 (1994). In 1998, the Federal Reserve Board again proposed amendments to Regulation B, its interpretative ruling that implements the ECOA. See Kristine Williams, Note, Community Reinvestment Act & Consumer Lending, in Developments in Banking Law: 1998, 18 ANN. REv. BANKING L. 2, 10 (1999). This discussion was inspired by ECOA data collection considerations. See id., at 6. The Board's earlier, 1996 proposal would have eliminated the Regulation B prohibitions against requesting or recording, the "sex, race, color or national origin [of a credit applicant], except in connection with home mortgage loans." Teitelbaum, supra note 14, at 969. In addition, "[i]f the borrower refused to supply the requested information, the creditor would have been prohibited from collecting it." Id. In 1998, the Board made another attempt to revise Regulation B, but the final rule did not include a provision to allow lenders to voluntarily collect race and gender data. See Williams, note 64, at 10. However the OTS director, in her remarks on June 17, 1999, urged financial institutions to voluntarily collect monitoring information in order to better measure how well they are serving their markets and to assure their products are reaching all parts of the communities they

serve in a non-discriminatory manner. See Seidman Remarks, supra note 34.

(65.) See 12 U.S.C. [subsections] 2801 - 2810 (1994). and its amendments in 1989. The Financial Institutions Reform, Recovery, and Enforcement Act's ("FIRREA") amended HMDA in 1989. See 12 U.S.C. [sections] 1811 (1994).

(66.) See 12 U.S.C. [subsections] 2901 - 2907 (1994).

(67.) See generally, 42 U.S.C. [sections] 3601-3631 (1994).

(68.) 42 U.S.C. [sections] 3604 (b).

(69.) See Simms v. First Gibraltar Bank, 83 F.3d. 1546, 1559 (5th Cir. 1996).

(70.) Id. The Simms standard requires that "the evidence taken as a whole must create a reasonable inference that race was a significant factor in the loan refusal." Id. at 1556. The Fifth Circuit was of the opinion that even if the financial institution's decision was unfair or unlawful, it was not violative of the FHA since there was no evidence from which a jury could reasonably infer that race was a significant factor in First Gibraltar's decision not to grant Simms a loan. See id.

(71.) Toni Jones, Record Settlement A Notice to Lenders, NEW PITTSBURGH COURIER, May, 20, 1998, at A5, available in 1998 WL 11446154 (citing statistics collected by the Federal Reserve Board).

(72.) Id. at A5 (citing U.S. Conference of Mayors Report, America's Home Ownership Gap, February 23, 1997).

(73.) See Peter Sinton, Fewer Blacks, Latinos, Get Loans/Computerized Processing Cited, SAN FRANCISCO CHRON., September 18, 1997, at D1, available in 1997 WL 6706084.

(74.) ACORN is "a nationwide nonprofit devoted to minority lending." Id.

(75.) Id.

(76.) See West's Legal News Staff, Study Finds Pervasive Redlining in Black, Hispanic, Middle-Class Neighborhoods, WEST LEGAL NEWS, Sept. 13, 1995, available in 1995 WL 909458.

(77.) See Teitelbaum, supra note 14, at 965-66.

(78.) See id. at 966.

(79.) See id.

(80.) See id.

(81.) Id.

(82.) See Snigda Prakash, Accubanc in $2B Settlement of Fair-Lending Charges, AM. BANKER, Apr. 6, 1998, available at 1998 WL 4882082.

(83.) See id.

(84.) Angelo B. Henderson, First Chicago Unit Agrees to Lend $3 Billion in Detroit, THE WALL ST. J., Jun. 26, 1998, available at 1998 WL-WSJ 3499375.

(85.) Id.

(86.) See id.

(87.) See id.

(88.) The Department of Housing and Urban Development ("HUD") "is presently studying the extent of the problem nationwide" related to inequalities in mortgage lending. Jones, supra note 71, at A5.

