Justice Department Urges Fair-Lending Compliance : Banking: A top official tells bankers that the industry should intensify its self-policing efforts.

A top Justice Department official urged banks Monday to voluntarily comply with fair lending laws or face legal action.

Paul F. Hancock, chief of the housing and civil enforcement section, told an American Bankers Assn. meeting in New York that banks should intensify efforts to police themselves to ensure that they’re not discriminating against minorities when making loans or providing services in their communities.

“Our goal is to see if we can have voluntary compliance from banks,” said Hancock, whose section is part of the Justice Department’s civil rights division. “But we will bring suits if we find discrimination.”

The Justice Department’s role in enforcing fair lending laws has been a thorn in the banking industry’s side over the last two years. Hancock’s comments urging voluntary compliance were viewed by some as an attempt to offer an olive branch to the industry.

Banks are required by regulators, such as the Comptroller of the Currency and the Federal Reserve Board, to lend fairly in their communities. Without a good fair-lending record, banks cannot get permission from the regulators to buy other banks or offer new services.

But the Justice Department--a law enforcement agency, not a bank regulator--has pursued several high-profile discrimination lawsuits against banks under broader equal credit and fair housing laws.

The bankers association contends that there are too many agencies trying to judge the banking industry. Even if they are cleared by the Fed, banks can still be sued by the Justice Department and have to pay millions.