We have found out that we've collected the Govt monitoring information (race and gender) from customers for mortgage loans on some rental properties and home improvement loans. Since we aren't a HMDA bank we violated ECOA. What should we do to correct the problem? We think in involves about 50 or so loans. In some areas we collected it on a separate form. Should we pull these forms out of the files and destroy them? In the mortgage area the information is on the application. Since we can't take that out should we black those out with a marker? While I'm a little uncomfortable destroying information from a loan file I think I've heard before that this is actually the proper thing to do since we at least eliminate the possibility that the informtion could be misused in the future. Sshould we keep a list of the loans if we destroy the information? I'm not trying to cover anything up. I want to do what's right. I'm just not sure what that is.

In my former life I would have recommended you black that information out so that it couldn't be used, or at least you knew you shouldn't get it. If an allegation of discrimination ever came up, the burden of proof would be on the institution to demonstrate that they didn't consider that information. I would probably keep a list of the loans in the audit workpapers, but also make sure you document your solution. That will show that you are aware there was a problem, and took action to correct. Also do retraining (and document!) for the appropriate parties.

Thanks. (I assume that in your former life you were a compliance examiner. With that in mind you speak with some real authority.)

What about anybody else? Before I grab my big black marker is there any good reason to reconsider?

A FRB compliance examiner told me during one exam that we shouldn't black out this information. ...nothing in the reg that says you should/must/could .... yatta, yatta, yatta. Like many other things, it probably depends on who your regulator is. Give them a call, ask, and document it.

When I worked at an FDIC regulated bank, that's what the examiner instructed us to do as well - balck out the information and indicate "collected in error." I've heard that the same is true for OCC banks as well.

We make a big "X" thru the info, but still leave it legible.