(89.) See 12 U.S.C. [subsections] 2901-2907 (1994). Certain scholars describes the effects and enforcement methods of the act on banking institutions as follows: "[t]he CRA imposes an enormous regulatory burden on banking institutions, which requires extensive data collection and record keeping...." Keith N. Hylton & Vincent D. Rougeau, The Community Reinvestment Act: Questionable Premises and Perverse Incentives, 18 ANN. REV. OF BANKING L. 163, 165 (1999). The authors note that the CRA is "primarily [enforced] through protests of bank [mergers] by community groups, which has caused many institutions to acquiesce to expensive demands in order to avoid negative publicity or major delays." Id. at 165.

(90.) See id. [sections] 2901 (a).

(91.) The effectiveness of the CRA, however, has been questioned by some observers. For instance, according to HMDA data released in 1998, the "growth in mortgage lending to minorities and low-income borrowers slowed considerably in 1997." Jaret Seiberg, Growth Slows Dramatically in Mortgages to Minorities, THE AM. BANKER, Aug. 6, 1998, at 1. This decline has been addressed by Dan Immergluck, vice-president of the Chicago-based Woodstock Institute, who claims that "the growth rate for loans to minorities may have fallen because banks no longer take the Community Reinvestment Act seriously. Some of this is due to a broad political climate where CRA is under attack instead of being promoted as a great tool.... Between the Congressional climate and the regulatory climate, you have had pretty free sailing for banks." Id.

(92.) Senator Gramm became the next Senate Banking Committee chairman, following Senator Alfonse D'Amato's defeat in his November 1998 re-election bid. See Anason, infra note 96, at 1. See also Stephen Labaton, Deal on Bank Bill Was Helped Along by Midnight Talks, THE N.Y. TIMES, Oct. 24, 1999, at 1. "Bankers have said Senator Gramm might be better for the industry than Senator D'Amato because he would defend them against burdensome consumer protection laws." Dean Anason, Senate Banking Shake UP Could Hinder Reform Bill, AM. BANKER, Nov. 5, 1998, at 1.

(93.) The FMA was introduced to undo The Banking Act of 1933 (Glass-Stegall Act). See H.R. 10, 105th Cong. The FMA would have permitted the establishment of a "financial holding company" which, in turn, would be permitted to own and operate banks, insurance companies, and securities firms, which have all been strictly segregated since 1933. See infra, note 97 at 3.

(94.) Phil Kunze, Per Usual, Bank Fails to Pass but Succeeds as Big Congressional Campaign Fund-Raiser, WALL ST. J., Oct. 20, 1998, at A24.

(95.) Jennifer S. Bucknam, Note, Banking Reform and Regulatory Relief, in Developments in Banking Law: 1998, 18 ANN. REV. BANKING L. 2, 3-4 (1999).

(96.) Gramm and Alabama Senator Richard C. Shelby "used procedural rules to stall the [financial reform legislation] because they object to provisions expanding the [CRA]." Dean Anason, GOP Stalling in the Senate Dims Hopes for Reform, AM. BANKER, Oct. 7, 1998, at 1.

(97.) In reference to the CRA, Senator Gramm, speaking on behalf of himself and Senator Shelby from Alabama stated that "[i]t is a scandal where a law is being used in such a way as to extract bribes and kickbacks and in such a way as to mandate the transfer of literally hundreds of millions of dollars and to misallocate billions and tens of billions of dollars of credit. I believe this represents something that should be stopped." 144 Cong. Rec. S11437, S11440 (dally ed. Oct. 5, 1998) (statement of Sen. Gramm). Furthermore, Senator Gramm has characterized the efforts of CRA community activists advocating fair banking practices as extortion, noting that:
 [i]t has now become common practice in CRA for professional protest groups
 to protest a bank's `community service record' and, in turn, use the
 leverage of those protests to extract bribes, kickbacks, set-asides in
 purchases and quotas in hiring and promotion, none of which has anything to
 do with CRA and the lending practices of banks in the communities they
 serve.... Based on this all over the country banks that have exemplary
 records in community lending and that have received the highest ratings on
 CRA are routinely shaken down every time they want to open a branch.... I
 want to stop this extortion.... We will not let this Bill go forward with
 these massive expansions in CRA power.


Id. at S11440-41.

This language is surprising coming from Senator Gramm considering he represents the state of Texas. Historically, Texas has been notorious for its poor record involving Civil Rights abuses against African-Americans and various forms of racial discrimination. One would think that Senator Gramm, representing this state, would be more sensitive to issues involving African-Americans.

(98.) For an extensive discussion of the compromise reached between Senator Gramm and the Clinton administration on CRA lending issues, see Labaton, supra note 92, at 1. Ultimately, the administration won its provision that banks with poor community lending records would not be permitted to expand into new lines of business without improving those lending records. Senator Gramm won his provision that community groups that reached lending accommodations with specific banks disclose the details of those agreements. See id. Legislative attacks on the CRA, such as those by Senator Gramm, promise to continue in the future, particularly in light of the fact that one of Congress' staunchest defenders of the fair lending and housing laws was Senate Banking Committee member, Senator Carol Moseley-Braun, who was defeated in her 1998 re-election bid. See Dean Anason, Senate Banking Shake-Up Could Hinder Reform Bill, THE AM. BANKER, Nov. 5, 1998, at 1. Moseley-Braun's opponent, Illinois State Senator Peter Fitzgerald, was a director of Harris Bank and a banking lawyer. See id. Prior to her electoral defeat, the former Senator Moseley-Braun co-sponsored the Home Ownership and Equity Protection Act of 1993, which enabled the Truth-in-Lending Act to provide more protection for consumers against "reverse redlining," a practice that targets certain neighborhoods with higher priced loans than are made available to other borrowers in the same city. See Skip Kaltenheuser, Riegle's New Recruits, MORTGAGE BANKING, Sept. 1993, at 20. Another time, at a mortgage discrimination hearing, Moseley-Braun noted that "regulatory efforts ... appeared to lack `any teeth, any muscle, any oomph.'" Id. At the same hearing, she took to task regulators testifying from the Federal Reserve, the FDIC, the OCC and the OTS. See id.

(99.) See id. at 8.

(100.) See id. at 8.

(101.) "[T]he Clinton administration fought a running battle with Congress in 1994 and 1995 to revise and improve CRA through regulatory changes. CRA Compliance Now Said Easier, Origination News, Nov. 1, 1997, available in 1997 WL 24626229.

(102.) See Community Reinvestment Act Regulations, 60 Fed. Reg. 22,156-58 (1995) (codified at 12 C.F.R. [sections] 563e (1999)).

(103.) See Community Reinvestment, 12 C.F.R. [sections] 563e.21-.29. Previously, regulators had focused their examinations on lending institutions' processes rather than results. See Community Reinvestment Act Regulations, 60 Fed. Reg. at 22,156. This Final Rule was intended to help the CRA achieve its full potential. See id.

(104.) As Ellen Seidman, Director of the Office Thrift Supervision, describes it, "The first and most important point to make about non-branch based institutions is that ... all banks and thrifts have a CRA obligation ..." Challenges to Measuring CRA Performance, Remarks by Ellen Seidman at The Fair Lending and CRA Colloquium, (June 17, 1999), (visited Feb. 4, 2000) <http://www.ots.treas.gov/docs/87066.html> [hereinafter Seidman Remarks] (emphasis added).

(105.) See supra note 56, at 2.

(106.) Challenges to Measuring CRA Performance, Remarks by Ellen Seidman at The Fair Lending and CRA Colloquium, (June 17, 1999), (visited Feb. 4, 2000) <http://www.ots.treas.gov/docs/87066.html> [hereinafter Seidman Remarks].

(107.) See id. at 2.

(108.) See id. at 3-4. "Assessment areas" are the geographical areas a bank may designate for the OCC to evaluate that bank's record of lending to determine whether the bank is meeting the credit needs of that community. See 12 C.F.R. [sections] 563e.41. The Rule does not seem to contemplate an "assessment area" across the nation for a bank, with physical locations in one city, making a substantial number of loans to people in another city via the Internet. However, banks "whose business predominately consists of serving the needs of military personnel ... who are not located within a defined geographic area" are permitted to designate its deposit customer base as its assessment area. 12 C.F.R. [sections] 563e.41(f). Thus, through the carving out of this exception, it is already recognized that a "geographic assessment area [may be] irrelevant to evaluating the CRA performance of an institution whose customers are spread across the world." Id. at 4. Seidman suggested that a "customer -- based assessment area" as established for U.S. service members might apply, by analogy, "to other non-branch based institutions" such as totally virtual banks. See id.

(109.) Id. at 3.

(110.) See id. at 2-3. For instance, were a bank to offer home mortgage loans, the focus of CRA applicability would be the product offered, and not the method by which the transaction would be conducted. In other words, as far as CRA applicability is concerned, if the CRA covers home mortgage loans, it is irrelevant whether the bank offering the product conducted its operations via traditional brick-and-mortar bank or via the Internet.

(111.) See <htttps://www.bankofamerica.com/mortgage/apply/index.cgi>.

(112.) 15 U.S.C. [subsections] 1602(h), 1691(a) (1994).

(113.) See Lee v. Board of Governors of the Fed. Reserve Sys., 118 F.3d 905, 908 (2d Cir. 1997).

(114.) Id. at 916. Obviously, waiving transaction fees only for wealthy customers creates an even larger possibility for disparity along the digital divide. For a more complete discussion on the "digital divide" and its effect on minority and lower-income citizens' access to information technology, see supra, Section III, Part B, Cyberbanking and the Equal Credit Opportunity Act.

(115.) Id.

(116.) See Lee, 118 F.3d at 916.

(117.) Id.

(118.) Id. (citing 12 C.F.R. 225.7(b)(4)). The regulation permits a bank to "[v]ary the consideration for any product or package of products based on a customer's maintaining a combined minimum balance in certain products specified by the bank (eligible products), if: (i) The bank offers deposits, and all such deposits are eligible products; and (ii) Balances in deposits count at least as much as non-deposit products toward the minimum balance." 12 C.F.R. [sections] 225.7(b)(2) (1999).

(119.) See id. at 916.

(120.) "Nor can we fault the Board's finding that UST was not remiss in failing to record the race and gender of its loan applicants in view of the fact that banks are exempted from this reporting requirement when applications are taken over the telephone." Lee, 118 F.3d at 915 (citation omitted).

(121.) Michael Lee's community action, and other stories like his, scream out for creative legislation that addresses the definition and applicability of "community" under CRA, "discriminatory policy procedure or practice" under FHA, "sufficient information to determine if a community's housing needs are being met" under HMDA and what "discriminate against any applicant" means under ECOA for those who do not or cannot cyberbank. See id. at 914-16. The National Financial Institution Antidiscrimination Cyberbanking Act [NFICA] would provide both an opportunity to solve these legislative applicability gaps and an expansive regulatory vehicle for federal financial supervisory agencies to regulate cyberbanking in the future.

(122.) See supra Section II, notes 48-56 and accompanying text.

(123.) For instance, the popular Internet credit card, Nextcard, provides a typical credit decision within two minutes. See Next Card Visa (visited on Mar. 31, 2000) <http://www.nextcard.com/pxweb/main4/index1.html>.

(124.) Electronic Banker Newswire, Online Mortgages, Credit Cards Ready to Boom, (visited on March 31, 2000) <http://www.electronicbanker.com/html/newsd032699_3.htm>.

(125.) See Jennifer Kingson Bloom, Issuers Expanding Presence on the Internet, AM. BANKER, Nov. 2, 1998, at 16, available in 1998 WL 13325496. Of course, Nextcard is not the only credit card that provides online credit application and approval. Many large, traditional credit card companies are also offering their web site as a forum for applying for their cards. American Express was one of the pioneers in this area, and has since been joined by Bank of America, First USA, Discover, Chase Manhattan, Citibank, Capital One and MBNA. See id.

(126.) See e.g., LendingTree.com; Where Lenders Compete for Your Business (visited on Mar. 31, 2000) <http://www.lendingtree.com>. This web site offers home, personal and auto loans. See id.

(127.) See e.g., P.L.A.T.O. - The Classic Student Loan (visited on Mar. 31, 2000) <http://www.plato.org> (offering students the opportunity to apply for an education loan online).

(128.) Kristi Nelson, Bank One Eyes Web for Student Loans, BANK SYS. TECH., Feb. 1, 1999, at 40, available in 1999 WL 3505390.

(129.) See Section III, Part B, supra, discussion of the CRA vis-a-vis cyberbanking.

(130.) For an excellent overview of the typical computerized credit scoring system, see Carol Teegardin, Knowing the Score: Depersonalized Credit Rating an Obstacle to Some Borrowers, PITTSBURGH POST-GAZZETTE, July 19, 1999, at BIO, available in 1999 WL 5282806.

(131.) See, e.g., Mark A. Fisher, Minorities Score Lower in `ColorBlind' Credit Ratings, COLUMBUS DISPATCH, Apr. 14, 1999, at 5A, available in 1999 WL 7179891.

(132.) 15 U.S.C. [subsections] 1691(a)(1), (2) (1994). Note, however, that it is not discriminatory to inquire about age, marital status, or whether an applicant's income derives from a public assistance program, if the intent of such inquiry is not to discriminate in a determination of credit-worthiness, but for the purposes of determining the amount and probably continuance of income levels and credit history. See 15 U.S.C. [subsections] 1691(b)(1), (2).

(133.) See James F. Peltz, Small Business Rights Group Finds Mortgage Lending Bias Banking: Flawed Credit-Scoring System Blamed for Declining Home Ownership Among Minorities, L.A. TIMES, Dec. 24, 1997, at D1. Also ignored are households in which several members of extended families share the monthly mortgage payments or get second or third jobs to make ends meet. See id.
 The two main providers of the credit-scoring systems are Fannie Mae
 (formerly called the Federal National Mortgage Assn.) and Freddie Mac
 (formerly Federal Home Loan Mortgage Corp.), and their formulas have been
 adopted as underwriting criteria by many lenders. That's because Freddie
 Mac and Fannie Mae--which were chartered by the government but are now
 stockholder-owned entities--purchase billions of dollars' worth of home
 loans each year from the banks and thrifts that originally make the loans.
 Those purchases are crucial to the banks, because they get fresh cash to
 make additional loans to consumers. But Gnaizda maintained that if minority
 borrowers fall short on the Freddie Mac and Fannie Mae credit-scoring
 systems, lenders are inhibited from making the loans for fear they won't be
 able to sell the loans to this so-called secondary market. Hence, the
 scoring `has inadvertently caused a subtle form of redlining,' his group
 said. His complaint was echoed by Angelo R. Mozilo, chairman of one of the
 nation's biggest home mortgage lenders, Countrywide Home Loans, a unit of
 Calabasas - based Countrywide Credit Industries Inc. `I have serious
 concerns about all this,' Mozilo said.... The credit-scoring formulas `do
 impact underwriters at Countrywide, as well as all over the country' and
 inhibit them from making more loans, Mozilo said. Freddie Mac and Fannie
 Mae defended their systems, challenged the group's findings and objected to
 a moratorium on using automated credit-scoring systems. `We never use
 credit-scoring as a single tool and we don't expect our lenders to use it
 as a single tool,' said Barry Zigas, an executive vice president at Fannie
 Mae. Lenders are encouraged to `look at all aspects of a person's credit
 history, including extenuating circumstances.' Moreover, `our data shows
 that we've had continued increases in our purchases of loans made to
 minorities in California,' he said.


Id.

(134.) Id.

(135.) Fischer, supra note 131.

(136.) Id.

(137.) Peter Sinton, Fewer Blacks, Latinos Get Loans/Computerized Processing Cited, SAN. FRAN. CHRON., Sept. 18, 1997, at D1. The following examples substantiate the covert bias of financial institutions in rendering credit denials.
 The number of Californians unable to secure a mortgage are even more
 alarming than the rest of the nation. For instance, in California mortgage
 loans to Asians and Pacific Islanders swelled 18 percent and loans to
 whites soared nearly 22 percent during 1996. But loans to Blacks dipped
 more than 2 percent and those to Latinos fell nearly 8 percent. Robert
 Gnaizda, policy director of the Greenlining Institute, considers this to be
 `a crisis in a state where 80 percent of new households formed consist of
 families of color.'


Id.

(138.) James F. Peltz, supra note 133, at D1.

(139.) The Home Mortgage Disclosure Act and its accompanying federal regulations require extensive disclosure of loan applicant information, including race, gender and income level of applicants. See 12 U.S.C. [sections] 2803(b)(4) (19941); 12 C.F.R. [sections] 203.1(d) (1999). See also Uniform Residential Loan Application, Federal Home Loan Mortgage Corp. Form 65 (visited at Apr. 8, 2000) <http://www.freddiemac.com/forms/html/volume1.html.>. The form contains a section requesting mortgage loan applicants to disclose their gender, race and national origin. See id. This section allows applicants to "choose not to furnish this information," but it also permits the lender's "interviewer" to fill in this information based on "visual observation or surname." Id.

(140.) See Jaret Seiberg, Administration Wants Banks to Amass Race, Gender Data, AM. BANKER, June 17, 1998, at 4, available in 1998 WL 13321462.

(141.) Since at least 1998, the Clinton Administration has urged the Federal Reserve Board to allow banks to voluntarily accumulate data on the race and gender of all borrowers. See id.

(142.) See id.

(143.) 12 U.S.C. [sections] 2801(b) (1994). All federally insured depository institutions conducting mortgage lending programs or those making federally connected mortgage loans must comply with HMDA. See 12 C.F.R. [subsections] 203.1(c), 203.2(e) (1999).

(144.) See 12 U.S.C. [sections] 2801(b).

(145.) Id. [sections] 2801(a).

(146.) See 12 C.F.R. [sections] 203.1(c).

(147.) See id. [sections] 203.1 (d).

(148.) Alicia H. Munnell, et al., Mortgage Lending in Boston: Interpreting HMDA Data, 86 AM. ECON. REV. 25, 50 (1996).

(149.) A 1999 General Accounting Office Report noted that although HMDA data can enable the regulatory agencies to find patterns of discrimination, the methods used do have limitations. See GENERAL GOV'T DIV., GEN. ACCT. OFFICE, (GGD-00-16) LARGE BANK MERGERS - FAIR LENDING COULD BE ENHANCED WITH BETTER COORDINATION, 5 (1999), available in 1999 WL 1091857. "For example, these statistical models cannot be used to detect illegal prescreening or other forms of discrimination that occur prior to the submission of an application." Id. Another major limitation to the usefulness of HMDA data is the exclusion of several important variables used in the mortgage lending process, such as "the creditworthiness of the applicant, the appraised value of the home, [and] the credit terms of the loan." Id. at 11. While this information is available to regulators when they examine that lender's compliance with fair lending laws, it is not reported as part of HMDA data. See id.

(150.) See Alicia H. Munnell et al., Mortgage Lending in Boston: Interpreting HMDA Data, 86 AM. ECON. REV. 25, 25 (1996).

(151.) See id.

(152.) See id.

(153.) See id.

(154.) See id.

(155.) Id. See also Paulette Thomas, Boston Fed Finds Racial Discrimination In Mortgage Lending Is Still Widespread, WALL ST. J., Oct. 9, 1992, at A3, available at 1992 WL-WSJ 628090 (discussing the Federal Reserve study examined supra note 116 that found, even after taking into account additional factors that lenders use to determine an applicant's creditworthiness, minorities were more likely to be refused a mortgage than their similarly situated white counterpart). See also, Barber v. Rancho Mortgage & Inv. Corp., 32 Cal. Rptr.2d 906, 913-14 (1994) (upholding jury's verdict that mortgage lender unlawfully discriminated against black plaintiffs, thereby violating the Equal Credit Opportunity Act).

(156.) Id. at 26.

(157.) Id.

(158.) Id.

(159.) Id. The authors remind us that extending a mortgage applicant discretion based upon these "compensating factors" is considered appropriate, due to the historically low default rate on residential mortgages. See id. at 26.

(160.) See id.

(161.) Id. at 25 (emphasis added).

(162.) Munnell, supra note 150 at 26.

(163.) Id. at 51. Race as an indicator of loan performance is a hypothesis suggesting that an applicant's race is an accurate indicator of that applicant's ability to repay the loan. Because there is no conclusive evidence that a person's race does signal her ability or desire to repay, the authors of this study believe that the different results in loans offered to blacks and whites may indicate that race is being used improperly in the mortgage market. See id.

(164.) 12 U.S.C. [sections] 2801(b) (1995).

(165.) The HMDA requires depository institutions to report data gathered from applicants in "primary metropolitan statistical area[s], metropolitan statistical area[s], [and] consolidated metropolitan statistical area that is not comprised of designated primary metropolitan statistical areas," which are defined by Department of Commerce. Id. at 2803(a)(1) (hereinafter the HDMA Areas). The HDMA Areas are established by the Census Bureau according to published standards applied to Census Data. See U.S. Census Bureau, Metropolitan Areas (visited Mar.29, 2000) <http://www.census.gov/population/www/estimates/metroarea.html>. Essentially, a Metropolitan area is "a large population nucleus, together with adjacent communities having a high degree of social and economic integration with that core." Id. A "cyber community" is thus not contemplated by the Act.

(166.) 12 U.S.C. [sections] 2803 (a)(1) (emphasis added).

(167.) Congress clearly expressed an intent to gather as much mortgage lending data as possible. Under the HMDA, "other lending institution [are] deemed to have a home office or branch office within [an HMDA Area] if [that] institution [has] originated or purchased or received completed applications for at least 5 mortgage loans in such area in the preceding calendar year." 12 U.S.C. [sections] 2803(a)(2). By defining "other lending institutions" as "any person engaged for profit in the business of mortgage lending[,]" id. at 2802(4), Congress encompasses all institutions that might not meet the definition of "depository institution," id. at 2802(2), thus, establishing that all institutions that offer mortgages in a HMDA area are subject to the HMDA.

(168.) For the Federal Trade Commission's authority, see 15 U.S.C. [subsections] 1607(a), (c), 1608. For the Department of Housing and Urban Development, see 12 U.S.C.S [subsections] 2803(h)(1), (5), 2804(a), (b) and 42 U.S.C.S. [sections] 3608(a), (b). For the Department of Justice, see 15 U.S.C. [subsections] 1691e(g), c(a).

(169.) In 1996, the HUD Office of Fair Housing Enforcement Center for New York and New Jersey received 522 discrimination complaints, 73 of which involved mortgage lending discrimination. See Norma Jean-Jacques, HUD Documents Bias in New York, NATIONAL MORTGAGE NEWS, Sept. 29, 1997, at 8. In about 70% of those cases, HUD found violations of the anti-discrimination lending laws. See id.

(170.) See A Framework for Global Electronic Commerce, July 1, 1997, (visited Mar. 31, 2000) <http://www.whitehouse.gov/WH/New/Commerce/>. These policies reflect an attitude of minimal government interference in the development of commerce over the Internet. The policy principles are (1) both domestic and international governments should take actions to preserve the unique characteristics of the Internet; (2) it is the private sector, not government, which should lead Internet development; (3) electronic commerce should be facilitated on a world wide basis and (5) governments should avoid undue restrictions affecting electronic commerce. See id. In addition to these five key principles, the government cites nine unresolved major Internet commerce areas: (1) electronic payments, (2) telecommunications and information technology infrastructure development, (3) privacy protection, (4) customs/taxation, (5) development of a Uniform Commercial Code for electronic commerce, (6) transaction/network security, (7) intellectual property protection, (8) online content management, and (9) network technical standards. See id.

(171.) OFFICE OF THE THRIFT SUPERVISION, OTS LOOKS BEYOND HOME TO ASSESS CRA PERFORMANCE OF NON-BRANCH THRIFTS, OTS 99-40 (June 17, 1999) <http://www.ots.treas.gov/docs/77940.html>. In adopting this approach, OTS Director Ellen Seidman emphasized two feasible alternatives to address CRA assessment issues: "a customer - based assessment area similar to that already provided by law for institutions that serve military personnel ... [and development of] the strategic plan option, already in limited use, which allows institutions [to utilize usual business strategies to meet CRA goals.]" Id. At this time, however, the strategic plan option is underutilized. See id. The OTS noted that "very few strategic plans have been filed, [yet they] offer[ ] a good example of the flexibility institutions have in tailoring their CRA obligation to their particular business strategies." Id. at 1-2. One plan approved by OTS for Household FSB created goals for community development in Chicago, the location of Household's home office. Additionally, Household will work with the AFL-CIO to meet consumer lending goals, which "shows how a customer-based relationship can substitute for a branch-based assessment area." Id. at 2.

(172.) 12 U.S.C. [subsections] 1829b, 1951-59 and 31 U.S.C. [subsections] 5311-5330 (1994).

(173.) ALAN GAHTAN, ET AL., INTERNET LAW, A PRACTICE GUIDE FOR LEGAL AND BUSINESS PROFESSIONALS, 230-31 (1998).

(174.) See Electronic Communications Privacy Act, 18 U.S.C. [subsections] 2510-2521, 2701-2711 (1994).

(175.) Developments in Banking Law: 1998, 18 ANN. REV. OF BANKING L. 1, 63 (1999).

(176.) Id. at 64. For example, Representative "Leach's Financial Information Privacy Act of 1998 would allow the Federal Trade Commission and other financial regulators authority to protect against breach of financial institution customer information." Id.

(177.) See id. at 64.

(178.) See GAO, ELECTRONIC BANKING: ENHANCING FEDERAL OVERSIGHT OF INTERNET BANKING ACTIVITIES, at 3 (1999).

(179.) See id.

(180.) See 12 C.F.R. [sections] 555 (1999).

(181.) See [subsections] 555.210-.310.

(182.) See GAO, ELECTRONIC BANKING: ENHANCING FEDERAL OVERSIGHT OF INTERNET BANKING ACTIVITIES, at 2 (1999).

(183.) See id. at 7.

(184.) See John L. Douglas, Banking, Technology and Regulatory Environment: Never Better, 2 Elec. Banking L. and Com. Rep 1 (1997).

(185.) See id.

(186.) Id.

(187.) See Effross, supra note 35, at 748-49. In fact, "the mortgage sites `attracting the most attention are not those of banks, mortgage banks, or even brokers. They are consumer friendly, independent entities that have combined entrepreneurial focus of the Internet with, in a growing number of cases, strong brand identities ... [including] America Online ... E-Loan, HomeShark, and GetSmart.'" Id. at n. 6 (quoting Steven Marjanovic & Heather Timmons, One Stop Shopping Web Sties Prove a Hit With Mortgage Borrowers, AM. BANKER, Mar. 24, 1998, at 1.)

CHERYL R. LEE(1)
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